Conference Transcript - DOLE 2026-06-02

Rob Moscow, Analyst — TD Cowen

thank you for coming everybody I'm Rob Moscow I'm managing director of food beverage and household products at TD Cowan and equity research very happy to have here today management team from from Dole CFO Johan Linden and VP of investor relations James O'Regan so they've come a long way to be here from from Homburg and Ireland, so thank you so much for coming today. So, Johan, maybe we'll start with just take a step back and give us a few minutes about the background of the company. There's been a lot of M&A over the years. Where is the company today in terms of that spectrum? And maybe give us that background.

Rory Byrne, CEO

Okay, so let's take a step back. So we went public in 2021, and when we went public it was a merger of two companies it was the dole food company which i was at the time the ceo of ceo of and the total produce company dole food company being a backward integrated with basically tropical fruit like the bananas and the pineapples a lot of farms assets when it comes to shipping whereas total produce then were forward integrated with a lot of assets in the market. Together, we created now the biggest, it was the biggest merger ever and the biggest acquisition merger that you have seen in the produce sector. And now we are the biggest in produce with $9 billion of turnover. We have the strongest brand with the Dole brand. We have some 110,000 acres of land that we farm on. We have some 200-odd facilities when it comes to packhouses, cold storages, warehouses in the markets, but also in the production. And we operate within, if you look at retail, one of the fads that's growing categories within retail. Everybody wants more health than wellness, and we are perfectly positioned in that sector.

Rob Moscow, Analyst — TD Cowen

And maybe a little more detail. So just internationally, what percent of sales is U.S., Europe, and then the rest of the world?

Rory Byrne, CEO

So we do 45-plus in each of Europe and in North America. And so you get maybe 5% that goes outside of North America and Europe. So we're very, very focused on Europe and North America. That's where we have our market.

Rob Moscow, Analyst — TD Cowen

And fresh produce, I mean, intrinsically is a lower-margin business. What are your profit margins, both in terms of gross margin and EBITDA margin? and, you know, how much fluctuation is there?

Jacinta Devine, CFO

Yeah, well, for gross margin, I suppose overall it's about 8% is probably a fair level. Adjusted EBITDA then will fluctuate between the two, I suppose, diversified segments and then the vertically integrated fresh fruit segment. So the fresh fruit segment is higher margin. It's probably, you know, somewhere from 5% to 6% adjusted EBITDA margin. And then the two diversified segments, closer to maybe 3%, 3.5% adjusted EBITDA margin, giving a blended margin of about 4.5% for the group.

Rob Moscow, Analyst — TD Cowen

And the product lines, like in Fresh Fruit?

Jacinta Devine, CFO

Fresh Fruit, the name can be a little bit confusing, but that's really our tropical projects. So that's bananas and pineapples in the main, whereas the two diversified segments, it's the full basket of projects. Right, right.

Rob Moscow, Analyst — TD Cowen

Can you talk about Dole's strategy today? How do you generate growth? Is it, I imagine it's more investments in the internal, in the core of the business. Are you still making acquisitions? How would you describe?

Rory Byrne, CEO

Yeah, so the strategy that we have pursued since going public was that we did some simplification. So we had one division. There was the vegetable division, salad in a bag, fresh cut salads. So we wanted to get out of that because it needed a lot of investment. It needed consolidation. We decided that we were going to sell the division, and it took some time. We finished that last August, so that is just done. Since IPO, we've also been working on delivering the company. So we have taken some $300 million off the debt load, and we are now around one and a half times leverage. We have worked on getting synergies between the two companies. We have expanded the Dole brand into Spain, into France, into the U.K. We have merged some assets in North America to better execute in the market. And at the same time, the core products, the three divisions that we have, have had very good and solid top-line growth. So we have done very well in the market, both taking market share, but also as capitalizing on the overall demand that we see for the product. So now when we've done the simplification and when we've done the delivering, we now feel that we are in a position to go back to our history of doing an M&A, doing smaller tuck-ins. We could also look at bigger things, but the focus is to see smaller tuck-ins to get the network effect of the whole system that we have.

Rob Moscow, Analyst — TD Cowen

Right. And how do you look at the M&A landscape? Are there a lot of these tuck-ins available to you market by market? Are there any capabilities that are really important to you to buy?

Rory Byrne, CEO

It's still a very fragmented market produce. You have a lot of local champions. You have a lot of family businesses. So we have a lot of opportunities for smaller tuck-ins. When it comes to the bigger ones, it becomes a little bit more complicated because then you have the private equity playing, and they are willing to pay higher multiples than we are willing to pay. So we see a lot of opportunities when it comes to buying the neighboring farm or the neighboring warehouse or the agent for a certain product that we don't have, but we're willing to invest all across the supply chain when it comes to produce.

Jacinta Devine, CFO

I think just on that as well, it's important to remember that we've actually a very long history of doing these types of smaller acquisitions. So the legacy total produce business was built up over a 30-year period by doing these smaller acquisitions, buying neighboring businesses, complementary businesses, normally done on attractive valuations and realizing pretty easy to realize synergies coming out of these acquisitions. So that's how we built the group. Probably put a pause in it over the last few years while we were integrating the two businesses, Dole and Total Productions. But we think at this stage now, we're in a good place to kick on again. And as Johan is saying, we're looking at things right across the value chain. So whether that's the M&A, but also we're looking at investments in production and sourcing into packaging and ripening capabilities or handling capabilities. And also looking at, I suppose, our distribution network and how we can enhance that and really how we can enhance it to the next level with further automation and use of artificial intelligence.

Rob Moscow, Analyst — TD Cowen

Let's stick on the consumer a little bit more. I mean, I would suspect that GLP-1s has got to be a good tailwind for your business. When I think, when I hear from GLP-1 users, they say that they crave fresher fruit and vegetables. How have you seen the expansion of GLP-1s impacting your business, and do you ever look at any consumer data to kind of back up what it's providing?

Rory Byrne, CEO

We're looking at consumer data, and we see that we are experiencing very good demand for our products. and when we're reading studies what we see is that when you have one person in the household going on GLP-1 the whole household will have to change how they eat because that's how they buy the food so what they have in the fridge that's what they're going to serve when they eat together and what we also have seen is that it's lasting it's not just that people go on GLP-1 and then they quit they actually tend to stay on GLP-1 so this change of behavior is persistent and even if they do get off, they keep these good behaviors. So what we have seen from consumers the last couple of years is strong demand. GLP-1 is probably one thing about it, but if you look at the younger generation, you also see that they want to eat less processed foods, which means that they are going to produce. We're also seeing that retailers are just focusing more on produce. So it's just everything combined is giving us tailwind.

Rob Moscow, Analyst — TD Cowen

Very good. And how would you quantify your growth rate? Like, what's a sustainable growth rate to think about for your business? I can't remember if you give annual guidance or not, but, like, is there population growth plus?

Jacinta Devine, CFO

Exactly. I think ultimately it is a mature industry, and we're probably – the industry itself grows at low single digits, 2% to 3%. So we believe that's there, that's sustainable. But then for us, based on our scale, our position with our customers, the categories that we're involved in, we think we can grow beyond that. So maybe that's growth of 4% to 5%. And that can be at the top line and then flowing down into the adjusted EBITDA. So we guide on adjusted EBITDA rather than on the top line. and I suppose for this year we've set out a figure of at least 400 million adjusted EBITDA but again probably stepping back from a few years ago the algorithm we would have given that we're seeking to achieve is growth of maybe 5, 6, 7% adjusted EBITDA growth.

Rob Moscow, Analyst — TD Cowen

And from a retailer perspective I know that the Fresh Isle is their biggest priority. Are you seeing any actions by grocers to expand shelf space for produce or is that kind of fixed we we see they investing more

Rory Byrne, CEO

in the department okay we see them putting it in a better position in the department so we see an overall uh increasing i mean it's always been focused for them but this is where they can differentiate themselves so we see a higher degree of focus today and it has to do with people buying online, they do stuff that are in the center store, not produce. So relatively, it's becoming more important to them. And we also see some format that did not carry it maybe five, six, seven years ago, were actually taking in some SKUs of produce. So overall, increased focus, more space, maybe not so much, but an increased focus. More attention. Yeah. That makes sense.

Rob Moscow, Analyst — TD Cowen

Your competitor, Fresh Del Monte, one of their main messages is their value-added work that they do, and that entails slicing up pineapples for more convenience. Do you focus on value-added in your portfolio, or are you less so?

Rory Byrne, CEO

So one of the simplifications we did was that we sold actually our fresh-cut salad business. So it's something that we see needs a lot of investments, needs a lot of automation. It's different from what we do in our other divisions. So we are working more on getting our products to local fresh-cut operators and let them do that work. It's a category that has great potential. We see it being sold a lot in the stores. But we are working with people that are supplying into that, and we think that is a better model for us.

Rob Moscow, Analyst — TD Cowen

Got it. Okay. Okay. In terms of investments that you make into the business, where's your first dollar of capital? Where does it go into? Is it for growth? Is it for maintenance? And how do you make sure that these investments are expanding your competitive advantage?

Jacinta Devine, CFO

Yeah, it's a good question. I suppose on the maintenance side of it, we typically have routine capex of about $100 million a year. and that's right across the operations it'll be a few million here a few million there and farms it equipment vehicles into our vessels um but then i suppose for us we are looking now more on the on the future investment on the growth trajectory and we it's quite targeted what we're doing and it's right across the value chain so when i think about production and sourcing within within the group you know we want to maintain a balance of having our own production we've recently invested invested more in in guatemala to expand our sourcing coming from that country and this is for conventional and organic bananas as well as plantains um diversification of sourcing is is very important for us and also diversification of of third-party growers as well so another example is we've um we've invested further in supplying additional financing to some growers of of actual of cherries coming from chili so these type of things can help to guarantee supply for some of the key, I suppose, times of the year when you're actually selling this product. We take it along then again from the sourcing and production side into the packing and handling capabilities that we have, taking on the next step. And again, if I think about the Chilean cherries, we've invested a lot in our automation of our packing lines and how we can improve that, reduce the amount of labor, improve the use of optical scanning for sourcing and picking the right products and the right right i suppose type of cherry that's that's being sold um and then you you play along further we've invested in ripening capabilities in europe in particular in spain and in france and then onto our distribution network and we've called out a recent you know focus on investing in sweden it's a pretty significant investment for us maybe in the order of 100 million dollars where we'll take one of our or I suppose it's a distribution facility, we're going to take it to the next level. We're looking at investing in a new warehouse and really expanding the use of automation within that warehouse, again, reducing the amount of labor that's required, improving the efficiencies, and all to improve your value proposition for key customers in that region.

Rob Moscow, Analyst — TD Cowen

It is a big investment. You said your capex every year is 100? It's about 100 million.

Jacinta Devine, CFO

Then this project is 100 on top of that. It'll be over a couple of years,

Rob Moscow, Analyst — TD Cowen

but that's right this sounds like kind of a scatter a smattering of different projects in different countries like do you have like a long list of these kind

Rory Byrne, CEO

of high return projects that you so so yeah so we don't you since we are a network we have the production assets we have the assets in the market to get to retail it's every investment nothing is a standalone thing it plugs into the network and it enhances value to the whole thing so we and we constantly have a long list of asks from the divisions and we prioritize them not only on the single return on that investment but how they enhance the whole competitiveness of the system okay um when you make those investments

Rob Moscow, Analyst — TD Cowen

is it intuitively do you get to capture the benefit of it or is it also like this will improve our cost to deliver to a big retailer and in a way the consumer is also getting the benefit as well

Rory Byrne, CEO

no the consumer will get it because we of course when we do it and that's not necessarily on price but that could be on freshness

Rob Moscow, Analyst — TD Cowen

because we

Rory Byrne, CEO

are able then to deliver better and quicker to them So from that perspective, yes, the consumer will get the benefit. But also for if we do this automation that we're now planning on doing, then, of course, also the consumer will benefit in the end because the costs will go down, and we're not going to keep all of that ourselves, even if we want to. That's just not going to happen.

Rob Moscow, Analyst — TD Cowen

Right. Okay. Maybe you could dig a little bit into the financial model. I would imagine this is a volume-driven business. So is it fair to say that it's very sensitive to volume? So if you have more volume to push through a low-margin business, that's the best lever for earnings and cash flow growth? Or is there something else that matters more?

Rory Byrne, CEO

Volume is always forgiving and very helpful, but we already have a big scale. so for us when we look at volume we need to be careful so that we don't take a step like a step up and you add a ship and you're not able to fill it so you need to be careful when you do this but volume is forgiving but we have 9 billion which is almost 50% more than the next competition so we are in a good position when it comes from volume

Rob Moscow, Analyst — TD Cowen

I guess what I meant was like an incremental 1% volume given the asset base like does that there's a lot of leverage to that 1% incremental volume just in it all else being equal to earnings

Rory Byrne, CEO

all else being equal to earnings of course volume helps us on the bottom line

Jacinta Devine, CFO

the volume growth really will probably come more from some of the bolt on M&A that we're talking about as opposed to within the existing categories that's where we've seen it in the past and that's the model that we believe works well

Rob Moscow, Analyst — TD Cowen

maybe we can talk a little bit about first quarter performance I imagine you had to talk about gas prices going higher, ocean rates going higher. How did your company navigate those things related to the Iran war, and how is it affecting your outlook?

Rory Byrne, CEO

So the Iran, the war that we have in the Middle East, is impacting us in a way that fuel prices goes up. We run our own ships. We have inland logistics, so it's having an impact on us. and Q1 we did not have that much of an impact because it was too soon you will see an impact in Q2 but the way we are set up is that we have fuel surcharges in place with our customers so if fuel goes up we will pass that on to retail but it comes with a quarter delay so what you do see our impact is going to be in Q2 which is then going to level out

Jacinta Devine, CFO

in the second half of the year right and i think an important point to remember is you know we we gave our guidance back in february of at least 400 million for the year we reaffirmed that again with our q1 results a few weeks ago even knowing everything that we did with the onset of the of the war in iran and i suppose one key point is the is the surcharges but also in the diversified segments a key point remembers we have dynamic pricing in place with most of our customers so So as changes happen in the, I suppose, in input costs, higher fuel costs or higher energy costs or packaging costs, they tend to get passed through. So, you know, you can go back and look at our EMEA division in particular over the last few years. There's obviously been shocks, things like the pandemic, the war in Russia and Ukraine, inflationary shocks. The margin has been very resilient because of that model.

Rob Moscow, Analyst — TD Cowen

Right. Would you expect these surcharges to turn into higher retail prices for consumers on the shelf and then the other side of the business? It sounds like it's also very automatic, too.

Rory Byrne, CEO

So the retailers normally make sure that they keep the margins, but what we have seen through the pandemic, through tariffs, is that consumers are willing to pay for increases. First of all, most of the products, they don't know the price when it comes to produce because it goes up and down all the time.

Rob Moscow, Analyst — TD Cowen

That's my next question. I don't know. Tell me the price of blueberries.

Rory Byrne, CEO

people don't know it so it's not it's not an issue for the products that they do know it such as bananas yeah it's the most affordable thing that you have in in the store anyhow value for money and people are not going to change the way they eat the bananas when it comes to what they want to have for breakfast or the lunch break so we we do not it's not going to be impacted right right so that

Rob Moscow, Analyst — TD Cowen

is my next question so why is it that the retailer like a retailer I could pay six dollars for blueberries one day I could spend three dollars the next and then nine dollars the next it's it's all over the place is that a function of the suppliers or like whatever is available at any given point in time I hate to keep bringing it but blueberries it's not really your and we we sell

Rory Byrne, CEO

blueberries as well no that's totally it's supply and demand okay so that's supply demand, if there is a shortage, the price will go up on those products, and that will be reflected on the shelf. So that is, it's not a, it's not a retailer that's trying to play you, it's an actual reality of the market. This year, avocados have been inexpensive. It's been a flood of avocados coming in to the market, and that has been reflected in the price. Bananas is more stable. It's something that consumer knows the price of, so there you will see stable price through the years and it will only be adjusted when something happens okay and cherries how does that play out so cherries actually we mostly sell the chairs we do that when we talk about cherries we also do cherries here in north america but the cherries we talk about is actually what we sell from chile into china oh okay and that is very up and down depending on is it the week before new years the chinese new year is the week after you can have it's tremendous price differences but we sell to the distributors over there so we don't set the retail price in that way so but that's

Rob Moscow, Analyst — TD Cowen

where we sell it so it's very variable thank you for the education um i think um dole fresh dalmonte you know inevitably every year there's discussion about the weather and hurricane activity and how it's affected growing conditions and and shipping conditions uh how have how have you developed your model in a way that kind of gives you some some balance and some cushion like maybe there's geographic balance to that that you can

Rory Byrne, CEO

use yeah so we are the most diversified in the industry we have we we Mexico to Guatemala to Honduras to Costa Rica Colombia Ecuador no one has the same kind of spread that we have so we believe that we are more more hedged than the competition when it comes to this but hurricanes don't strike that often into our regions but if it's due if something happens and a big big piece of the production tape is being taken out and it's more than one of the players that's been taken out then that immediately go to retail price so then there is a discussion with retail and the prices are compensated for the extra cost that we're having so the times that hurricanes have happened to us we have been able to immediately transform that into a price increase to retail.

Rob Moscow, Analyst — TD Cowen

Right. Okay. And when the pricing does go through, do you model out elasticity? Like,

Rory Byrne, CEO

is there a rule of thumb internally? Yeah, the rule of thumb is that there is none. I mean, no, we're talking bananas now. People will continue to buy their bananas. Okay. It doesn't change. You don't care if you buy 69 cents or 79 or 89 cents per pound. Right. You will buy your bananas sure and it's very people have their habits when it comes to bananas mm-hmm so we haven't seen any any of that what about the other crops though no we haven't it really on the other crops if you're going to berries or if you're going to pineapples the consumers are so trained in that those fluctuating price anyhow so they don't actually they don't know the price points for those products So if the price needs to go up, people buy. Grapes, if you really do campaigns and you put them down, yes, you will move more volumes. But the general rule of thumb is produce, it's not very – we sell it no matter the price.

Jacinta Devine, CFO

I think also there's a different consumer for some of the higher-priced products. If you think of, say, the gold kiwi, it's a different consumer buying that than somebody who might be impacted by changes to their income level. So the demand doesn't seem to be impacted if there are fluctuations in price.

Rob Moscow, Analyst — TD Cowen

I'll take a step back and talk about the deleveraging you've done post the merger. Culturally, do you feel like the company is now one Dole Foods, or is there still organizational things that are left over that makes it feel like two companies?

Rory Byrne, CEO

No, there's no feeling that there is two companies. You will always have a little bit of leftovers when it comes to this. But there is no. We feel that everyone is working now for Dole PLC. If you go out to, we are representing, you have finance, have these kind of trade fairs or fairs. We have for produce with our fairs. We now show up and everyone is Dole and everyone is under the Dole banner. So that, I think we have digested the merger and digested it very well. But we're also very decentralized, which means that if you're working for – we're very big in Sweden. So if you're working for Everfresh, as we call ourselves in Sweden, you have a strong identity with Everfresh, but you're very proud to be able to carry the Dole brand. If you work in Chile, you are very proud to be the number one exporter of apples out of Chile, and you identify yourself with that local office, but you're still Dole. So you have the local identification, but everybody is under the Dole umbrella, and it's always a risk with mergers, and this was the biggest merger within the produce sector had ever seen, and we feel that we had digested that very well.

Rob Moscow, Analyst — TD Cowen

Were there any learnings along the way as to what it takes to merge two big companies like that, that I can tell other food companies that are about to do the same thing?

Rory Byrne, CEO

No, I think it's the same. You have a lot of Egos, and you just need to work around it and probably not be too directive. Because in the beginning, we were trying to be a little bit directive, but sometimes you just need to let people work it out because we have a lot of interaction between our divisions, even if they are decentralized. So if you are running – we are big in Spain as well. So if you're running the local Eurobanan office in Spain, you still need to agree if you want to have apples from Chile you need to agree a price because this is just not automatic so of course there's going to be a lot of fights and sometimes they call up and say hey you need to tell us what the price is going to be it's like no, work it out so in the beginning we probably were trying to be mending but

Rob Moscow, Analyst — TD Cowen

you've mentioned so many different countries that you have people in at a pretty high level of management like I'm just thinking of your corporate overlay and you have to identify people within your organization to elevate and maybe serve in a corporate role is that for such a spread out company you know is is there a process for that and are you are people at the regional level identified for

Rory Byrne, CEO

promotion so so what what we did and that had started before the merger but would we accelerate it when we had the merger is that we have a talent program and it's a talent program where we get some 20 plus people across the organization together every year for a nine month program we give a certain tax like okay so AI is the thing, what do we need to do with AI, how should Dole adapt it and then they present after nine months to the management and now we've been doing that for five years so now we have a we have these 20 people every year so we have some 100 plus people from across the organization so every division sends a couple of people depending on years one year three people one year one so that has been a very good catalyst for the integration and has and and that's not the top management in the divisions this is as a mid management or or down with talents that has really got the organization together and that has spread the phone numbers across so that people are contacting each other when that need help. That has been very helpful.

Rob Moscow, Analyst — TD Cowen

Oh, interesting. Okay. And that's also then

Rory Byrne, CEO

where we get input when we, if we see that we need talent, we have then a short list from these development programs.

Rob Moscow, Analyst — TD Cowen

And you mentioned AI, which is a major theme across this whole conference. So what did the 20 people say that you have to do? What are some of the things that you're working on to use that technology internally?

Rory Byrne, CEO

So what they said, the thing that came out of that was that we need to learn from each other because there's so many local things, the use cases and local. So we did actually do that. So we now have across the divisions we have quarterly meetings where people are sharing what they're doing. The good thing about AI for us and for some sectors is probably a threat for us and an opportunity to do things better but it's not a threat to our industry and it's not a threat to our company. But we are not going to be the first movers when it comes to this. we are going to be slowly and deliberate when we implement right now we have a lot of a lot of different things uh projects going on in the organization but we're not pushing them from central they're doing it local we're doing small things we have we have we have wholesale in uk delivering to small mom and pop stores right they don't want to use they don't want to call they don't want to use any kind of IT when they deliver the orders. They call in their orders how much they're going to have and they deliver that to a phone machine to an answering machine. So now we have implemented an AI that listens to all the answering machines and those are the kind of things we do. We're experimenting with drones flying over the farms to do better predictability about how much are we going to get from this farm in two weeks so we can do better planning for the shipping being and the market can be better prepared but it's still in its infancy for us we we are trying things out and we going slowly but steady on this interesting okay um your your stock has done okay

Rob Moscow, Analyst — TD Cowen

the last few years but i'm sure you you wish it would do a lot better so maybe tell us um what do you think uh are a couple of things that the market maybe underestimates about dole or should learn more about?

Rory Byrne, CEO

The biggest thing that I think people miss when they think about Dole is that when you think about Dole, you think about a banana and a pineapple. And then you stop thinking and you think, okay, so it's a two-trick pony. They are totally focused on two products, so it's probably volatile. It's a piece of our business, but over 50% come from something else. So we are very diversified when it comes to products. We are diversified when it comes to sourcing. We are diversified when it comes to retail. We basically sell to every single retailer. And we are diversified when it comes to pricing models. So we are very stable. We are not volatile. We're very stable. And if you go back and see how stable we have been, I think that's one thing that is being missed about us, that we are so much more.

Jacinta Devine, CFO

And what am I missing? I think the growth story piece. People probably are looking for that. You know, over the last few years, we've been focused on probably integration, delivering the balance sheet, and now investors are looking for, okay, what's the next step? And, you know, we have outlined this range of various investments across the group, but they want to see us execute upon those and to start seeing an increase in, I suppose, returns ultimately then to shareholders from that. So that's the other piece.

Rob Moscow, Analyst — TD Cowen

You said at least $400 million EBITDA this year. And what growth does that represent from last year?

Jacinta Devine, CFO

Last year, we had an impact in the fresh fruit business, so we ended the year at 395 million. So it's still growth, but if we didn't have that impact in fresh fruit, I think you're talking a few percent growth.

Rory Byrne, CEO

We feel good about that considering what's going on in the world and the Middle East. We think that is... We felt good about being able to reiterate the 400 plus.

Rob Moscow, Analyst — TD Cowen

Well, I think we're going to end it there, and I thought it was a great session. Thank you so much, Dole Management Team, for coming, and thank you all for attending.

Jacinta Devine, CFO

Thank you.