Earnings Call
Dole plc (DOLE)
Earnings Call Transcript - DOLE Q3 2021
Operator, Operator
Hello, and welcome to the Dole plc Third Quarter 2021 Earnings Conference Call and Webcast. Today's conference is being broadcast live over the Internet and is also being recorded for playback purposes. For opening remarks and introductions, I would like to turn the call over to the Head of Investor Relations with Dole plc, James O'Regan.
James O'Regan, Head of Investor Relations
Welcome, everybody, and thank you for joining our third quarter 2021 conference call. Joining me on the call today are Rory Byrne, Chief Executive Officer; Johan Linden, Chief Operating Officer; and Frank Davis, Chief Financial Officer. This conference call is being webcast live on our website and will be available for replay after this call. During this call, we will be referring to presentation slides and supplemental remarks, which are available on the Investor Relations section of the Dole plc website. Please note that our remarks today will include certain forward-looking statements within the provisions of the federal securities safe harbor law. These reflect circumstances at the time they are made, and the company expressly disclaims any obligation to update or revise any forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied due to a wide range of factors, including those set forth in our SEC filings and news releases. Our earnings release, financial report, and related materials for the third quarter can be found on our website. Information regarding the use of non-GAAP financial measures may also be found in the Notes section of the release, which includes the reconciliation to the most comparable GAAP measures of adjusted EBITDA, adjusted net income, net debt, and adjusted earnings per share. The details of our statutory forward-looking statements disclaimer can be found in our SEC filings and the presentation slides we will be discussing today. With that, I'm pleased to turn today's call over to Rory.
Rory Byrne, CEO
Thank you, James, and thank you all for joining us on our first earnings call at Dole plc following our IPO in July. As well as discussing our third quarter 2021 results and performance year-to-date, I'll also provide you with a high-level overview of the Dole plc business. Later in the presentation, I'll give you some further insight into our long-term strategy. Johan will give an update on trading, the progress being made on synergies, and comment on some of the strategic initiatives being undertaken across the group. Finally, Frank will take you through the financial review. So, turning to Slide 5, while 2021 has been a transformative year for the group, Dole plc was formed by bringing together total products plc and Dole Food Company, followed by the IPO of this new company at the end of July. We received net proceeds of $398.9 million from the IPO, and all of the proceeds were used to strengthen our balance sheet by repaying higher-cost debt. Concurrently with the IPO, we also successfully completed a $1.44 billion refinancing package, providing us with well-structured liquidity to support our continued growth. For the purpose of this presentation and as set out in our press release issued today, the financial information has been prepared on a pro forma basis, illustrating Dole plc's results as if the merger, IPO, and refinancing had all occurred on January 1, 2020. This is consistent with the pro forma financial information presented in the Form F-1 filed with the SEC in connection with the IPO. Since the IPO at the end of July, we've been focused on the integration and reorganization of management across the enlarged entity, implementing our synergy strategy, and further strengthening our public company reporting and compliance functions. Looking at our financial performance, we've delivered strong results for the first nine months of the year against the backdrop of a unique economic environment. Pro forma revenue and pro forma adjusted EBITDA are both up versus the comparable prior-year period, with pro forma revenue up 4.5% and pro forma adjusted EBITDA up 12.6%. We're very pleased with this growth, set against the context of a strong prior year and also given the complexities currently being experienced in supply chains across the globe. The talent and dedication of our people, along with the diversity of our operations, both from a geographic and product and service offering perspective, as well as our sophisticated asset base, has helped us manage the industry-wide supply chain pressures. We've witnessed firsthand the continued benefits of our integrated business model and having control over assets within our supply chain, such as our fleet of 11 ships and approximately 17,000 containers in our tropical fleet business. This has enabled us to continue to deliver in a challenging environment. Despite the benefits of our integrated supply chain, we've not been immune from industry-wide cost inflation, which we managed earlier this year. As increasing inflationary pressures emerged, we initially focused our efforts on optimizing our supply chain to limit cost impacts. However, now that it's clear that inflation is pervasive and persistent, we have reacted by increasing prices in segments of our business that have longer-term contracts, such as our tropical fruit division and value-added solids. We're pleased that our customer base has largely been supportive and understanding. Within the diversified segment of our business, pricing tends to be more dynamic, and to date, we've been able to largely pass through cost increases while working closely with our suppliers and customers. We're also very pleased with our financial position following the IPO. At the end of Q3, our net leverage stood at 2.76x, which is below our targeted level of 3x. Our well-capitalized balance sheet creates the basis for long-term sustainable growth for the group, and I'll provide a recap of our long-term strategy later in the presentation. Today, we've also announced a cash dividend for the third quarter of 2021. We will pay a dividend of $0.08 per share on January 7, 2022, to shareholders on record as of December 17, 2021. We're providing a full year 2021 pro forma revenue target in the range of $9.2 billion to $9.4 billion and the full year 2021 pro forma adjusted EBITDA target in the range of $390 million to $400 million. This corresponds to year-on-year pro forma growth of 2.6% to 4.8% and pro forma adjusted EBITDA growth of 4.9% to 7.6%. I'll provide further details on our outlook later in the presentation. Turning to Slide 7, I'll now give you a brief overview of the Dole plc business. We are the global leader of fresh produce, nearly 2x larger in terms of revenue than the next largest company in this category. We produce, market, and distribute an extensive variety of fresh fruits and vegetables across the globe. Our produce is sourced both locally and from around the world, from a broad sourcing network and our own farms. We have sales in over 80 countries, with North America and Europe being our largest markets, but we also have a presence in parts of Asia, Latin America, the Middle East, and Africa. The four operating divisions of Dole plc are Fresh Fruits, Fresh Vegetables, Diversified Fresh Produce America and Rest of World, and Diversified Fresh Produce, EMEA. The Fresh Fruit division is responsible for farming, sourcing, and distribution of bananas, pineapples, and various other tropical fruits, as well as providing commercial cargo services. The principal markets and geographic regions served are North America and Europe. The Fresh Vegetables division is responsible for the distribution and sale of fresh-packed vegetables, as well as value-added salads, which includes prepacked salads and meal kits. The two diversified divisions are responsible for the production, marketing, and distribution of a wide variety of fresh produce to customers, primarily in North America and Europe across the retail, wholesale, and food service channels. Dole plc has leadership positions in categories such as bananas, pineapples, value-added salads, grapes, and fresh-packed vegetables. We also have a focus and expanding presence in faster-growing product categories such as avocados, berries, and organic produce. Fresh produce is a key and growing category within the overall food sector. We are seeing an acceleration of growth driven by health and wellness trends. Consumers are increasingly focused on their physical and mental well-being and sustainability, shifting towards plant-based vegetarian and vegan diets. As a result, the category itself is expected to experience annual growth of over 2.7% per annum over the next five years. One final point to mention is that the market we operate in is still highly fragmented, with significant potential for further consolidation. As total produce, we use M&A as a successful lever for growth, and we expect Dole plc to do the same. On Slide 8, just to remind you, we've illustrated the wide geographical presence of Dole plc as well as giving some insight into the highly valuable and strategic asset base that we have. We operate in over 250 facilities across the globe, including over 160 distribution facilities and 75 pack houses. We operate 12 cold storage facilities and 5 solid manufacturing plants. We own over 109,000 acres of land, which combined with the multi-continental sourcing model, enables operating flexibility and product availability throughout the year and enhances our ability to manage costs. Another important strategic asset is our fleet of ships. We own 13 ships and operate 11 of those ships ourselves, with 2 currently out on charter. Included in the 11 are 2 new ships we took delivery of earlier this year, the Dole Aztec and the Dole Maya. Our 11 owned and operated ships are used to transport tropical produce from our production facilities in Central and South America to our customer network in North America and Europe and support our commercial cargo business. Having our own fleet of ships provides greater certainty of distribution and enhances our supply chain transparency and control. So with that, I'll pass you now over to Johan to give an update on operations.
Johan Linden, COO
Thanks, Rory. Good morning, everyone. I want to start by emphasizing both my own excitement for what we have started here at Dole plc, as well as my satisfaction with how we have progressed to date with our first steps as a new company. As you heard already from Rory, the performance of the combined business year-to-date on a pro forma basis has been strong and provides an excellent foundation for the opportunities ahead. Turning to Slide 11, as Rory has already noted, we are not immune to inflationary pressures, and so we have had to take actions to address the ongoing challenges, including initiating price increases. In the Fresh Fruit and Fresh Vegetables division, which represents 45% of our pro forma revenues, we typically have longer-term contracts in place, so we have needed to address the current issues proactively. In that context, we have been pleased with the response from our customers to the price increases that we have sought, and we are progressing well toward having the pricing in place to offset current inflationary pressures in full in 2022. In the Diversified Fresh Produce division, which represents 55% of pro forma revenues, pricing tends to be on a short-term basis, and any inflationary cost increases can be passed through the supply chain relatively quickly. While we are pleased with the support from our customers, we also know that in this environment, we need to be highly focused and attentive to all aspects of the supply chain so we can continue to deliver excellent products and service to our partners and maintain a healthy business for our stakeholders. Looking at the four divisions in more detail, this has been an abnormal year in Fresh Fruits. Throughout the year, we have endured significant cost impacts on both our sourcing base and supply chain following the November 2020 hurricane in Guatemala and Honduras, as well as by the current inflationary pressures. To deal with these increased cost pressures, we have been working with our customers to increase pricing and expect to have the pricing we need to offset the current inflationary impact in place by the end of 2021. It's been a challenging year in the Fresh Vegetables division for two main reasons, both of which are being addressed. The first is that our Fresh Packed Vegetables business has suffered from persistently weak market pricing caused in part by oversupply, as the market projected a greater recovery in the foodservice sector than has been possible as COVID-19 has lingered. To address this issue, we have reduced our own planting to limit our market exposure in 2022. We have also seen some short-term relief in the form of better pricing as the market has achieved more balance with the move to the winter sourcing locations. The second impact has been the significant inflationary challenges that have affected the value-added salad business, particularly in relation to freight, labor, and packaging. Heading into Q4, we have already implemented price increases with value-added customers to help address the inflationary challenges we encountered earlier in the year. In our Diversified business in the Americas, we have overcome specific weather-related challenges by relying on our diversified range of products and services and have grown our business by further strengthening our customer relationships and by continuing to grow in high-growth categories like berries and avocados. Finally, in our diversified EMEA business, we have withstood the continued impact of COVID-19-related disruptions in both supply and demand patterns by building on our strong customer relationships and providing unrivaled service in a challenging environment. We also reorganized our Dutch businesses, which has contributed to strong growth. Next, I would like to mention some of the net investments we have made, which we believe will drive the business forward in the years to come. Most critically, we took delivery this summer of two new vessels: the Dole Aztec and the Dole Maya, which will serve our U.S. Gulf markets and which we believe are foundational assets for our ability to manage today's unique supply chain challenges. Year-to-date, as numerous global ports have suffered from congestion and delays leading to equipment shortages and rising shipping costs, we have been able to insulate ourselves from the worst of the crisis by relying on our owned assets and by operating out of ports where we have our own teams on the ground. In addition to the protection our integrated supply chain has afforded us in the current environment, I'm very pleased to say that both the size of the new vessels and the new routes we have implemented improve both our environmental footprint as well as reduce costs. To give you some context, with the two new ships, we were able to retire four old ones. We have also invested significantly in replanting in Honduras after several of our farms were devastated by last year's hurricanes. We believe our quick action to reinvest and the incredible work of our team on the ground positions us well to drive further cost competitiveness in the business in the years to come. Another important strategic initiative for us this year was the acquisition of an additional pineapple farm in Costa Rica that is adjacent to one of our existing farms. This farm has been one of our long-term growers, and the owner has been looking to sell the business. The acquisition secures supply, allows us to access additional grower margins, and gives us the opportunity to expand margins by driving synergies due to the combined farms. Finally, we have also invested this year in important packaging and cooling assets at the source and close to the market. We believe investments here not only make sense for operations on a stand-alone basis but will also give us enhanced capability to further drive group synergies. And on the topic of synergies, I would like to make a few specific points regarding the additional steps we are taking to position ourselves to deliver on our synergy targets for the years to come. Firstly, and of critical importance, the executive management team of Dole plc quickly builds on our existing relationships to establish the foundation for long-term growth. All the necessary functional projects that come with any mergers are advancing well, and we have integrated several key management teams across the legacy Dole Food Company and total produce businesses. We believe this cross-pollination will not only bring new practices and ideas to existing areas but will foster the culture we need in our management team to sustain our existing success and develop our new opportunities. We have already made some small investments together to drive further integration, like in the French market, where we plan to grow our presence with new rising capabilities, and in South Africa, where we are consolidating some of our sourcing operations. We have also established a new cross-company logistics function that is currently laying the foundation for key group-wide projects. We are also seeing good forecasts for growth in selling and sourcing for both core products and higher growth products like berries and avocados. As we look forward into 2022, we expect to make further strides with sourcing efficiencies, particularly in South America and in South Africa, while selling opportunities and extending the Dole brand in important European markets, and also with specific progress on our logistics, berries, and avocado strategies. With that, I will hand you to Frank to give you the financial review.
Frank Davis, CFO
Thank you, Johan. I'm very pleased to be reporting our first quarterly earnings as Dole plc following our listing on the New York Stock Exchange. As already mentioned at the outset, the financial information referred to today and as outlined in our press release has been prepared on a pro forma basis, illustrating Dole plc's earnings as if the merger, IPO, and refinancing had occurred on January 1, 2020. This methodology is consistent with the pro forma financial information presented in the Form F-1 filed with the SEC in connection with the IPO. Turning first to Slide 15, Dole plc has delivered strong results with year-to-date pro forma revenue of 4.5%, totaling USD 7.1 billion at the end of September. The increase in the year-to-date pro forma revenue was driven by growth in the two Diversified Fresh Produce divisions and the Fresh Vegetables division. For the third quarter of 2021, pro forma revenue was 0.3% ahead of the prior year. Year-to-date pro forma adjusted EBITDA is up 12.6% to $337.7 million compared to $299.9 million for the first nine months of 2020. The increase in the year-to-date EBITDA has shown to be driven by EBITDA increases in the Fresh Fruit division, which had a strong first half of the year, and from Diversified Fresh Produce EMEA. This was partially offset by EBITDA decreases in the Fresh Vegetables division due primarily to weakness in our Fresh Packed Vegetable business due to an oversupplied market, and inflationary pressures in value-added salads. Additionally, there was an EBITDA decrease in Diversified Fresh Produce Americas and Rest of World due to the impact of adverse weather events at the outset of the year. Pro forma adjusted EBITDA is down 35.4% for the third quarter of 2021 versus the comparable quarter in 2020. The decrease was predominantly driven by EBITDA decreases in Fresh Vegetables due to weak markets in our Fresh Packed Vegetables business and inflationary headwinds in value-added salads. In addition, we experienced EBITDA decreases in the Fresh Fruit division due to the ongoing supply chain impacts following last year's hurricanes. Moving to the next slide, on a pro forma basis, adjusted net income was $131.6 million for the first nine months of the year, which corresponds to a 22.5% increase from the first nine months of 2020. The increase is predominantly due to the increase in pro forma adjusted EBITDA, offset by an increase in the depreciation charge and an increase in the earnings attributable to noncontrolling shareholders. Looking at each of the divisions in more detail and starting with Fresh Fruit. Throughout the year, we have seen cost pressures from the supply chain impact caused by the hurricanes Iota and Eta in Honduras and Guatemala in November 2020, and more recently from the inflationary pressures that have increased as the year has progressed. However, more positively, we have also seen good market pricing in the first half of the year and have been continuing to optimize our supply chain, including taking delivery of our two new vessels, the Dole Aztec and the Dole Maya, to improve our own costs. Third quarter pro forma revenue was down 0.8% versus the prior year due to lower volumes of bananas in North America and lower banana prices in Europe, as well as lower pricing for pineapples in North America. This was offset in part by higher pricing in North America for bananas, volume growth in pineapples in North America and in Europe, and growth in commercial cargo revenues due to higher freight rates. Year-to-date pro forma revenue was up 2.7% compared to the prior year due to higher banana pricing in North America and higher pineapple pricing across all markets, as well as growth in commercial cargo, partially offset by lower banana volumes in all markets. Third quarter 2021 pro forma adjusted EBITDA was down 53.2% compared to the prior year due to lower revenue, higher transportation costs in North America, and higher produce costs driven by material increases, as well as the continued impact on supply chains from last year's hurricanes in Guatemala and Honduras. These cost increases were partially offset by improved performance in our commercial cargo business, as well as by the benefit of currency hedges in our European markets. For year-to-date, pro forma adjusted EBITDA is up 27%, largely due to higher revenue, particularly from the benefit of higher prices in the U.S. banana market and the growth of the commercial cargo business, partially offset by higher sourcing costs following the impact of the hurricanes last year and inflationary headwinds. Moving to the next slide, Fresh Vegetables. This division has had a challenging year for two main reasons, as Johan mentioned earlier. The Fresh Packed Vegetables market has been oversupplied in 2021, based on an expectation that foodservice recovery would be greater than has occurred. This additional supply has put downward pressure on all markets for fresh-packed products. With the outlook for COVID-19 and 2022 still uncertain, we are cutting back our own planting to reduce our exposure. Within the value-added salads business, we have persevered through significant inflationary pressures due to both a labor shortage in the U.S. and inland transportation challenges. However, as Johan mentioned, we have already successfully adjusted pricing with customers to help offset cost pressures from earlier in the year. Pro forma revenue increased 1% in the third quarter of 2021 primarily due to higher pricing in the value-added salads business, offset in part by lower volumes in this business. Production was impacted by labor availability challenges in the quarter. In addition, lower volumes and pricing in Fresh Packed Vegetables led to a decrease in revenue. Year-to-date pro forma revenue increased 4.3% due to higher volumes and pricing in the value-added salads business, driven by strong market demand and a better mix of products sold. This was partially offset by revenue declines in the Fresh Packed business. Third quarter 2021 pro forma adjusted EBITDA decreased by 90.8%, primarily due to persistently weak Fresh Packed Vegetables markets. The impact of inflation in inland transportation, packaging, and labor continue to increase. However, the early action taken on increasing prices with customers and value-added salads also started to offset some of these pressures in the quarter. Finally, pro forma adjusted EBITDA for the first nine months decreased 84.8%, primarily again due to the impact of persistently weak Fresh Packed Vegetables market and inflationary challenges mentioned earlier. Looking next at Diversified Fresh Produce Americas and Rest of World. Third quarter 2021 pro forma revenue was up 4% primarily due to a strong performance in the berry category and growth in apples and kiwis from Chile, partially offset by some port-related challenges in North American export business. Pro forma revenue for the first nine months of 2021 was up 5.2%, primarily due to higher revenue from berries and growth in the Chilean export business. Third quarter 2021 pro forma adjusted EBITDA was down 52.4%, largely driven by the continuing impact of adverse weather during the Chilean grape growing season in the first part of the year, partially offset by good growth in berries. Pro forma adjusted EBITDA for the year-to-date was down 15.1%, with a decrease again substantially driven by the adverse weather events that impacted the Chilean grape season. This was offset in part by EBITDA improvement from the berry category as well as asparagus and in the Chilean top fruit and stone fruit. Finally, Diversified Fresh Produce EMEA has had a strong performance in 2021 year-to-date. The reorganization of our Dutch businesses, as well as a recovery in the foodservice channel, contributed to this strong growth. Pro forma revenue decreased 0.8% for the third quarter of 2021 due to the divestment of our business in the third quarter, partially offset by positive contributions from step-up acquisitions and favorable impacts of currency translation. Pro forma revenue is up 5.9% for the first nine months of the year due to positive currency movements, strong performance across all channels, and contributions from step-up acquisitions in the period. This was partially offset by the incremental impact of divestments in the third quarter. Third quarter 2021 pro forma adjusted EBITDA was up 9.4% due to a good recovery in our Dutch businesses following the reorganization mentioned previously, as well as strong performance across other European markets and favorable impacts from foreign currency translation. Finally, pro forma adjusted EBITDA for the year-to-date is 33.8% ahead of the prior year, again driven by a recovery in our Dutch business and good performance in Ireland and the U.K. due to the reopening of foodservice channels. Our Brazilian export business also performed strongly, benefiting from favorable foreign currency translation.
Johan Linden, COO
Moving to capital allocation and leverage. Our capital expenditure strategy is focused on investing where we see the greatest opportunity for profitable growth to support our existing strong market positions in core products. While in a typical financial year, we expect that our capital expenditures will be broadly in line with our depreciation expense, this can vary at times, primarily our reinvestment cycle with major capital assets is not linear. In 2021, we made a number of strategic investments. We made $53 million in final payments for our two new vessels in the first half of 2021. Additionally, we spent $16 million reinvesting in our Honduran farms impacted by last year's hurricanes and $25 million on acquiring pineapple assets that bring unique strategic value to our operations. As Rory mentioned previously, we have announced a quarterly cash dividend for the third quarter of 2021 of $0.08 per share, which will be paid in early January to shareholders on record on December 17, 2021. Finally, we will continue to focus on maintaining leverage within our targeted levels of 3x net debt to adjusted EBITDA. End of the third quarter, our net leverage ratio was 2.76x, which we believe is sustainable. Now I'd like to hand you back to Rory, who will give an update on ESG initiatives being undertaken across the group.
Rory Byrne, CEO
Thanks, Johan. The fresh produce industry is delivering the most nutritious of foods to the world at the lowest environmental impact. Increasing consumption of fruit and vegetables is almost universally recommended by health leaders, doctors, and nutritionists. Proper nutrition plays a crucial role in improving the quality and longevity of lives for millions of people that are suffering in growing numbers from health issues related to unhealthy eating. In comparison to other food sources, the environmental impact from produce-related emissions and water usage is among the lowest, making it an exceptional food category to tackle the food needs of an ever-increasing world population. While the fresh produce industry is well positioned, we at Dole plc are formally committed to ambitious environmental and social targets for our company, and we intend to lead the industry on the journey to establish even more sustainable ways to operate. We have taken this journey in partnership with broad stakeholder groups while staying anchored in science and the latest research. We are dedicated to continuous improvement in sustainable production from field to porch. In 2022, Dole plc will finalize a new combined framework, materiality assessment, and a set of goals during the first half of the year. We are also committed to disclosing our emissions as a combined entity to CDP for the first time in 2022. This will include Scope 1 and Scope 2 data, and qualification of Scope 3 emissions is well underway. With that, I will provide our outlook for the reminder of full year 2021. We do still expect full year pro forma revenue and pro forma adjusted EBITDA growth. For the full year of 2021, we expect to deliver pro forma revenue in the range of $9.2 billion to $9.4 billion. We also expect pro forma adjusted EBITDA in the range of $390 million to $400 million, which reflects mid-single-digit growth compared to the prior year. For the remainder of 2021 and looking into 2022, we expect our Fresh Fruit division to continue to deliver robust performance by leveraging its significant asset base and customer relationships, as well as due to the continuing recovery in Honduras. For Fresh Vegetables, we expect to continue leveraging the strong underlying growth in the value-added segment of this division to both grow our sales and support pricing models and customer relationships that allow us to respond to cost pressures when they cannot be offset. Finally, in our two diversified fresh produce businesses, we expect to continue building on our success with key customers by leveraging the benefits of Dole plc's integrated supply chain to bring our customers even closer to source and by continuing to expand our service offerings in the marketplace. Overall, we remain confident that the excellent underlying fundamentals of our category, our primary position in this category, and our high-quality asset base and people will combine to position us for success for the remainder of 2021 and into 2022. On Slide 27, we've set out the elements of our strategy to deliver sustainable long-term growth. Our growth strategy is focused on expanding our presence in the large and growing fresh produce segment as well as continuing to focus on our core business. We're setting out to capture market share in the faster-growing categories, such as avocados, berries, value-added salads, and organic products. These categories are growing at above-average growth levels and together represent approximately 25% of our total revenue. Our integrated supply chain provides competitive advantages, and our goal will be to continue to further optimize this to unlock additional growth opportunities. We also own the leading brand in the sector, the Dole brand, which aligns quality, freshness, and a healthier lifestyle for consumers. We'll continue to utilize the strength of this iconic brand and expand its presence into additional categories and markets. We'll deepen our market penetration by continuing to focus on new product innovation and strengthening our customer relationships through enhanced customer insights. This is particularly relevant in the value-added salads category and has been a main reason for growth in this division. Finally, we've historically grown our total product through acquisitions, and we continue to look for synergistic M&A opportunities. The market is fragmented and growing, and we believe we are well-positioned to capitalize on upcoming opportunities. In closing, we're very pleased with the company's strong performance during 2021 and the outlook for the remainder of the year. Our position as the global leader in fresh produce, with a wide geographic footprint and diverse product offerings, coupled with the talent and dedication of our people, leaves us well-positioned to deliver long-term sustainable growth. With that, I'll hand you back to the operator, and we can open the line for questions.
Operator, Operator
The first question today comes from Adam Samuelson of Goldman Sachs.
Adam Samuelson, Analyst
So I guess my first question is thinking about 2021. Obviously, there's been strong performance in parts of the business, especially in the first half of the year, and specific challenges and inflationary headwinds that you've experienced in the second half. Next, to a full year EBITDA, look, it seems pretty consistent with how you would think about your long-term growth framework. With what you know today in terms of the pricing actions that you've taken, in terms of managing the inflationary environment that you're in addressing some of the specific things in the fresh vegetables. Is there a reason to think that you wouldn't be able to achieve that kind of midterm, mid-single-digit EBITDA growth in '22 or just seems like your stock remains very skeptical of that view, and I'd love to get your perspective.
Rory Byrne, CEO
Yes. Thanks, Adam. Yes, I mean, I think what you've really got to do is perhaps even look back at the history of when we were total products on a stand-alone basis. From demerger with five years back in 2006 to the creation of this new entity, we had about a compound growth of 400%. In 2019, on a stand-alone basis in total produce, we achieved over 10% EPS growth. And then in 2020, a further 9.1%. And if we were running the numbers on a stand-alone total project basis for '21, we'd have really strong numbers again. So it's a complicated world out there, lots of headwinds, lots of challenges around sudden surges and inflation. I think lots of unexpected consequences arising from the COVID crisis. The most important thing for me is that we still looked at all those challenges and the diversity of our earnings across all the different geographies that we operate in the different product segments that we operate in. We've been able to react, and we've been able to hit the target that we essentially set at the time of our IPO for 2021. And so we haven't been surprised by anything that's emerged. And with everything that we know, we've no reason to believe that we can't continue on the same path going into 2022.
Adam Samuelson, Analyst
Okay. That's really helpful. So maybe then just on capital allocation, just—and again, this comes to kind of a stock valuation point. You talked about bolt-on M&A, and that makes sense. Your leverage is slightly below the long-term target. How could we think about opportunistic share repurchase as a use of capital, particularly where the stock is now? It would just seem to be a particularly attractive use of cash with the stock trading well below the IPO price and your leverage below your target range.
Rory Byrne, CEO
Yes. I mean it's an interesting point, Adam, and obviously, we keep our eyes on all potential capital allocation opportunities open to us, including buyback. And in some ways, it’s a bit contradictory to have recently IPO-ed the company to start buybacks very quickly. But there is no doubt that we will keep that tool in the toolbox as an alternative. And I mean, clearly, at the current rating, it’s developed by even small companies that value level own the biggest company in the world. So we’re well aware of the dynamics. We’ll keep our eye on it. And it’s one of the elements of capital allocation that over the medium and long term is there for us to use.
Operator, Operator
Our next question today comes from Christopher Barnes of Deutsche Bank.
Christopher Barnes, Analyst
I guess I just want to follow up on Adam's first question on the inflationary pressures. It's good to hear that you think you can still do a mid-single-digit growth in EBITDA next year. But, I mean, it seems like we’re past the peak inflation, peak pressures on many commodities, but freight, especially, like inland transportation remains challenging, even if there should be relief coming as capacity is online and more drivers return. However, we're also starting to hear more and more about incremental labor and wage rates going forward. So, with all that in mind, I mean, Johan, you mentioned that pricing in Fresh Fruit should be enough to offset current levels of inflation in the diversified segment. They're also taking pricing later this month, but I guess to the extent you see additional pressure from here, how well do you think 2022 is protected? Are there any areas you believe need additional work from here, whether in terms of pricing or other actions on your part? Any color you're able to provide there would be very helpful.
Rory Byrne, CEO
Yes. Thanks, Christopher. I mean, obviously, we are in a very dynamic world at the moment. And as I said, in answering Adam's question, I think there have been huge consequences from the COVID pandemic that dislocation of containers, transport disruptions to the labor market, uneven demand from consumers, so lots and lots of things that have caused surges and inflation in certain categories. So far as we can, we've tried to analyze what the inflationary pressures are in certain aspects of our business; we can lock in costs for the full year. I think as Johan said as well, in the diversified fresh produce side of our business, pricing tends to be very short-term. So in that division, we really—it tends to be quite seasonal, depending on supply and demand out of different regions of the world into the market, and that tends to be more accustomed to coping with ongoing cost changes. You tend to be able to pass it through in a much more fluid way to the customers, and people are used to variable pricing in that. It’s our fixed-price areas that we’ve got to be a little bit more careful in analyzing. We’ve got some flexibility around major divergences in costs. So, who knows, Christopher, looking into 2022. We’ve been surprised by lots of things over the course of last year. So far as we can and within what’s within our control, the commitment and dedication and management, we’re feeling comfortable with where we are. Maybe Johan would like to add something further on that.
Johan Linden, COO
No, I think you are right on. We were a little bit surprised by all the price shocks that happened at the beginning of the year, and we thought maybe they would be transitional. Therefore, we were a bit slow to react. But now we have reacted, and we have the things in place that we feel we need going into the new year. We’re going to stay attentive, and we also have dialogue with customers to see if we, over time—not directly now, but over time can change some of the contracts to build indexes into the contract. We have some of those indexes already in place when it comes to fuel for North America, but we’re looking at now putting other indexes in place.
Operator, Operator
The next question comes from Patrick Higgins of Goodbody Stockbrokers.
Patrick Higgins, Analyst
A couple of questions for me, if that's okay. So firstly, just obviously, a good start to the year.H1, Q3, slightly more difficult or quite difficult. How has trading continued into Q4? Have you seen some of the challenges around supply chain or labor availability ease? And I guess added to that, how is pricing—the price increases within the fresh or the value-added salads business being received? Secondly, just on the synergies, the $30 million to $40 million, interested to hear if there's any kind of early delivery on them, or perhaps you're able to comment on the expected timeline for delivery of some of them into next year. And then finally, just on cash flows and net debt. Obviously, a strong performance to end of September. How should we think about cash flows into year-end? Should we anticipate, I guess, an improvement in net debt versus that September number? Or are there any kind of outflows we should be aware of?
Rory Byrne, CEO
Thanks, Patrick. Yes, I mean, in terms of looking at how you view H1, Q3, and Q4, I think the best way to look at that is to review the forecast I've given for the full year. And again, the most important point from my perspective is that the information that we communicated to analysts at the Analyst Day that we held before the IPO is an accurate reflection of what was going to evolve over the course of 2021. We continue to believe in those numbers, which are reflected in the full-year outlook. So I think we're comfortable with that. In terms of synergies, again, Johan might want to comment a bit further on that, but obviously, we've kicked off the process on a wide range of projects. Again, we believe there’s no reason to believe that the synergies won't flow in the same manner that we anticipated at the outset of the IPO. We’re making progress with our restructuring management to bring together the two teams in a better way. We’re dedicating resources to various projects. We’re closely analyzing and trying to build and integrate different elements of our business in categories such as berries or avocados—the berry initiative, for example, we're thoroughly examining what we have today and what we want to achieve tomorrow and how we might get there. So, again, I think the timetable for delivering the synergies will be within the outline established at the IPO. In terms of cash flows and net debt, I don’t know, perhaps Frank could address that.
Johan Linden, COO
Yes. Maybe just to add one second on the synergies. When we marketed the IPO, we indicated that the synergies would be in the medium term between $30 million and $40 million, and that would build up over time. For the number we're looking for next year, we feel relatively comfortable about it. So far, we have progressed well. We have centralized the logistics function, and we can already see some benefits in negotiations. We have merged certain sourcing activities, especially in South Africa and in avocados and berries for Europe, that is progressing well. We've moved some people over between the companies, and that's beneficial because they can explain to the other side what's going on and share the benefits from both sides. Overall, we feel positive about the synergies. I would also note that in Q3, it was expected to some extent to have a weaker performance considering the impact of last year's hurricanes; we had good pricing and strong development in the first half, but anticipated some oversupply in Q3 that occurred, which has since tightened.
Frank Davis, CFO
Yes. Patrick, as you know, in our industry, we tend to have a working capital inflow at this time of year, trending towards the end of the year. So I would anticipate maybe a slight improvement. The reason why it's tempered is that we also have some CapEx in the last quarter that might offset that. But overall, I’d expect—I'd hope for a slight improvement; it depends on timing, but overall a slight improvement, I'd expect, Patrick.
Operator, Operator
Our next question comes from Bryan Spillan of Bank of America.
Bryan Spillan, Analyst
So just two questions for me. One, just as we're thinking about the price increases that you've recently implemented, to the extent that we start seeing relief on costs, how much of that pricing do you think will end up having to be rescinded, or will it not? So I guess I'm just trying to understand how we should be thinking about matching your inflation with net pricing. And to the extent that we see inflation begin to moderate next year, would we expect that to also flow through in terms of lower prices? And then I have a follow-up.
Rory Byrne, CEO
Yes. I guess, Bryan, you must be in the optimistic category about inflation if you think it's going to recede so strongly. I think what Johan said earlier is that we’re trying to introduce a few new categories into the variable element of our annual fixed prices. For example, with the fuel surcharge, it can go up or down depending on movements in the price, and similarly for other elements.
Bryan Spillan, Analyst
Okay. And then second question, just around M&A. You mentioned it a little earlier in the call. I'm curious if with the pressure on your peers in the industry has perhaps loosened things up a bit in terms of properties you might be interested in, and could it actually accelerate or enhance the M&A activity?
Rory Byrne, CEO
Yes. I mean, I think it’s not entirely fair to say that our peers are under enormous pressure. I don’t see it quite that way. The industry is actually doing pretty well. You look at, say, the Fresh Monte results; they had a poorer third quarter, but overall, the rest of their numbers are good. If you look at the European companies that have disclosed numbers, they're doing fine. So the industry is not in a negative state in any way. The fundamentals of the industry remain strong. We had a good year. We managed to keep running well through the pandemic, despite the challenges. The dynamics haven't changed fundamentally. Obviously, we’d like to have a complete—much stronger share rating, that would make it more encouraging for us. But there hasn't been a dramatic change in the available opportunities. We've had many more people approach us, given our scale and size, expressing interest in being part of this compelling entity. So that does present additional opportunities, but we’re examining each one on its merits.
Operator, Operator
Our next question comes from Kenneth Zaslow of BMO.
Kenneth Zaslow, Analyst
Just had a couple of questions. My first one is when I think about your first half, how much of the benefit was from force majeure pricing? And then when you look forward into 2022, how does the comp compare to that? Will your net pricing—because you did talk about mid-single-digit growth—does that change how you think about the profit in 2022 on a comparable basis?
Rory Byrne, CEO
Yes. I think if you go out to '22, the dynamic over the course of the year is quite likely to be different compared to the quarterly dynamic over the course of 2021, for sure.
Kenneth Zaslow, Analyst
Can you give us some framework on how much force majeure did you actually add in the first half of 2021, just so we have a bearable modeling?
Rory Byrne, CEO
I don't think it's a question of force majeure having added anything to the equation because we had significant costs associated with the hurricane damage in both Honduras and Guatemala. It's more really just we could have valued for a slightly longer force majeure to compensate for that. It’s a complex equation, and I think we’ll see more balanced pricing over the course of 2022. It’s a little early to call that. We don’t really look at this on a quarter-by-quarter basis. We've got to assess this in the context of a full year. Yes, there can be movements from quarters year-on-year, and yes, the dynamics may differ than we expect from ’22 to ’21. But we approach this looking at the full year and are still confident of the full year ’22 outcome; however, force majeure really only covered the costs of the hurricanes in Honduras and Guatemala, and no more than that.
Kenneth Zaslow, Analyst
Okay. I'll take it offline. And then my next question is, as you've seen the pricing, can you discuss the elasticity you’re seeing with consumers? And how is that playing out?
Rory Byrne, CEO
Yes. I think if you look at bananas in particular, they’ve been relatively inexpensive for consumers. So it’s been very elastic to price. We haven't seen a falloff in consumption. You look at a broader range of products in the diversified section. As I said earlier, in that context, people are well-versed with variability in pricing depending on origin. It's not the same selling in the U.K. as in Chile, for example, and different grapes bring with them all the cost differential associated with transport. As the seasons change, consumers adapt to price. But we haven't seen any impact on demand due to price increases. The baseline for bananas, in particular, is quite low, and consumers continue to buy them, even when they’re priced slightly higher.
Kenneth Zaslow, Analyst
Okay. And my last question is, regarding the logistics issues and challenges you face, do they impact your synergy realization going forward, particularly as you're trying to expand into Europe and leverage the brand more sales-side versus cost-side? Have you noticed any effect on that?
Rory Byrne, CEO
No, I can't say we've seen any material impact from that on our synergy projects.
Operator, Operator
And our final question today comes from Roland French of Davy.
Roland French, Analyst
I think I have three on the pad. Just maybe—I just didn't pick it up, but broadly speaking, if you think of the COGS basket, where is inflation running out? And I guess, I like that, how should we think about what pricing is required to mitigate that inflation headwind? Secondly, Johan, you mentioned that customers had largely been supportive; you’ve taken the requisite pricing actions to mitigate that inflation. Just in the context of the contract negotiations within fresh foods in the banana category in January, how should we think about that, i.e., have you executed a component of the book as we sit today? But largely, there's still a lot of work to do in January with those retailers? Finally, you've kind of alluded to confidence around mid-single-digit growth in 2022. Just in terms of the shape of that, clearly, not dragging year into quarters, you’ve had a very strong H1 this year, but perhaps even just on a margin basis, could revenue be stronger in context of pricing?
Rory Byrne, CEO
Thanks, Roland. Yes, in terms of COGS inflation by category, they vary by different elements of the cost chain; paper costs have risen, fertilizer costs have risen, and transport costs differ for different operators. There are some competitive elements that are not the same for all operators facing similar challenges, so we believe we have an advantage in some cases. We don’t want to get into details regarding specific elements of inflation regarding micro elements of our cost of goods lines, but we're confident that the price increases that we are pursuing will compensate for those cost increases going forward. In terms of contracting, the process is underway at the moment, and we’re having constructive, positive interactions with all of our key customers. I suppose that underpins our confidence that we’ll be able to meet the required level of price increases. Everyone across many sectors is experiencing inflation, and that broader context makes it more understandable to customers, providing us with a better reception. In terms of growth targets for 2022, they will be broadly in line with the projections we communicated at the time of the IPO, as previously outlined.
Operator, Operator
We have no further questions in the queue, so I'll hand back for closing remarks.
Rory Byrne, CEO
Okay. I'd just like to say thank you very much to everyone for taking the time to join us on our very first earnings call and update call. This is the first time we've had this opportunity to interact with the investors and analysts since we went public. We hope you’ve gained a better understanding of our medium-term, long-term objectives as a group and a better appreciation of the scale and size of our operations, the consistency of our earnings, and the broad diversity of earnings that we hold. Thank you for your support, and hopefully, we’ll see a better share price when we come back for the next quarter. Thank you very much. Good day.
Operator, Operator
This concludes today's call. Thank you for joining. You may now disconnect your lines.