DMC

Good day everyone, and welcome to Del Monte Corporation's second quarter 2026 conference call. Today's conference call is being broadcast live over the internet and is also being recorded for playback purposes. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. For opening remarks and introductions, I would like to turn today's call over to the Vice President, Investor Relations with Del Monte Corporation, Ms. Christine Cannella. Please go ahead, Ms. Cannella.

Thank you, Rob. Good day everyone, and thank you for joining our second quarter 2026 conference call. Joining me in today's presentation of results are Mr. Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer, and Ms. Monica Vicente, Senior Vice President and Chief Financial Officer. I hope that you had a chance to review the press release that was issued earlier via Business Wire. You may also visit the company's IR website at investorrelations.freshdelmonte.com to access today's earnings materials and to register for future distributions. This conference call is being webcast live on our website and will be available for replay after this call. Please note that our press release and our call today include non-GAAP measures. Reconciliations of these non-GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website.

I would like to remind you that much of the information we will be speaking to today, including the answers we give in response to your questions, may include forward-looking statements within the Safe Harbor provisions of the Federal Securities laws. In today's press release, in our SEC filings, we detail risks that may cause our future results to differ materially from these forward-looking statements. Our statements are as of today, July 29, 2026, and we have no obligation to update any forward-looking statement we may make. During the call, we will provide a business update along with an overview of our financial results, followed by a question-and-answer session. With that, I will turn today's call over to Mr. Mohammad Abu-Ghazaleh. Please go ahead.

Thank you, Christine. Good morning, everyone, and thank you for joining us. This quarter marks a defining milestone in our company's history. We officially stand as Del Monte Corporation, a premier organization built on decades of world-class leadership in fresh produce, now fully empowered to create exceptional value across fresh, refrigerated, shelf-stable, and prepared foods, while unlocking the complete potential of our global agricultural platform. That strategic evolution is already delivering clear, tangible results. Our foods division, created through the purchase of Del Monte Foods, rapidly validated our thesis following the acquisition in March, where we moved with speed and precision to execute a clear value creation plan built on operational discipline, targeted product focus, sharpened commercial execution, and supply chain rigor across our expanded global distribution network.

By the end of the second quarter, I'm proud to announce that our Foods division delivered profitable performance, establishing a strong operational foundation that represents just the beginning of the growth trajectory we have mapped out as we expand our branded platform. What we are building is a fundamentally stronger, more dynamic company designed to deliver enhanced earnings quality, continuous resilience, and long-term valuation expansion. For decades, Fresh has been the foundation of our success, and it remains the core of our business. Our Fresh platform delivers massive global scale, supply chain expertise, and deep retail relationships worldwide, driving our volume, powering operational leverage, and anchoring our global market presence. By pairing our Fresh strength with our expanded prepared foods portfolio, which includes the acquisition of Del Monte Foods, we now operate two distinct, highly complementary growth engines.

Our shelf-stable prepared foods category brings structurally higher margins, extended shelf life, and predictable revenue streams backed by incredible consumer loyalty to the Del Monte brand. Put simply, we have evolved into a fully diversified global food platform that balances the reach and momentum of Fresh with the margin quality and brand equity of packaged foods, positioning us to navigate market cycles more smoothly and deliver consistent long-term shareholder value. Equally transformative is how this acquisition unlocks the full strategic potential of the Del Monte brand. For nearly four decades, brand ownership was divided across separate platforms. Now, for the first time since the 1980s, the Del Monte brand is under single, unified leadership. We now directly control the global brand strategy, the innovation roadmap, and category expansion decisions, creating a major structural competitive advantage.

This unified ownership empowers us to expand retail partnerships through cross-selling across Fresh, refrigerated, and pantry categories, streamline procurement and logistics under one integrated supply chain, and leverage shared consumer insights to extend the brand into high-growth modern consumption occasions. As we execute our multi-year integration plan, our operational priorities for the remainder of 2026 remain clear and focused. First, we will drive operational rigor across our Foods division by maintaining outstanding service levels, deepening customer partnerships, and executing a high-performing pack season. Second, we will capture clear line-of-sight synergies through early cost efficiencies across procurement, logistics, SGA, and trade spend optimization. Third, we will continue investing in and growing our Fresh division, which remains our primary engine for overall revenue and operational cash flow. The performance of our first 100 days since acquiring Del Monte Foods confirms the strength of our strategy and the vast opportunities ahead.

Owning the Del Monte brand outright and leveraging our combined agricultural platform enables us to capture growth in areas this company has never reached before. I am remarkably confident in what we are building, and I believe the Del Monte Corporation of the coming decade will be a stronger, higher margin, and significantly more valuable business. With that, I will turn it over to Monica Vicente, our Chief Financial Officer, to discuss our financial results. Monica.

Thank you, Mr. Abu-Ghazaleh, and good morning, everyone. Before I review our second quarter results, I want to address the three key strategic initiatives that we believe will support our future growth and performance. We maximized our expanded production portfolio following our first full quarter of Del Monte Foods ownership. We strengthened our liquidity through our expanded revolving credit facility, and we are actively optimizing our global agricultural and production network. Each of these actions reinforces our core priorities: strengthening operational efficiency, maximizing cash generation, and elevating long-term shareholder value. Starting with our transformation and growth initiatives, the second quarter marked a successful first full quarter of Del Monte Foods ownership. Integration is moving swiftly and delivering ahead of our expectations. We acted decisively to capture operational efficiencies, and early performance supports our expectations for long-term value creation from this combination.

Reflecting this momentum, we are raising our 2026 outlook for Del Monte Foods. We now expect net sales of $625 million, up from $600 million, and adjusted EBITDA of $35 million, up from $23 million. We believe this reflects the underlying strength, margin quality, and value creation of our expanded business. During the quarter, we initiated target pricing actions, product portfolio enhancements, and trade spend optimizations. Together, these high-return focus areas are expected to generate approximately $9 million in annual margin expansion as they phase in across 2026 and 2027. Looking forward, our focus remains in completing a seamless integration, driving procurement and logistics efficiencies, and scaling our combined commercial execution. To support our expanded commercial scale and seasonal opportunities, we fortified our financial flexibility.

Earlier this month, we expanded the capacity in our revolving credit facility from $750 million to $900 million, maintaining our favorable terms through February of 2029 with the full support of our lending partners. We believe this enhances our liquidity position as working capital normalizes across seasonal harvest cycles and supports future cash conversion. Across our fresh core operations, we are proactively taking decisive return on capital actions to build an agile, cost-effective production network. In Costa Rica, strategic adjustments to our production footprint are expected to support long-term cost efficiencies. By optimizing our agricultural footprint, we are repurposing high-value land to scale our premium Del Monte Gold and Honeyglow pineapple production. This directly aligns with strong global demand for our high-margin, premium fresh offerings and positions us to pursue accelerated profitable growth into the future. Turning to our overall financial performance for the quarter.

Net sales reached $1.22 billion, up 3% year-over-year, driven by our strategic expansion into prepared categories. On an adjusted basis, net sales rose 9%. Gross profit reached $121 million, yielding a solid 9.9% gross margin despite inflationary headwinds. Adjusted operating income was $49 million, adjusted net income reached $34 million, and adjusted diluted EPS was $0.72. Adjusted EBITDA was a strong $72 million with a 6% margin, underscoring the resilience and earnings quality of our diversified enterprise model. Looking holistically at our combined total fresh operations, comprising our fresh and value-added products and banana segments, demand across our flagship offerings, particularly our proprietary pineapples, remains robust. High per-unit realizations across major international markets demonstrate the enduring strength of our brand and customer preference for our premium fresh portfolio. Our primary operational focus for our fresh business is centered on three strategies.

First is supply and logistics optimization, realigning production networks to maximize throughput, control domestic and ocean logistics, and drive margin improvements. Second is high margin focus, prioritizing capital towards our highest returning fresh premium offerings like the Del Monte Gold and Honeyglow, and maximizing yield consistency. Third is pricing and sourcing agility, expanding our global sourcing flexibility to capture favorable market pricing while maintaining delivery reliability for our retail partners worldwide. Moving on to capital allocation and outlook. Our disciplined capital allocation framework continues to deliver balanced growth and direct return of capital to shareholders. Our operating cash flow reached $94 million for the first half of 2026. Our full-year capital expenditure expectations are set between $85 million and $95 million, focused directly on expansion projects in Central America, fresh-cut growth in Europe, investments in the Del Monte Foods business, and technology investments.

Our board has declared a quarterly cash dividend of $0.30 per share, $1.20 annualized. Additionally, we repurchased $16 million in common stock during the quarter, reflecting our ongoing commitment to enhancing shareholder value. Looking at our full-year 2026 outlook, we expect adjusted net sales growth of 13%-15%. Furthermore, favorable shifts in macro-environmental cost factors are providing positive momentum. We now anticipate external cost pressures to moderate significantly to $45 million-$55 million, down from prior estimates of $60 million-$70 million, benefiting our production, ocean freight, logistics, and distribution cost profiles. Full-year gross margin expectations across our integrated business model remain firm, supported by expanding trade efficiency and strategic sourcing flexibility. For our fresh and value-added segment, our target margins are 11%-12%. For banana-

Ladies and gentlemen, we are experiencing some technical difficulties with the conference call. Please stay on the line. We will resume momentarily.

For our full-year gross margin expectations across our integrated business model remain firm, supported by expanding trade efficiency and strategic sourcing flexibility. For our fresh and value-added segment, our target margins are 11%-12%. For bananas, target margins are 3%-4% as footprint adjustments take effect. For the prepared product segment, the target margins are 14%-15%, and for other products and services, our target margins are 10%-11%. As far as adjusted EBITDA, we are targeting between $230 million and $240 million. In summary, we believe our business model is stronger, more diversified, and better positioned to enhance cash conversion. Our priorities are clear. Capture integration efficiencies, optimize our global supply network, reduce leverage as working capital normalizes, and drive disciplined shareholder return. That concludes my remarks. Operator, we're ready to begin Q&A.

Thank you. We will now begin the question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question comes from the line of Mitch Pinheiro from Sturdivant & Co. Your line is open.

Yeah, hi. Good morning. Can you hear me?

Yes, Mitch. Sorry for the interruption.

Okay.

Some technical issue.

That's okay. Yeah. That caught me off guard. Thanks for the updated guidance, the detailed guidance. That was very helpful. Let me ask, good news on the Del Monte Foods. You're sort of raising your guidance, or you are raising your guidance on sales and your adjusted EBITDA outlook. What is it in that first 100 days? Can you just maybe give us some examples as to what you're seeing, what you've been able to accomplish, and maybe where, in the next six months or the remainder of this year, what you hope to achieve in that segment?

When we acquired the assets and the Del Monte Food Company, there were many issues that they were facing. One of them was service levels; other was shortage of volumes to customers. Our management has addressed this, together with the food management, which is the core, of course, players in this game. What our management guidance, we have reached service levels, which could be the maximum in any food service environment, 95% and above delivery on time, as well as delivering volumes when the volumes are needed, which is very, very important in this business, of course, as you know. Rationalizing our product lines, the SKUs. We are in the middle of the harvest and packing season for the green beans, corn, and other products. This is going full speed and scale.

Distribution and logistics have been rationalized and still will be going rationalization, especially storage and warehousing, which is a very important part of the business. That's something that we have rationalized in some ways, but we still believe that within the next 12 months, we will be able to maximize that rationalization. Of course, that will result in very significant cost savings and efficiencies. These are just part, as well as the pipeline. We have several products that are in the pipeline and new products that will be introduced probably starting by the end of this year, going into 2027. That's in short summary, how we are going forward with the food division. As I mentioned earlier, what I just said earlier, the scope and the magnitude of our ability to Integrate food and Fresh together is significant. Is really a dream.

We're very optimistic and very bullish for the future.

I guess the question, looking at this year's adjusted EBITDA and sales, is, "Is it a 5.6% EBITDA margin?" Is that just a reflection of only really having to run Del Monte Foods or the food assets for just nine months? Is that what that is, or? Because I would expect your EBITDA margin to be in the double digits, obviously, at some point. Is that where we're heading, and is that the reason why it's not there yet?

Absolutely right. Don't forget that this year, in particular, Mitch, with all the headwinds we are facing since beginning of the year, with everything that is going on around the world. We have so many headwinds, and all fronts being the transportation, logistics, supply chain, and the costs and the fuel transportation. It's not a normal year, let's say. Hopefully, 2027 could be a normal year again. That would reflect significantly on the results and the cash flow.

I agree with you, Mitch. Our EBITDA margins going forward should be in that range that you mentioned.

Okay, great. It was nice to see the costs coming down. What are the costs that $60 million-$70 million down to, I guess you said, I think $45 million-$55 million, I wrote down?

55.

Is that—

Go ahead.

What comprises the reduction?

It's basically bunker fuel, diesel, fertilizer. We feel, and we see, that the markets have pulled back, and they're not as negative as they were when we first announced these expectations. We have made also some changes on how we do things, how we're buying our products, our raw materials. We're seeing an improvement.

The Costa Rican Colón, is that still a problem?

That's still a headwind. Yes, that's still a headwind.

Okay, got it. On the banana side, lower volumes, or I guess weak demand in North America, is that weak demand, is that where you've maybe walked away from some unprofitable or less profitable business? Or are you actually seeing consumption declines in that segment?

I don't think it's

As a category

Consumption decline. I don't think it's consumption decline. I think there were, unfortunately, competition has been extremely severe during the last six, seven months.

Yeah

From different players, as well as higher cost at the origin. Going forward, I believe that situation cannot be sustainable, cannot continue like this because, for argument's sake, today, some competitors are selling fruit in the market for $11, while the cost at the farm is FOB is almost over $11. That gives you an idea of what is happening in the market. I believe we rationalize our volumes in order not to go into this kind of vicious circle, which never ends. We are rationalizing our supply as well, sourcing itself, like we said earlier, like Monica mentioned. We will be only sourcing fruit from where it makes sense to be able to be competitive in the market. Banana is an important part of our business, and this is what we will continue to focus on, but in a much more, I would say, rational way.

This points, Mitch, to the exit of some banana farms in Costa Rica and repurposing the land for our most important products, which is one of them is Del Monte Gold and Honeyglow.

Just to give you an idea.

Yeah.

That's because of the exchange rate in Costa Rica. The cost per box went up over $2 in the last year, just because of the exchange rate. Just think about that.

Right.

That gives you.

Those four farms, I'm sorry.

It doesn't seem that the exchange rate is going to reverse or go back to what it used to be. I don't believe so. I think we are going to make some decisions where it makes sense to us as a company and our interests going forward.

The four farms that you've closed on the banana side and repurposing, is that on the East Coast or West Coast?

These are on the East Coast.

Okay. Of those four farms, what percentage of the total banana of your own production was those four farms that you closed, roughly?

It's small, actually. The total picture is small.

Yes, about 5% of the Costa Rica production, but still.

Okay. On the pineapple side, you mentioned in the release higher production costs. Is that on the fertilizer or on that side of the cost side, or is there yield issues or anything along those lines?

On the pineapple, it's the same as everything else. The fertilizer, the diesel, the exchange rate in Costa Rica—that's what's really impacting the pineapple.

I didn't see the Q yet, but how were pineapple sales in the quarter?

They were strong. The volume was a little bit lower this quarter than previous year, but it's just a cycle from the growing cycle. Very strong, higher pricing.

Okay. Great. I guess, last question, just going back to bananas. I haven't heard any updates on the Black Sigatoka or Panama disease. Any update that you could give us on the outlook there?

Yeah. Well, Sigatoka is getting worse, to be honest with you. It's sort of, especially this year is a lot more rainfall than previous years. The more rain you get, the more Sigatoka infection spreads. As far as the TR4, the Panama disease, you know that it has been reported that it's spreading in Ecuador further. As I said on many occasions before, it's not if, it's when, and I think that is going to definitely spread to Central America itself down the road. This is not a situation that will happen overnight. This can take 10, 15 years; ultimately, it will happen. I'm very convinced of that.

Okay. I guess just my final question is on your fresh-cut business. How did that perform in the quarter, and any update on the outlook there?

Fresh cut did well. It didn't increase from last year, but it stayed steady.

It's consistent, Mitch.

I'm sorry, I missed that.

I said the business is consistent.

Okay.

Some variables would be because of fruit cost, because what's happening in the market, supply chain, things like that. There were a little bit some difficulties, especially shipping from Mexico, Brazil, Peru, and things like that, sourcing. There were hiccups, but all in all, it's consistent business, and we have kind of a front position in that market.

Sale pricing was strong, definitely same as with every other product; we were impacted by some of the inflation; still, demand is strong.

Okay. Well, that's all I have. Thank you for your time.

Thank you, Mitch.

Thank you, Mitch.

If you'd like to ask a question, press star one on your telephone keypad. Your next question comes from the line of Anja Soderstrom from Sidoti. Your line is open.

Hi, thank you for taking my question, and congratulations on the acquisition of Del Monte and this new chapter of the company. I'm just curious with the top-line synergies. Can you just sort of double-click on that and what some sort of near-term opportunities there you see in terms of cross-selling and maybe innovation?

Well, innovation, that's something that we will announce when it is already in the market. As I mentioned earlier, some products will start going into the shelves sometime at the end of this year. A lot more will be during 2027. There has been products that have been under development before we acquired Del Monte. Some of these were kind of max. We put it on a fast track and others that we kept on the back burner. We will be announcing, and the market, of course, will be informed of all these products when the time comes.

Okay. Thank you. Looking forward to that.

We will be introducing products that will be innovative and make a huge difference for the category that we are in.

You will be able to cross-innovate between the Del Monte Foods and Del Monte Fresh?

Absolutely. Between the Fresh and the food, there will be a lot of synergies. Just to give you an idea, Pinkglow pineapple, for instance, we were not being able to put it in any kind of packaging before. Now, hopefully, by the end of the year, this Pinkglow pineapple will be packaged as our grapefruit and other segments in syrup. It will be in the market within, hopefully, the next three, four, five months.

Okay, thank you. I'm just curious; you were talking about the adjustments to the footprint in Costa Rica with the purchasing of the land for pineapples. What is the timing of that, and what goes into that in terms of costs, and when will you start seeing revenue coming in from those pineapples?

That's more of a long-term. Growing the pineapple has a long growing cycle, so it's about a three- to four-year cycle. It's important to keep those lands for the higher-margin products. This is very high-value land, and we can grow pineapple there, but it is a long growing cycle.

Okay, did I understand correctly—

I will follow up.

I'm sorry, yes

On what Monica just mentioned, that the benefit will appear very quickly because once we shut down these farms, the losses that we were incurring on running these farms will be immediately eliminated, and it will show up on the bottom line. That's very important. Aside from using these lands to maximize the value of these assets, it depends on how quickly we will transform it into pineapple. It could be three, four years if we are not too agile. I think we will be agile, and this could be shortened by a year or a year and a half.

Okay. Thank you for that clarification. That was helpful. I'm just curious; I thought you said you were also starting to repurposing some banana farms.

Yeah, that's the whole idea, is to every farm that is very excessive into cost and will never be viable, that farm will be shut down and turned into some other product, which mainly would be the pineapple.

Okay, it's the same there. The cost will go away quite quickly, but it will take a couple of years for that to produce something again.

Of course. After shutting these farms, you will take at least two years to start seeing the production of pineapples.

Okay. Thank you. That was all for me.

Pleasure.

Thank you.

As there are no further questions, I will now turn the call back over to Mr. Mohammad Abu-Ghazaleh for closing remarks.

I would like to thank everyone for participating on this call and hope to talk to you next time or with even more exciting news. Thank you very much, and have a good day.

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Good day everyone, welcome to Fresh Del Monte Produce Q1 2026 Conference Call. Today's call is being broadcast live over the Internet and is also being recorded for playback purposes. We will have a question and answer session. If you would like to ask a question, simply press star then the number one on your telephone keypad. If you'd like to withdraw that question, again, press star one. Thank you. For opening remarks and introductions, I would like to turn today's call over to the Vice President, Investor Relations with Fresh Del Monte Produce, Ms. Christine Cannella. Please go ahead, Ms. Cannella.

Thank you, Krista. Good day everyone, and thank you for joining our Q1 2026 conference call. Joining me in today's discussion are Mr. Mohammad Abu-Ghazaleh, Chairman and Chief Executive Officer, and Ms. Monica Vicente, Senior Vice President and Chief Financial Officer. I hope that you have had a chance to review the press release that was issued earlier via Business Wire. You may also visit the company's IR website at investorrelations.freshdelmonte.com to access today's earnings material and to register for future distribution. This conference call is being webcast live on our website and will be available for replay after this call. Please note that our press release and our call today include non-GAAP measures. Reconciliations of these non-GAAP financial measures are set forth in the press release and earnings presentation, which is available on our website.

I would like to remind you that much of the information we will be speaking to today, including the answers we give in response to your questions, may include forward-looking statements within the Safe Harbor provisions of the Federal Securities laws. In today's press release and our SEC filings, we detail risks that may cause our future results to differ materially from these forward-looking statements. Our statements are as of today, May 5, 2026, and we have no obligation to update any forward-looking statement we may make. During the call, we will provide a business update along with an overview of our financial results, followed by a question and answer session. With that, I will turn today's call over to Mr. Mohammad Abu-Ghazaleh. Please go ahead.

Thank you, Christine. Good morning, everyone, and thank you for joining us. Following up on our last quarter, we reached an important milestone this quarter with the closing of the Del Monte Foods transaction, bringing the brand back under a single owner for the first time in nearly four decades. The quarter included approximately one week of contribution from the acquired business, so the financial impact in the quarter is limited due to timing. We are encouraged by the initial performance of the Del Monte Foods business, and we see clear opportunity as we begin to thoughtfully scale the business and believe there is a meaningful opportunity to realize the full potential of these assets. As I mentioned during our last call, this acquisition is not expansion for expansion's sake. It's alignment, bringing the brand, the portfolio, and the platform back under a single focused owner.

This acquisition not only reunites one of the oldest and most recognized brands in the world, but it also positions us to operate from a more complete platform, expanding our presence across both the perimeter and center of the store and allowing us to offer customers a broader, more integrated portfolio. Our priority during this early phase remains continuity, ensuring stability for customers, partners, and employees while taking a disciplined approach to evaluating the business and identifying where we see the strongest opportunities. We are focused on strengthening the platform, prioritizing key customer relationships, and building a more focused, high-quality portfolio over time. It is important to dedicate a portion of today's call to discuss the broader environment shaping our business, the industry, and the global food system.

The conflict in the Middle East has introduced a meaningful shock across key inputs fundamentals to food production, energy, fertilizers, packaging, and transportation. There is no part of agriculture that is not energy-dependent, from inputs to packaging to transportation. As a result, movements in every energy cost do not remain isolated. They cascade through the entire system. Agriculture does not operate in real time. The timing of impact varies meaningfully by category. In crops like pineapples, for instance, where production cycles extend to approximately 18 months, the inputs being deployed today will be reflected in cost and pricing later this year. Bananas, by contrast, move more quickly through the system and therefore respond more immediately to changes in input costs.

As a result, the pressures that emerged during the quarter are now embedded in the system and will continue to move through the value chain in the periods ahead, regardless of how conditions in the Middle East evolve from here. We are already seeing this dynamic take hold from higher fertilizers and packaging costs to increased ocean freight and inland transportation driven by fuel and labor. The impact is more pronounced in our fresh business, given its production cycles and input intensity, while other parts of the portfolio are affected differently based on their supply chain structures. This is not a short-term volatility. It's a natural transmission of input costs through a global time-lagged system. The situation remains dynamic, and we are managing the business with discipline and flexibility. This is an environment we are well-positioned to navigate, but it will not be without challenges.

We expect pressure to build in the coming quarters, particularly in the Q2 and Q3, as these costs continue to flow through the system and the full impact move through the value chain. Our global footprint, diversified sourcing, and integrated supply chain enable us to adjust and respond across markets, while our scale and disciplined execution position us to manage through this period effectively. These are the conditions where those advantages become most evident. We have navigated complex operating environments before. We will continue to do so with clear focus on execution, cost management, and operational efficiency. With that, I will turn it over to Monica Vicente, our CFO, to discuss our financial results.

Thank you, Mr. Mohammad Abu-Ghazaleh, and thank you everyone for joining us this morning. I will begin with our Q1 results and then share our expectations for the year ahead. I will cover key items affecting comparability, most notably the Del Monte Foods acquisition and updates to our segment reporting structure. We closed the Del Monte Foods acquisition late in the quarter. Results include one week of contribution and have no meaningful impact on the Q1 results. We are assessing the cost structure and spending profile to establish a near-term cost baseline while identifying efficiency opportunities we expect to execute over time. We are also evaluating the operating footprint, including a recent purchase of a warehouse previously leased by Del Monte Foods in Wisconsin with a focus on optimizing asset utilization and portfolio alignment across our facilities.

We paid a total cash consideration of $308 million, which included $285 million base purchase price, plus $23 million in cash, representing wind down and closing costs, along with adjustments for working capital associated with the transaction. The acquisition was funded through a combination of cash on hand and borrowings under a revolving credit facility. The consideration closely approximated the fair value of the identifiable net assets acquired. The acquisition is expected to be accretive to net sales by $600 million and Adjusted EBITDA by approximately $23 million in 2026 as operations normalize. As a result of the acquisition, beginning this quarter, we updated our Business segment reporting to better align with internal management reporting. A new reportable segment, Prepared Foods, combines the Del Monte Foods business acquired with our existing Prepared Foods operations.

Prior period segment information has been recast for comparability. We also completed the previously announced divestiture of Mann Packing in December 2025. Our Q1 results reflect continuing operations. Prior period comparisons are presented as reported and where applicable on an adjusted basis with reconciliations in today's earnings press release. With that context, I will turn now to our Q1 financial performance. Year-over-year results reflect portfolio changes following the divestiture of Mann Packing alongside pricing, volume, cost, and foreign exchange dynamics, as well as the recent geopolitical developments. Net sales were $1 billion, primarily driven by lower net sales in our Fresh and Value-Added Product segment. This reflected the divestiture of Mann Packing and lower net sales in our avocado product line due to industry-wide oversupply, which resulted in lower per unit selling prices.

The decrease was partially offset by the initial contribution of Del Monte Foods and the favorable impact of fluctuations in exchange rates, primarily the euro. Gross profit was $89 million, reflecting lower gross Other Products and Services and prepared foods segment, where results were impacted by lower selling prices in our poultry and meats business due to softer demand and the conflict in the Middle East. In our Prepared Foods segment, higher per unit production costs weighed on results. Gross profit was generally affected by supply chain disruptions in the Strait of Hormuz and the unfavorable impact of a stronger Costa Rican Colón. These impacts were partially offset by higher per unit selling prices in our Banana and pineapple product lines, as well as the contribution of Del Monte Foods. Gross margin increased to 8.5%.

Adjusted gross profit was $91 million, and adjusted gross margin was 8.7%. Operating income was $20 million, primarily driven by higher asset impairment and other charges net. Adjusted operating income was $40 million. Asset impairment and other charges were related to the Prepared Foods acquisition. Income from equity method investments was $7 million. The increase reflected higher equity earnings from unconsolidated investments, primarily from distributions received in excess of our carrying value upon the liquidation of a fund in which we previously held an interest. Fresh Del Monte net income was $10 million, and on an adjusted basis, Fresh Del Monte net income was $30 million. We delivered earnings per share of $0.21 and adjusted earnings per diluted share of $0.63.

Adjusted EBITDA was $58 million, with a margin of 6% as a percentage of net sales, reflecting disciplined cost management amid a dynamic cost environment. I will now go into more detail on the quarter performance for each of our business segments, starting with our Fresh and Value-Added Product segment. Net sales were $549 million, primarily driven by strategic reductions in our fresh and fresh cut vegetable product lines, reflecting the divestiture of Mann Packing, as well as lower per unit selling prices in our avocado product line, driven by industry-wide oversupply. These declines were partially offset by higher net sales in our pineapple product line, reflecting higher per unit selling prices and the favorable impact of exchange rate movements, primarily the euro.

Gross profit was $60 million, driven by the divestiture of Mann Packing, which generated negative gross profit in the prior year, as well as higher per unit selling prices in our pineapple product line. The increase was partially offset by higher per unit production costs, as well as weather-related events in North America that negatively impacted sales volume in our fresh cut fruit product line and contributed to lower per unit selling prices in our melon product line. Gross margin increased to 10.9%. Adjusted gross profit was $61 million. Turning to our Banana segment. Net sales were $357 million, primarily driven by lower volume and market disruptions across regions, including adverse weather and supplier changes. The decrease was partially offset by higher per unit selling prices across all regions and the favorable impact of fluctuations in exchange rates.

Gross profit was $16 million, driven by higher per unit production and procurement costs, partially offset by higher per unit selling prices. Gross margin was in line at 4.6%. Adjusted gross profit was $18 million, and adjusted gross margin increased to 5%. Moving to our Prepared Foods segment. Results reflected one week of contribution from the Del Monte Foods acquisition, along with contributions from our existing Prepared Foods operations. Net sales were $83 million, including $22 million of net sales from the acquisition, partially offset by lower net sales in Europe due to supply availability constraints of pineapple used in our canned pineapple product line. Gross profit was $9 million, primarily driven by lower net sales in Europe and higher per unit production and distribution costs. Gross margin decreased to 10.8%. Lastly, results for Other Products and Services segment.

Net sales were $56 million, driven by higher net sales of our third-party freight services business, partially offset by lower net sales in our poultry and meats business due to lower per unit selling prices. Gross profit was $4 million, and gross margin decreased to 6.8%. Moving to selected financial results for the Q1 of 2026. Our income tax provision was $8 million, reflecting changes in the global tax and regulatory environment and higher earnings in certain jurisdictions. Net cash provided by operating activities was $44 million. Cash flow was primarily driven by net earnings and partially offset by higher non-cash items, including asset impairments, as well as working capital movements, mainly lower inventory levels and higher trade receivables due to the timing of period-end collections.

Turning to capital allocation, at the end of the Q1, long-term debt stood at $438 million, and our average adjusted leverage ratio is at 1.4x EBITDA. This compares to $173 million in long-term debt at year-end, with the increase reflecting the closing of the Del Monte Foods acquisition. Capital expenditures totaled $14 million during the quarter, reflecting pineapple expansion and packing facility construction in Costa Rica, equipment investments in Kenya, and the replacement and maintenance capital. As previously announced, our board of directors declared a quarterly cash dividend of $0.30 per share payable on June 11, 2026, to shareholders of record as of May 19, 2026. On an annualized basis, this equates to $1.20 per share, representing a dividend yield of approximately 3% based on our current share price.

During the quarter, we repurchased 100,000 shares of our common stock for $4 million at an average price of $40.24 per share. As of March 27, we had $160 million available under a $150 million share repurchase program. Together, our capital allocation actions during the quarter, including dividends, share repurchases, and the completion of the Del Monte Foods acquisition, reflect our balanced approach to capital deployment. We continue to prioritize reinvestment in the business and a competitive, reliable return to shareholders. Turning to our outlook for the full year of 2026. We are providing our expectations for our Business segments and key financial priorities, including SG&A, capital expenditures, and cash flows. This outlook is based on the information available to us today and our experience managing through comparable industry and macroeconomic cycles.

Given the current environment, our priorities for 2026 are clear. First, protecting the long-term earnings power of the portfolio. Second, maintaining balance sheet and liquidity flexibility. Third, managing through near-term volatility with discipline. Our 2026 outlook reflects Fresh Del Monte Produce's continuing operations. It excludes the Mann Packing business exited in December 2025 and includes nine months of contribution from Del Monte Foods transaction. We expect net sales on a continuing operation basis to increase between 13% and 15% year-over-year, reflecting execution across our base business and the contribution from the Del Monte Foods transaction, which we expect will contribute $600 million of net sales in 2026. As discussed, developments in the Middle East have driven higher energy, shipping, and commodity input costs.

Based on current assumptions and observable market conditions, we estimate the impact of these cost pressures to be approximately $40 million-$45 million, which will impact us starting in the Q2. These impacts are primarily related to ocean freight costs, including bunker fuel and war-related surcharges, inland transportation, fertilizer, and packaging costs, consistent with recent elevated oil and fuel price trends. Our outlook also reflects approximately $20 million-$25 million of headwinds over the balance of the year, roughly 50% from foreign exchange impacts, primarily related to the Costa Rica colon, and the remainder driven by higher domestic transportation and logistic costs resulting from shortage of driver availability in the U.S. Separately, tariffs implemented beginning in March 2025 continue to function largely as a passthrough. Tariffs had a modest impact in the Q1.

Given the uncertainty around recoverability and timing, we have not assumed any tariff refunds. In Bananas, near-term industry supply and cost dynamics, combined with trade dislocations following Middle East-related disruptions, are creating incremental volume pressure in North America and Europe markets, which is reflected in our guidance. At the same time, per unit costs are higher, driven by lower production from Costa Rica and the disease management efforts on our own farms. Fertilizer inflation has added further pressure. These headwinds are reflected in the segment gross margin ranges we are providing today. Consistent with our established cost management approach, our outlook reflects a disciplined and active response to the current environment. This includes targeted pricing actions where market and customer dynamics support them, contractual fuel recovery mechanisms, and continued focus on cost containment and operational efficiency.

Just as important, it reflects ongoing deliberate trade-offs around timing, mix, and service to protect customer relationships, sustain throughput, and preserve long-term earning capacity during a period of elevated volatility. Turning to gross margin expectations by segment. In our Fresh and Value-Added Product segment, we expect gross margin to be in the range of 11%-12%, compared with 14% last year. This reflects higher per unit production and distribution costs across the segment, as well as industry-wide supply constraints and pineapple volumes that limit our ability to fully benefit from increased market demand from our premium pineapple varieties. In our Banana segment, we expect gross margin to be in the range of 3%-4%, consistent with the cost, supply, and market dynamics discussed before. In our Prepared Foods segment, we expect gross margin to be in the range of 13%-14%.

This reflects the combination of Del Monte Foods transaction, which brings an inherently higher margin branded CPG profile with our existing Prepared Foods operations, as well as integration, timing, input cost volatility, and mix across geographies. Importantly, the reported range does not yet reflect the full margin potential of the Del Monte Foods platform as integration Other Products and Services segment, we expect gross margin to be in the range of 12%-13%, consistent with prior years. Selling general and administrative expense is expected to be in the range of $270 million-$280 million, reflecting the inclusion of Del Monte Foods and our intentional shift toward a branded CPG operating model, which carries a higher SG&A profile than our historical fresh produce operations.

This range also includes wage inflation and targeted investments in technology and organizational support to operate and scale a global branded foods platform. Capital expenditures for the full year are expected to be in the range of $85 million-$95 million, focused on production expansion in Central America, growth in our fresh food and Prepared Foods operations in Europe, a recent warehouse investment and other investments related to the Del Monte Foods acquisition, as well as investments in core technology systems. For the full year, we expect net cash provided by operating activities to be in the range of $40 million-$50 million, which reflects lower cash generation than we historically produced as a pure fresh produce company. With the addition of Del Monte Foods, our cash profile now reflects the seasonal working capital dynamics of a branded CPG business.

This includes higher working capital requirements in the Q2 and Q3 as inventories are built to support seasonal packing and processing activities that ramp through the harvest season and peak from summer through fall. As those inventories convert to sales, we expect stronger cash generation in the Q4 and into the Q1, driven by peak demand during November and December holiday season and again around the Easter holiday period.

Due to the timing of the acquisition, working capital needs will be higher in 2026 than in future periods. In summary, while the operating environment remains challenging, we believe the underlying fundamentals of our portfolio are sound and our focus remains on disciplined execution, prudent capital allocation, protecting long-term value, consistent cash generation across the full operating cycle, and maintaining flexibility and financial resilience as conditions evolve. This concludes our financial review. We can now turn the call over to Q&A. Krista?

My apologies. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, again, press star one. We'll pause for a moment to compile the Q&A roster. We have no questions at this time. I would like to turn the conference back over to Mr. Mohammad Abu-Ghazaleh for closing comments.

Thank you, Krista. Thank you for everyone for joining us today and hope to speak with you on our next call, at the Q2. Thank you, everyone, and have a good day.

Well, ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.