Dole posts lower first-quarter profit despite higher sales

Q: Why are Dole's profits falling when consumer demand and sales are hitting record highs?

Dole’s profits are falling because its costs are rising faster than its sales. The company’s first-quarter revenue rose 12% to $2.34 billion on strong demand and higher prices for bananas, pineapples and plantains. But that top-line growth did not translate into higher earnings because operating income weakened. Dole said profit was hurt by higher tax charges and lower equity-method earnings, and the year-ago quarter also benefited from a $6.9 million non-cash M&A gain that did not repeat. The bigger issue is margin pressure in a business that already runs on thin margins. Fresh fruit adjusted EBITDA fell 17%, largely because fruit sourcing costs increased. Higher shipping, fuel and logistics expenses have also become a heavier burden, especially as conflict-linked disruption in the Middle East has pushed up energy, freight and fertilizer costs and complicated global transport routes. Currency effects also distorted the picture. Foreign-exchange translation added roughly $96 million to revenue, helping reported sales, but that does not necessarily improve profitability. In some segments, currency and cost pressures still squeezed margins. So the gap is straightforward: Dole is selling more produce and often at higher prices, but the cost of sourcing, moving and financing that produce has climbed sharply, while taxes and weaker affiliate income further reduced net profit. That is why sales can hit records even as earnings per share slip and investors react negatively.

1 articles · Updated · MarketWatch · May 11

The Dublin-based group reported net income of $31.3 million, or 33 cents a share, as revenue rose 12% to $2.34 billion, beating analysts' $2.23 billion estimate.
Adjusted earnings were 33 cents a share, below the 34 cents expected, while fresh fruit sales rose 6.8% and diversified fresh produce revenue increased 15% in Europe and the Middle East and 16% in the Americas.
Dole said robust consumer demand supported growth despite operating complexity from the Middle East conflict, reaffirmed full-year adjusted EBITDA of at least $400 million, and shares fell 3.2% in premarket trading.