Calavo Growers reported net income of $1.3 million and a 20% increase in total revenue for the third quarter of 2022, despite changing avocado prices.
Total revenue was $342 million, compared to $285 million in the third quarter of 2021, with Grown segment sales increasing 28% and Prepared segment sales increasing 9%.
“I am pleased that our teams were able to navigate the temporary avocado price volatility that impacted both our cultivated and prepared segments, particularly in July,” said Brian W. Kocher, President and CEO of Calavo Growers, Inc. in a statement.
“Despite the volatile conditions, we achieved sequential and year-over-year improvement in our Prepared segment, driven by continued P&L growth in Prepared-RFG. However, a temporary but strong increase in input costs of fruits for our line of guacamole products removed Prepared’s overall revenue,” he added.
While volumes were 19% lower than the prior year period due to supply constraints in Mexico and deliberate measures taken to maintain margins, the average selling price of avocados in the Grown segment of the company grew by 63%.
“Avocado supply challenges and price volatility in Mexico also negatively impacted our Grown segment results in July as sales volume slowed and selling prices fell faster than we couldn’t move our inventory,” Kocher said.
“While our disciplined avocado inventory management practices helped us maintain our gross profit per carton target during the quarter, lower than expected volume put pressure on our overall profitability.
In August, the Grown segment began to recover and margins are now approaching the historical range of $3-4 per carton.
Regarding the Prepared segment, Kocher described his excitement “with the continued progress we are making with our Project Uno initiatives in our Prepared segment, as gross margins in Prepared-RFG approached 8% in the quarter, closer to our target of 10 to 12 percent.
“As the costs of purchasing avocados decrease in Mexico, we have seen a similar decrease in the costs of processed raw products in our guacamole product line,” he continued.
Calavo Growers gross profit for the third quarter was $18.5 million, or 5.4% of revenue, compared to $7.9 million, or 2.8% of revenue, for the same period last year.
Additionally, the company reported net income of $1.3 million for the third quarter, compared to a net loss of $13.0 million. Additionally, Adjusted Net Income was $2.9 million compared to an Adjusted Net Loss of $3.0 million and Adjusted EBITDA was $8.1 million compared to $1.0 million. at the same time last year.
“We generated strong free cash flow during the third quarter and used it to repay $16 million of debt, bringing our total debt reduction to $38 million since the end of the first quarter,” said Kocher added.
Discussing the outlook for avocados, Kocher said he expects margins to normalize in the fourth quarter, but cautioned volume will remain challenging in the near term.