Fresh Del Monte Produce Inc (FDP) 2003 Q3 法說會逐字稿

Ladies and gentlemen, good morning. My name is Brad Boucher and I will be your conference facilitator today. Please note that today's call is being recorded. At this time, I would like to welcome everyone to Fresh Del Monte Produce's third quarter 2003 earnings results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question and answer period. If you would like to ask a question during that time, simply press star then the number one on your touchtone phone. And if you would like to withdraw your question, please press the pound key. At this time, I would like to turn the program over to your host Ms. Dana Weinstein. Ms. Weinstein, please go ahead.

Thank you, Brad and good morning everyone and welcome to Fresh Del Monte third quarter 2003 conference call. I am Dana Weinstein, Vice President of Finance and Corporate Development. Joining me today are Chairman and Chief Executive Officer Mohammed Abu-Ghazaleh and Executive Vice President and Chief Financial Officer John Inserra, who will discuss our results for the quarter ended September 26, 2003. We released our results this morning via business wire e-mail and First call. If you have not received a copy of our earnings release, please contact Eva Torez (ph) at 305-520-8156. You may also visit our website at www.freshdelmonte.com to register for future distributions. This conference call is also being webcast live on our web site and will be available for replay approximately two hours after the conclusion of this call. To those listening to this call live via webcast, or those of you who are participating in a listen-only mode, please feel free to contact me directly with any questions following today's call. My number is 305-520-8278. This morning Mohammed will review our quarterly operating performance, recent developments and outlook. After which John will review our financial performance during the third quarter and over the last nine months.

Before we turn the call over to Mohammed, please let me remind you that much of the information we will discuss this morning including the answers we give in response to your questions may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These forward-looking statements are intended to fall within safe harbor provisions at the Securities Laws. Our actual results may differ materially from those in the forward-looking statements as a result of various factors including those described under the heading `description of risk factors in the company's Form 20-F for the year ended December 27, 2002. With that I would like to turn this call over to Mohammed Abu-Ghazaleh. Mohammed?

Thank you Dana, and good morning everyone. I would like to take a moment to welcome Dana Weinstein to Fresh Del Monte. Dana joins us from Morgan Stanley where we she worked closely with our management team. As Vice President of Finance and Corporate Development, Dana will be heading up our M&A and Investor Relations activities. I would like to ask you to join me in welcoming Dana of Fresh Del Monte. I'm pleased to report solid financial performance during Fresh Del Monte's third quarter of 2003. Net sales rose 13% to $564m compared with $499m in the third quarter of 2002. Net income increased 5% to $34m from $33m last year at this time. Earnings per share climbed to $0.60 compared with last year's third quarter EPS of $0.57. This favorable comparison illustrates our ongoing commitment to meet or exceed our financials objectives. We achieved these results in spite of tough market conditions brought on by the heat wave in Europe and unfavorable weather conditions in the US, which impacted banana and tomato profitability during July and August with some rebound in September. Our performance is a testament to the success of our initiatives to enhance our product lines through diversification and value-added services. These efforts provide us with the resilience we need to deliver steadily. Sustainable performance even under temporary (ph) challenging market conditions.

Fresh Del Monte's financial position also continues to gain strength during the quarter. We maintain no outstanding debt on our revolving credit lines and we amassed a significant cash position on the balance sheet accumulating a record 82m compared to the 10m at the beginning of 2003. These ample of cash resources provide us with a platform to execute our growth strategy and they afford us the financial strength and flexibility to capitalize on acquisitions opportunistically. As you know, we recently announced our eighth consecutive quarterly cash dividends. We also doubled the quarterly dividend from $0.10 to $0.20 per share, an increase that highlights our strong earnings, our confidence in the future and our board's long-standing commitment to return value to shareholders. Let's now review the results from our product lines. Although melons, grapes, and non-tropicals all performed well. During the quarter, our star performer was flagship Del Monte Gold Extra Sweet pineapples. Gold pineapples pricing continued to be strong and net sales was driven by increased volumes in Europe and North America. Our competitive position in Del Monte Gold continued hold firm in existing markets and to grow stability in new ones. Speaking of the competitive landscape, as you know there was an article recently in the Wall Street Journal that focused on the Del Monte Gold Extra Sweet Pineapple and on raising competition in the Gold Pineapple category. Some of you correctly noticed that the information related to increased pineapple competition was not new news.

Competition has been heating up in the pineapple category for several years as other interested (ph) participants' attempt to gain traction in the rapidly expanding Gold Pineapple business. Nonetheless, we continue to be confident in the strength of our market position, the future of our market - of our product and the sustainability of our pricing. We feel this way for several reasons. First, Del Monte Gold Extra Sweet offers the superior taste that consumers want, as well as the consistently high quality fruit with a longer shelf life that retailers and consumers demand. As a matter of fact, a side note, we have received - since the article was published in the Wall Street Journal, we have received so many emails from consumer that never tried the Del Monte Gold before, and they were complimenting us on the product after they bought and tasted it. Second, we enjoy a leading competitor position in almost every market in which we operate. Third, prices and volumes remain high, even as we enter new markets in Central Europe and South America. And finally, we are well ahead of our competitors in terms of long-term product development. The Wall Street Journal story highlighted the growing consumption trends in the gold pineapple business, as well as the fact that the market continues to expand significantly. It also positions the name and attributes of the Del Monte Gold Extra Sweet pineapple on the front page of an Asia business publication. As a result, we believe that we reached a new audience of potential consumers who might now sample our gold pineapple.

Finally, the story pointed out Fresh Del Monte's industry leading pineapple expertise and it created a public platform for us to introduce our exciting new pineapple variety, Del Monte Honey Gold, about which we issued a press release last Wednesday. Fresh Del Monte Produce has won the HARP reputation (ph) as the most innovative fresh and fresh-cut produce company in the world. This reputation for innovation would be further reinforced by the Del Monte Honey Gold introduction. The new pineapple, an extension to our existing pineapple product line, was developed after five years of extensive research and testing by our world class R&D team. Our focus efforts have resulted in a new pineapple that has a distinctive look, flavor and aroma, as well as an exceptionally long shelf life. We are confident that the introduction of the new Del Monte Honey Gold will further fortify our global leadership positions and increasing the competitive pineapple categories. While our launch of this exciting new product reflects our long-term strategic commitment to product line diversification, it also clearly amplifies Fresh Del Monte's defining strategy and prevailing corporate culture.

To stay well ahead of the competition at every time we implemented strategy with the same intense focus and discipline as leading package goods or pharmaceutical companies do in their own highly competitive arenas. In our case, while our competitors are trying to dater to play catch up with the Fresh Del Monte in the Gold pineapple arena, we moved aggressively five years ago to fill the lengthy pineapple pipeline with additional new pineapple products. These new products will instantaneously enable us to secure our overall pineapple franchise, drawing new customers and maintain our formidable lead on the competition, just as we have - since we first produced the Del Monte Gold Extra Sweet Pineapple in 1996. Another area where we outpaced the competition is in global fresh-cut arena. We're growing this business steadily every day, every week, every month. We have an increasingly global efficient delivery capability and we are moving increasing volumes of consistently high quality fresh fruit through the system to grosser retailers and high volume institutional and fruit service chains. For example we are making significant progress with Starbucks, which is selling our product in select US markets, and we continue in test markets with Wendy's, with these and other initiatives, - through these and other initiatives we see tremendous growth potential for our fresh-cut business in the future.

The integration of our balance-based acquisition continues to advance, and we are now seamlessly moving our products through One (ph) and other distribution outlets. We are also installing tomato and potato repack equipment in six of our existing distribution centers thereby expanding our market reach and further broadening our range of value added services. The repack business now represents 14% of all North American sales of Fresh Del Monte Produce. Since there was some discussion in the Wall Street Journal article about our previously disclosed litigation and the SEC enquiry, I would like to emphasize that the article did not provide any information that we have not already disclosed. Of course we'll keep you updated of any development in the future. Maintaining high quality standards continue to be a key strategic focus for Fresh Del Monte and we are pleased that we are the first multinational fresh produce company in the world to receive EUREPGAP certification. The fact that we have met these standards signals the European retailers and consumers that the fresh produce from our certified operations is of the highest quality and that it meets the strictest food safety standards. This certification could generate even more new opportunities for us with large European and global retailers in the future. At this point I would like to John to take over and give some financial information. John?

Thank You Mohammed. As Mohammed said, we are very pleased with our results for the third quarter and for the first nine months of 2003. We saw a year-over-year improvement in most metrics with net sales, net income, and EPS increases as well as a continuing decline in debt and a steady rise in cash. These healthy results highlight the fact that Fresh Del Monte is making great strides towards our goal of delivering steady, reliable performance despite certain factors like weather conditions on our business. Net sales rose during the third quarter by $65m to $564m primarily due to growth in our repack business that we acquired in January 2003. Exchange rates primarily in the euro also benefited net sales during the third quarter by approximately $9m. On a nine-month basis net sales rose to $1.9b, a $305m increase from the first nine months of 2002. Gross profit for the quarter declined but only slightly to $65m from $68m in 2002. This was due primarily to the impact of adverse European and US weather conditions on our banana and tomato sales. Gross profit for the first nine months was $281m, $10m greater than last year at this time. This increase was driven by gold pineapple and non-tropical produce sales, partially offset by a lower banana gross profit in the third quarter and lower melon gross profit in the first half of the year due to adverse weather conditions in Latin America.

As Mohammed mentioned, EPS for the quarter was $0.60 compared with last year's record quarterly EPS of $0.57. EPS for the first nine months was $3.56 compared with $2.84 a year ago. During the third quarter of 2003 we more than doubled product volume through our North American distribution centers due to the addition of our repack business. Our distribution network generated $125m in sales compared with $43m in the prior year. In North America, sales through our distribution centers rose 40% of total regional sales, up from 18% a year ago. Year-to-date we had generated $368m in sales through our distribution centers, up from $137m a year ago. On the balance sheet, it's stronger than ever. Our revolving credit facility remains undrawn and we have - we had $48m in debt at the end of the third quarter, down from $87m at the end of 2002. Our reduced debt levels have yielded considerably lower interest expense on a quarterly and year-to-date basis. At quarter-end, our debt equity ratio was insignificant and we had $82m in cash to fund future acquisitions or leverage other new opportunities. I'll now provide detail on our other business segments for the third quarter and first nine months of 2003. Banana net sales during the quarter were lower than the same time last year because of decreased consumption in Europe due to unfavorable weather conditions in July and August. In Asia, banana net sales rose with higher volumes offsetting lower pricing. In North America, sales were lower than last year due to reduced consumption.

Gross profit declined to $8m, $2m lower than last year at this time. With worldwide banana pricing averaging $9.40 per box for the quarter, down slightly from last year. Nine months, banana net sales rose to $741m driven by improved pricing. Gross profit for the first nine months were $71m, up slightly from last year. With worldwide banana pricing averaging $9.99 per box, an increase of $0.14 per box from last year's prices. In our other Fresh Produce segment, net sales for the quarter rose 31% to $314m and gross profit was $54m compared with $56m in 2002. This slight decline was due primarily to poor performance in the tomato category brought about by adverse weather conditions combined with higher fuel costs. For the first nine months our Fresh produce sales rose $284m to $1.1b, with a 26% increase in volumes and a 7% increase in pricing. For the first nine months, gross profit reached $203m, a 5% increase over the same period last year. Del Monte Gold Extra Sweet Pineapple continued to perform exceptionally well in the third quarter. In North America, sales rose as a result of increased volumes. In Europe, sales rose due to higher local pricing and the benefit from positive exchange rates. Sales increased in Asia with slightly higher volumes and higher pricing. These positive results in all regions translated into a 5% increase in sales of Del Monte Gold. On a nine-month basis, Del Monte Gold Pineapple sales increased 9% driven primarily by an 8% increase in volume and improved pricing. Melon net sales and volumes for the third quarter were up 16% and 11% respectively due to high yields in our US growing areas and higher pricing. For the first nine months, melon net sales and volumes were in line with last year. In our Fresh-Cut business, net sales for the third quarter rose 5% with volume gains in North America. Fresh-Cut net sales represented 10% of the company's total net sales in the third quarter due to the growth in our North American markets.

Fresh-Cut sales for the nine months increased to $162m, up 63% from the prior year due to expansion in the UK and US markets. For the quarter, our repack business contributed $55m in net sales related to tomatoes, potatoes, and onions. For the nine months of 2003, net sales were $147m in our repack business. Rates in non-tropical net sales for the third quarter decreased 10% as a result of planned reductions in volume of 32%, partially offset by increase in pricings due to the shift to more profitable products. On a nine-month basis non-tropical sales improved 10% on the expansion of our grape business. Sales and gross profit for the quarter and the year-to-date in our non-produce segment are consistent with last year's levels. Sales, general and administrative expense for the quarter and nine months increased primarily as the result of business expansion, new market efforts in Europe and higher professional fee. Interest expense for the third quarter and nine months decreased as a result of our debt reduction efforts. Other income for the quarter was lower by $2m primarily due to a non-recurring insurance recovery in 2002. On a year-to-date basis, other income increased by $14m as a result of $12m of insurance recoveries related to hurricane Midge in the first quarter of 2003 and again on the sale of Guatemala box ( manufacturer in the second quarter. Tax expense in the third quarter of 2003 was $2m, and for the nine months tax expense was $13m in line with 2002. I'd like now to open the call up to question and answers session. Brad are you there?

Yes. I am. If you'd like to ask your question or make a comment, you press the star key followed by the number one on your telephone keypad at this time. We will take as many questions as time permits today, and once again it's star one to ask a question or make your comment. We will pause for a moment. And we will take our first question today from Bill Leach (ph) at Newburger Investments (ph) .

Good morning everyone.

Good morning Bill.

Hi, Bill.

I have got couple of questions, I was wondering, first in the short-term, does the grocery strike in California have any implication for you?

It has some implication, but not significant in my opinion in the long term, I mean it's a very short-term impact but without really a major significance.

Okay. And what exactly is the timing for the Honey Gold product, when will we start seeing commercial quantities of that and how big can that be?

Hopefully, by end of '05 or early '06. That's when we will have the commercial volumes to the markets.

Can you give us any numbers on that?

It will be progressive. I mean we will probably start by, I mean 10,000 - 15,000 boxes a week and then climb from there.

And is this product patented?

It is. It is patented. Of course it is on this configuration, but it's already patented, - filed let's put in that way.

Okay. And lastly, what would your priorities be now for your balance sheet, you have such a liquid balance sheet? You've raised the dividend twice I guess this year, but your fare (ph) ratio is only about 20%. Do you think we might actually see another dividend increase?

You know I cannot comment at this stage, but I think our objective as I said, always has been to grow the company and I think we will grow the business through, hopefully through some strategic acquisitions and adding value to our products and that would be our future, I mean our immediate target.

Okay great. Thank you very much.

And moving on we will now take a question from Leonard Teitelbaum at Merrill Lynch.

Good morning everyone.

Good morning Leonard.

Just a few questions please. I assume that the new Del Monte is under the - you've patented under the PVPA. Plant variety protection act, is that where it is patented?

I am sorry, I cannot under - I don't understand your question Lenny.

It's a hybrid, is it not, the new pineapple?

It is, it is a new hybrid, yes.

And is it protected under the plant variety protection act, is that where it would be - is that where it's been patented?

No. No, I don't know, I cannot speak about legal issues. I don't understand the-?

I'll follow up with you off line. Let me just move on to the fresh-cut operation. Mohammed you had said that your - I know you got 1,000 Wendy's under test market, you said something after that that we didn't pick up here. You said Wendy's and something else?

Starbucks.

Oh that was Starbucks, okay. Now Wendy's you had said earlier, you are going to have a no-go decision in December, does that still stand with Wendy's?

Yes.

All right. And the school lunch program here in the United States, is that done on a local basis or is it done under a federal grant or where is it, under what basis (ph) is that done?

It's done on a local basis, usually on a state-wide basis.

All right. And when - now, I know budgets come up in the, usually in the spring, are you getting ready to find out now if this is going to be a permanent part of the schools programs or is this still going to be on a experimental basis?

It is in my opinion experimental basis and in some areas it's more let's say advanced in other areas, but we see this momentum picking up and usually what we see is that sector food service providers going into this kind of tenders and taking over the supply and of course linking up with people like us to give them the product. So this is what's happening right now.

And in the UK you'd started to put it in the McDonald's on a test basis. You are expanding it to three countries is that - where does that test stand now?

In a small scale in Scandinavia really. We just had actually a big exhibition in France and Paris - I don't remember the place, but in France recently and Paris. And we had a very very strong reception by retailers and people from France and other European countries. As a matter of fact we cannot even - with our capacity right now in the UK we cannot meet the demand for fresh-cut fruits.

Now is this perceived demand or this is actual orders?

No, no. Actual you know people wanted to have the product. I am not saying you know, anticipation but people wanted to product. We cannot supply it right now with our present capacity and that's why we're expanding now our operations for the fresh-cut fruit in UK. As I was with Hannie a couple of weeks ago in the UK and we gave the decision to expand our production there immediately.

Just couple of questions on your slide. It is now - fresh-cut is now 10% of sales you said in the - or was that for the quarter or is that the projection. Did I misunderstand, John?

No Lenny, that was 10% in the quarter. On a nine-month basis it is 8% of sales.

8. Okay. That's why I was coming up short.

Yes.

All right. With all of the talk and you know, and potential out there, sooner or later we've got to realize that that don't mean damn thing. I would have to suspect that in the second half of this year - and this is what I am looking for. If you - if we have estimated before - and when we talked to the company before we thought that this could easily exceed a $3b category on the fresh-cuts. And what ramp up do you see Fresh Del Monte moving along that line. First of all do you still agree with the $3b potential market out there and if you do how long do you see it taking you to ramp up. Let's say starting January 1 through?

It's too difficult to predict Lenny, at this time. As you can see we are expanding every quarter, every year and we are growing this business and you have the numbers.

Yes. But you've got a $162m now. Do you see it doubling in a year, do you see it moving up 25%. I mean you got to have some-

I think we've can easily say 25% that could be achievable.

And I'd guess your - okay. Diane (ph) do you have any questions on. One final thing on the banana issue, we have to set an index in Europe last year was 100. Where would it be today John, on banana pricing in Europe?

Banana pricing in Europe I believe it was, it was still strong. On a year-to-date basis it's ahead of last year and on the quarterly basis we were pretty much in line a little bit better than - it wasn't pricing as much as consumption was the issue in Europe.

Asia was down, was that because of SARS?

No, not SARS. Overall we did well. The sales in Asia was also propelled by a higher volume. Asia in the quarter was good as far as volume was concerned.

I thought you said, Asia, the sales were down.

Yeah, because of the - the pricing was low, but volume had picked up in Asia.

I am sorry, my notes are [Inaudible] . Okay, thank you very much.

Okay.

And moving on, we will now take a question from Nichole Black at Bear Stearns.

Hi. It's actually Terry Bivens here. Good morning everyone.

Good morning Terry. How are you?

Given all the, I guess, a little bit of financial interest and a great deal journalistic interest in the Gold pineapple business, little bit more specific there as to how the quarter evolved, John, in terms of volume and pricing, both on the North American and global basis?

Well, on the global basis, the volume increase is up 4% with a 1% increase in price, overall we were up 5% in Gold pineapple business worldwide.

Okay. And then for the quarter - I am sorry, for North America, for the quarter?

That was reported Terry.

And that was global, correct?

Global, yes.

Okay. Was there positive pricing in the domestic market?

It was in line with last year, wasn't far off the mark - was in line with last year.

Okay. So, basically flattish, right?

Yes, yes.

Okay. And just, you know, in terms of the current environment, I mean, this has been an issue with company for years but from your vantage point, have you seen what you would term significant incursions in terms of Golden pineapple competition, you know, as your sales guys go around to the big grocery accounts, are they finding that some competitors are knocking at the door, could you give us some color on that?

Yes, that's a fact, I mean, I'd said that now, few minutes ago, when I was informing you about the quarter, and we continuously see, I mean, it's not only yesterday, we have are seeing it since last year and the year before that volumes are increasing and from so many parties and they are going to super markets and to retailers and food service, and they are aggressively trying to market their own products, and at a big discount to our pricing. I mean that is fact that anybody that is selling Gold variety in the market is selling it at a very big discount to our pricing, however, what we notice and what we realized and that's not just because of the market preference for Del Monte Gold, our team as well, sales and marketing very aggressively pursuing and maintaining our position and market share in the market, as a matter of fact even improving our numbers in volumes and pricing as well.

So, you know this competition is there, the volumes are increasing, that is a fact, we do not deny it, however we believe that we will maintain our position, we will hopefully maintain and continue with our pricing. And don't forget, I mean everybody must realize that when Del Monte Gold was introduced by us in 1996, we had quite a clear advantage and we don't have because we have figures and we know what is competition costing and the investment and the cost of production and years and we have a lot of information which makes us much more comfortable in our you know approach and position in the market because we know with our cost and I can tell you that is very, very confident that nobody can compete with us, nobody can compete with our years, nobody can compete with our costing, I mean growing. So, to be honest with you, I think it is a 10% a cup, you know people are making a big noise out of it but we continue doing our business and that is what we will do, we will continue doing our business and we will continue to deliver good results. The Del Monte Gold is not the only product that we have, we have there so many of our products and we will have many other products in the pipeline as we go forward one of them is the Del Monte Honey Gold. People will not yet realize the importance and significance of this product until it comes to the market and we are not going to the same mistake we did the Del Monte Gold by not taking our protection on patenting it. We have taken all the protections to make sure that nobody will put his hands on this variety, or any other varieties that we will bring in the future.

Okay.

So I think that will put us you know, we are very comfortable as far as our future you know operations or our horizon in the future.

Okay just one more quick one if I might thank you for that explanation Mohammed, of your fresh-cut business, what portion would say is contributed by the golden pineapple, of fresh cut?

I don't have figures but the Del Monte gold was very important part of the you know I mean the Del Monte gold of course the pineapple is important part of the fresh cut fruit because we don't only do fruits, you know, we do vegetables, we do other things.

Okay, I will follow-up off line on that one. Thank you very much.

My pleasure.

And moving on, we will now take a question from Arthur Rol Acer, Banc of America Securities. And once again, it is star one on your telephone keypad to ask a question. Please go ahead.

Good morning.

Hello.

Wanted to focus a little bit on the banana business and you have gone to the numbers somewhat quickly, could you - I think you were giving us some gross profit numbers for this quarter versus the prior year, can you just give that one more time.

Sure, one second. Our banana gross profit for the quarter was at $8m, down slightly from last year, about $2m from last year.

Pardon me, what was it last year, - you said it was about 10m?

Around ten.

And can you talk a little bit about why the consumption was down for the products with people switching to other fruits?

No they weren't switching, if you recall the heat wave in Europe, really brought the consumption down and lowered our volumes for Europe. So, that had an impact on the business.

Okay.

And we think that's' temporary of course.

Right. And then pricing on average, I think you were saying was - and again you spoke quickly, was it 940?

Right 940 is the average price.

And what was it in last year's quarter?

948.

948? And is that across the entire globe or which market was that?

Yeah, that's the worldwide front.

Global. And specifically in Asia, you said consumption was down there as well?

No, consumption was not down in Asia, as a matter of fact it was up.

Okay. Well, how much was it up?

It was about 10% increase in volume in Asia.

And why did that increase so much?

Well, last year we had a drought so that production is back and the consumption is back to normal levels. It is not really a major increase, it is more of a return to normal consumption levels.

Okay. And in North America, can you just talk about how consumption is there as well?

I think it was down a little bit in North America but not major.

You are saying that it was down slightly only.

Yes.

Okay. And what was pricing in North America?

We really don't go into all that detail on pricing in our specific markets, we only talk globally.

Okay, great. Thank you, that's all I need.

Okay.

And moving on we will turn to Eric Larson at Piper Jaffray.

Yeah, good morning everyone.

Good morning Eric.

A couple of quick questions. I don't that you guys talked about your Standard Food acquisition. I am assuming that now your debt is off back, you have already paid your debt off. Was that acquisition accretive to earnings in the third quarter?

Well you know Eric; it's very very difficult to see that company as a standalone company. We certainly don't have financial statements that go down that far anymore and we really talk in product as we go forward. But all in all it's been fully integrated and really our standard business right now is a distribution business.

Correct. When you first made the acquisition and maybe this is a question for Mohammed, is that you - although there were significant revenue opportunities but putting it through your DCs and adding distribution capabilities to Standard Food, has that been a positive surprise for you and do you expect even more benefits from that?

Extremely beneficial. I mean, as I said earlier that we are putting in six of our DCs across the country and new packing lines for tomatoes and potatoes and some for onions as well, and this will be in the next - before the end of the and hopefully most of this will be operational and will be catering to major retailers for any in the pipeline. I mean the business opportunity that we have from the Standard acquisition is really significant. I would say extremely positive. So we are very confident about the future in these product lines. I believe that we will make very important inroad in that direction.

Okay, good. Thanks. A final question really on the banana business. And, I think Mohammed we had talked sometime back about some of the structural changes, you know the positive structural changes that have gone on in that business, i.e. that you had a significant contraction in the amount of refrigerated ship distribution, you know, that industry had shrunk substantially and that shipping rates were up substantially year-over-year, do you still see those benefits from in the banana business, so it's possible even with more fruit being grown around the world that maybe you won't see a lot of the lower quality fruit hitting the markets and hurting pricing?

I think what we had talked about is coming to reality. I mean, the - and I give you an example. For instance, last week Ecuador, part of Ecuador was complete strike and no ships could be loaded from Ecuador during that period because the laborers, I mean the growers, especially small and medium-sized growers were, stopped operation and refused to cut the fruit, because what is happening is that they cannot sustain anymore the pricing that they are receiving from the exporters and the market condition has become so difficult for them that they cannot anymore sustain the operation. As well, they started neglecting their farms and in Sigatoka you know this is a black, what they call disease to the banana leaves has been rampant in Ecuador over the last eighteen months - two years and no application has been done because they don't have the funds to do that. And it's all you know, it's a matter of catching up. So what we discussed earlier I think is coming to reality now, as far as production is concerned, and we can see that from the numbers of Ecuador weekly exports, I mean they used to export between 5m to 6m boxes a week. Now we're seeing between 3m to 4m a week and that's significant and I believe a lot of this fruits even that is exported, I would say is 20 to 25% should not be exported because of it's a fruit that really does not have good reception in the market. To top all that you know shipping itself has moved dramatically up in the last few weeks. And this is a period where it is usually a low period for market rates, I mean if you go on a charter, a refer vessel or a refrigerated vessel in the market during this period usually you get very attractive rates. However what we' are seeing during the last few weeks is that the rates are increasing significantly year-over-year and especially for this part of the year. And that we believe is going to be the trend as we go forward because conventional vessels have decreased and contracted a loss from few years ago.

The production of course in bananas maybe is not increasing but you have other products around the world that are increasing, the sedulous (ph) and citrus and others. So as far as we are concerned we see a huge potential as far as the logistics and that will put more pressure on small exporters, on medium size exporters to go to these markets because the trade rate will be horrendous that they cannot really afford going into these markets. Now this really, I am saying this because I think it's a surprise for us that we took the decision few years ago to go and buy all these ships. We own today 22 refrigerated vessels and by the end of this month I think we'll have only 2 ships left to be paid back. I mean we will have 20 ships by the end of this month fully paid by Fresh Del Monte and these ships were brought at very attractive pricing during that time. I don't need to explain how this will translate in terms of our capability in competitive terms vis-a-vis the competition and reach in these markets with a very competitive shipping rates. So, what we've been doing during the last six-seven years, and building up and putting the foundations - for what we have - what we foresee in the future is really becoming a reality now and it is happening. So I think that's a testament of where the management of Fresh Del Monte is been heading and what they're doing. And that we'll [Inaudible] for the future because it's the same strategy, it is the same approach. So I am very confident and I am saying this with full confidence that we will continue doing well and we'll continue performing as we should and I have no real worry about the immediate future or the long-term future because our financial position is, thanks to god, is so strong that I don't need to worry, that's nice, you know, if I am going to pay X or Z . Now I worry more about who should I buy and who should I sell.

That sounds terrific. Thanks Mohammed for that. Just one final question, it is just more of a curiosity question. Will your new Honey Gold Pineapple, will that be grown in the same Western Costa Rican type soils or is that, and may be Brazil or is it different regions of the world?

No it will be mainly now in the Western part in the same area where we have our Gold Pineapple, but that doesn't mean that we can't grow it somewhere else. Because of the limited seed availability now, it will be only grown in that part, in the Western part. But mentioning, you just mentioned the word Brazil, Brazil will start production, commercial production and marketing by beginning - hopefully by mid of December and I think that is going to be a very very interesting source of supply especially for the Brazilian market and Europe as well. I think that is going to make a nice addition to our balance sheet, and even to offset any other - if everybody is saying that we will deteriorate pricing in another markets, I think this is going to be another cushion for us. Because Brazil is a huge market and they love pineapples. It may be that 10% consumption is the highest in the world as far as pineapples are concerned. And the Del Monte Gold, I can tell you today that we are selling whatever small volumes that we crop every week may be a 100-200 boxes. It's pricing in terms of returns more or less the price that we get in other markets, so that is on a local basis.

Great, thank you everyone, I appreciate it.

And moving on, we will now turn to Heather Jones, at BB&T Capital Markets.

Thank you. Just want to go back to the currency, do I understand correctly at the beginning that a $9m impact, and I think you said net sales for the quarter?

Yes, Heather (ph) , you are right.

Why is it so much lower than the - because if I remember correctly Mohammed had said in the second quarter call that you are over hedged for the euro well above a $1.10, and you got a $29m benefit in the second quarter why is it only $9m this third quarter?

Because the 2002 third quarter average is much closer to our overall averages now Heather, you know, the currency started to improve last year in the third quarter if you recall.

Right, I have it, was averaged about 97 or 98, I mean where you hedged at about dollar - above a $1.10 for the quarter?

No, we were hedged, we hedged quite a while ago. So, we were somewhere in that range.

Okay, so 15% rise in the currency is only going to translate to about $9m?

That's what the number is.

Okay and then I have a question on the pineapples. Given the benefit of currency, you said pricing is up in local pricing per Euro and then flat in US and up in Asia. Why it's overall pricing up only 1% then?

Well. That's overall, I mean I think that is very good, as in our pricing to be up 1% with 4% increase in volume I think is very good and very strong.

I was just, I mean given that you have currency which would have boost your price and I was -

But you know, most of the currency relates to bananas, because of the huge value and the huge sales of bananas in relation to pineapple.

Okay. Was the volume increase in the quarter, was that - any of that [Inaudible] or was all that gold?

We only sell gold now.

Okay. And finally just wondering if I could get guidance for the tax rate, because back in the second quarter and I believe this first quarter you'd guided to like $5m to $6m per quarter in taxes and it came to about $2m.

I think we were talking percentage wise. If you look at the year-to-date percentages, they are year-to-year in line 6.2% for the nine months of this year versus 6.9% of the nine months of last year. So, pretty much the taxes I think continue to be in line on the year-to-date basis and I think that's how you look at taxes.

So, we should look at that as 6.5% rate for the year?

Roughly, in that neighborhood .

Okay, thank you.

Okay, Heather.

Now we will go to Leonard Teitelbaum with Merrill Lynch.

Just a follow-up. What is the shelf life on the new Del Monte pineapple going to be, do you know? Have you tested it out yet?

Yes, we tested it but I mean it is - we know that it is much longer than the present Del Monte Gold. But let me clarify one thing Lenny, we are not going to replace one item with the other, we are going to create a new demand for a new variety which is going to be a niche.

Okay. Now, I want to follow up on Heather's question a little bit John. You are saying the way to look at the taxes is not how much per quarter, but the percentage of the taxes accrued for the nine months?

I think right now of the - nine month numbers are you know in line with where we see we are going to be. You know, about 6% - 7% is a very nice rate right now.

Okay. Because I was under the impression - is Heather that if we were to use $5m to $6m a quarter I thought that was you know like dollars and - or rates excuse me, and - okay, so we should adjust it down is what you are telling me.

Yeah I think we are in that - taxes are where - it depends on where the earnings will come from and we had earnings in jurisdictions that have lower tax rates.

Now, you see the spread that's out there in terms of earnings, and, sooner or later gets out of the theory and into the numbers here. And you have got, the mean estimate is $3.73 this year and, I guess we're sticking - I am sticking out there a little bit high at around $3.80. Can you give us some guidance with one quarter to go where you would expect the year to come in at?

I think we are on our target, I don't think we are too far off the mark.

We appreciated very much. Thank you kindly.

Thank you.

And that does conclude our question and answer portion, Mr. Abu-Ghazaleh I'll turn things back to you for closing comments.

Thank you very much Chris (ph) . I would like to thank everybody. Fresh Del Monte outlook continues to be excellent and we are poised for growth in 2004. Our performance is solid and increasingly sustainable as a result of our ongoing diversification strategy. Our balance has never been stronger, our competitive positions across all markets remains excellent, our acquisitions have been well integrated, our long-term strategy is on track. Now, it's a matter of leveraging these manufactures (ph) to drive new growth in 2004 and beyond. That is our mission and we are confident that we will achieve it. Thank you for participating in this call today, and I hope to speak to you on our next conference call. Thank you.

That does conclude our program. Once again everyone, thank you for your participation and have a pleasant day.