On June 10, 2024, Calavo Growers Inc (CVGW, Financial) released its 8-K filing for the fiscal second quarter ended April 30, 2024. Calavo Growers Inc, a leader in the avocado industry and a provider of value-added fresh food, reported notable financial achievements, surpassing analyst estimates for both earnings per share (EPS) and revenue.
Company Overview
Calavo Growers Inc operates in two business segments: Grown and Prepared. The Grown segment includes fresh avocados, tomatoes, and papayas, while the Prepared segment comprises fresh-cut fruits and vegetables, ready-to-eat sandwiches, wraps, salads, snacks, guacamole, and salsa sold at retail and food service, as well as avocado pulp sold to food service.
Performance and Challenges
For the second quarter of 2024, Calavo Growers Inc reported total net sales of $184.4 million, a 16.5% increase from $158.3 million in the same period last year. The Grown segment sales rose by 18.9%, driven by a 28% increase in the average selling price of avocados. However, the Prepared segment saw a slight decline of 1.9% in sales.
Gross profit for the quarter was $20.4 million, or 11.0% of net sales, compared to $15.7 million and 9.9% of net sales in the prior year. Despite the positive results, the company faces challenges such as the ongoing divestiture of its fresh-cut business, which is classified as discontinued operations.
Financial Achievements
Calavo Growers Inc reported a net income of $6.5 million, or $0.36 per diluted share, significantly higher than the $1.4 million, or $0.08 per diluted share, reported in the same quarter last year. Adjusted net income was $8.9 million, or $0.50 per diluted share, compared to $5.1 million, or $0.29 per diluted share, in the previous year.
Adjusted EBITDA for the quarter was $13.4 million, up from $9.9 million in the same period last year. These financial achievements are crucial for the company, especially in the Retail - Defensive industry, where maintaining profitability and operational efficiency is key.
Income Statement and Balance Sheet Highlights
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Total Net Sales | $184.4 million | $158.3 million |
| Gross Profit | $20.4 million | $15.7 million |
| Net Income | $6.5 million | $1.4 million |
| Adjusted Net Income | $8.9 million | $5.1 million |
| Adjusted EBITDA | $13.4 million | $9.9 million |
Calavo Growers Inc ended the quarter with $48.5 million of net debt, including $45.8 million of borrowings under its credit facility and $7.0 million of other long-term obligations and finance leases, less cash and cash equivalents of $4.3 million. The company had approximately $47.3 million of liquidity as of April 30, 2024.
Segment Performance
The Grown segment reported a gross profit of $16.0 million, an increase of $3.5 million from the prior year quarter. The average selling price of avocados was 28% higher, although volume declined by 13%. The Prepared segment's gross profit improved by $1.2 million to $4.3 million, with gross margin rising to 24% from 17% in the prior year quarter, primarily due to lower fruit input costs and the divestiture of the salsa business.
Management Commentary
"We are pleased with our second quarter results which reflect strong operational performance across our portfolio, demonstrating Calavo’s earnings capacity," said Lee Cole, President and Chief Executive Officer of Calavo Growers, Inc. "Improved prices and margins in our core avocado business as well as in our tomato portfolio both sequentially and versus the prior year contributed to our results. We also improved our guacamole business meaningfully versus the prior year through favorable input costs and operational efficiency."
Analysis
Calavo Growers Inc's strong performance in the second quarter of 2024, particularly in the Grown segment, highlights the company's ability to capitalize on favorable market conditions for avocados. The increase in gross profit and net income indicates effective cost management and operational efficiency. However, the ongoing divestiture of the fresh-cut business and the associated challenges may impact future performance. Investors should monitor the company's progress in completing the sale and its impact on overall financial health.
For more detailed insights and analysis, visit GuruFocus.com.
Explore the complete 8-K earnings release (here) from Calavo Growers Inc for further details.
