Del Monte Pacific Reports 9M FY2016 Results
Singapore/Manila—(PHStocks)—Singapore Mainboard and Philippine Stock Exchange dual listed Del Monte Pacific Ltd (PSE: DMPL, SGX: D03) reported today an improvement in sales and profitability for the nine-month period ending January 2016.
The group achieved nine-month sales of $1.7 billion, 6% higher than the same period last year. Its US subsidiary, Del Monte Foods, which accounted for 80% of group sales, generated revenue of $1.4 billion, 8% better than prior year period.
The Philippine market delivered a good performance in the nine-month period with sales up 7%, driven by expanded penetration and increased consumption for its juices, tomato-based sauces and packaged pineapple products. Meanwhile, sales of the S&W branded business in Asia and the Middle East grew by 16% on higher sales from both the fresh and packaged segments, partly offset by lower non-branded OEM exports.
The group’s gross margin in the nine months improved to 21.4%, much higher than the 18.9% in the same period last year with lower trade spend in DMFI, the absence of purchase accounting inventory step up, and cost optimization initiatives to mitigate the impact of lower pineapple output from El Niño, particularly in the first half.
The group posted an EBITDA of $174.3 million and a net income of $41.9 million in the nine-month period, inclusive of one-off favorable adjustments of $23.4 million after tax mainly due to DMFI’s retirement plan amendment in the second quarter, a turnaround from the $23.9 million loss position last year.
In the third quarter, the group generated sales of $594.1 million, down by 7% due to lower sales in DMFI of 9% mainly from unsuccessful government and co-pack contract bids, partly offset by the good performance in the Philippines, up 6% with effective holiday season advertising campaigns. The rest of Asia under the S&W brand performed strongly, higher by 35%. China and Japan markets grew significantly on higher sales of canned tropical fruit and fresh fruit.
“In the United States, lower sales to the government and co-pack sectors unfavorably impacted our third quarter sales and may continue to impact our fourth quarter sales. We are reviewing our strategy for these channels as part of our long range plan to optimize sustainable sales and profits for the company in the coming year,” said Joselito Campos Jr., managing director and group CEO of DMPL.
The group’s gross margin in the third quarter improved to 20.5%, higher than 19.2% in the same period last year with the absence of purchase accounting inventory step up, significant improvement in productivity as well as cost optimization initiatives.
For the third quarter, the group reported an EBITDA of $43.9 million and a net income of $0.6 million, inclusive of one-time expenses of $6.9 million after tax, continuing the improved profitability achieved in the second quarter.
DMPL’s share of loss in the FieldFresh joint venture in India was lower at $0.3 million from $0.4 million in the prior year period due to a 13% growth in sales driven by the robust performance of Del Monte packaged business, primarily led by improved volume in juices and the culinary segment. Higher sales and production efficiencies resulted in FieldFresh sustaining its positive EBITDA trend for the quarter.
As part of the group’s deleveraging plan, DMPL intends to issue US dollar denominated perpetual preference shares in the Philippine capital market, to be listed on the Philippine Stock Exchange. The Group anticipates to launch the offering this year subject to regulatory approvals and market conditions. The proposed issue will be up to $360 million that will result in a further improvement of the Group’s leverage ratios.
Barring unforeseen circumstances, the group will report a profit for the full year, a significant turnaround from the loss position last year.