Quezon City—(PHStocks)—D&L Industries Inc.‘s (PSE: DNL) recurring net income reached PhP1.07 billion, or earnings per share of P0.30, in the first six months of 2015. This is 15% higher from the same period last year. Earnings before interest and taxes were similarly higher by 15% year-on-year at PhP1.35 billion.
Including the one-time costs on taxes and filings related to the increase in the authorized capitalization in June 2015, net income for the period amounted to PhP1.03 billion, or an increase of 10% year-on-year.
First half revenues were up 10%, with weak commodity prices, in particular palm oil, more than offset by higher volume in food ingredients, oleochemicals, and aerosols. High margin specialties accounted for 59% of revenues.
The company is delivering on its long-term vision of growing the high margin, high value businesses. Even as commodities continued to outgrow specialties, improvements in margins across specialties resulted in gross profit margin increasing to 17.7% from 16.7% in 2014. The company generated return on equity and return on invested capital of 17.9% and 17.3%, respectively.
During the period, food ingredients led the group in volume growth and margin gains, complemented by consistently solid results in oleochemicals and aerosols. This underscores how the company is uniquely built to manage underperformance of certain key business units.
Further, weak commodity prices provided windfall to the company’s cash flow, generating positive free cash of PhP1.29 billion during the period, a reversal from the negative free cash of PhP157 million in the full year of 2014.
Balance sheet remains strong post-acquisition of Chemrez Technologies Inc. (PSE: COAT), shifting to a net debt position as cash decreased and borrowings increased to fund the transaction. As of June 30, 2015, net debt was reduced to PhP3.03 billion from PhP4.21 billion at the end of 2014, while net gearing remained relatively modest at 0.27x from 0.38x as of end of 2014.
Strong consumer sentiment is resulting in steady flow of new products and product improvements in the F&B industry and has been fueling growth in volume and margin in specialties. Growth in volume of commodities was still robust but showing signs of easing, with revenues mirroring the persistent softness in commodity prices. Overall margins were up, resulting in 28% increase year-on- year in net income. Revenues grew by 12% year-on-year.
Domestic consumption continues to be a leading engine of growth and with over 1,300 customers and close to 800 SKUs, Oleo-Fats is in a sweet spot to capture the resulting opportunities. Leveraging its market leadership, vast customer network and customization expertise, Oleo-fats continues to keep a pulse on different markets, working together with customers to give consumers more choices and better experiences.
Oleochemicals and other specialty chemicals
Oleochemicals are areas of continued strong performance, with biodiesel performing remarkably well, underscoring robust transportation activities. Results of oleochemical specialties remained solid as well, benefitting from Chemrez’ green chemistry applications. Other specialty chemicals also achieved better margins resulting from improvement in mix. Overall, revenues were up 13% and net income was higher 29% year-on-year.
In the recent decade, green chemistry has taken an increasingly important role in Chemrez. These innovations respond to changes in the marketplace, including the profound growth in the importance of sustainability and health and wellness. These initiatives continue to make good progress commercially.
Growth in engineered polymers was significantly held back by the port congestion, which was experienced mainly in the second half of 2014 and first half of 2015 and led to additional costs in fulfilling orders as well as missed sales opportunities. Volume was down, driving revenues 15% lower year-on-year. Net income was down 9% from last year.
While the past four quarters have been challenging, the strong fundamentals of the business remain intact. In fact, the quarter-on-quarter increase in volume has been an encouraging indication of a gradual recovery. As the year progresses, further improvements on supply chain, particularly at the ports, should help ease constraints on growth.
Aerosols maintained solid growth through home care and personal care applications, with revenues and net income overall up 36% and 59%, respectively. Volume and revenues in home care, in particular, were significantly higher given the low base from the same period last year.
Drawing on its full range of capabilities in manufacturing and R&D, Aeropack continues to build customer relationships enabling substantial opportunities for growth. These include diversification into markets that, at present, include personal care, home care, and maintenance chemicals.