Earliest Start of Commercial Operations for D&L’s Batangas Plant Moved to May 2022
The earliest start of commercial operations (SCO) for D&L Industries’ Batangas plant will be moved to May 2022 following an SCO extension granted by the Board of the Philippine Economic Zone Authority (PEZA) to D&L Premium Foods Corp (DLPF) during its 23 July 2021 meeting.
DLPF, a wholly-owned subsidiary of D&L Industries which will manufacture various food ingredients to cater to the company’s growing export business, was originally slated for commercial operations by October 2021. However, in consideration of the challenges and delays encountered due to the recent spike in COVID-19 cases and subsequent reimposition of Enhanced Community Quarantine (ECQ) and Modified Enhanced Community Quarantine (MECQ), as well as shipping delays for equipment and machineries for the said plant, PEZA has
granted an SCO extension to January 2023.
As such, Natura Aeropack Corporation (NAC), another wholly-owned subsidiary of D&L Industries which will manufacture coconut oleochemicals for various consumer care products, will now be the first plant to operate within D&L’s Batangas facility. It will start its commercial operations in May 2022 as originally planned.
“While the COVID-19 pandemic and various mobility restrictions have caused challenges in the completion of our Batangas plant, we remain committed to this project. We see ever-growing opportunities in relevant industries in the new normal that we can tap into with this new plant. This is evidenced by the resilient and robust growth in our export sales which grew 84% YoY in the first quarter of the year. Our existing capacity is still sufficient to serve requirements in the near term, as such the extension in the SCO should have no material impact on current operations,” remarked D&L President and CEO Alvin Lao.
D&L’s Batangas expansion sits on a 26-ha property in First Industrial Township – Special Economic Zone in Batangas. The ongoing expansion, also referred to as Phase 1, will occupy roughly half of the property. The company has so far spent about P4.5 billion for the project. Remaining capex to be spent this year and in 2022 stands at about P3.5 billion. The company made an announcement earlier this year that it plans to do a maiden bond offering to fund the remaining capex for this expansion.
Once completed, the new plant will be instrumental to the company’s future growth, in line with plans to develop more high value-added coconut-based products and penetrate new international markets. It will mainly cater to D&L’s growing export business in the food and oleochemicals segment. It will add the capability to manufacture downstream packaging, thus allowing the company to capture a bigger part of the production chain. For instance, while the company primarily sells raw materials to customers in bulk, the new plants will allow it to “pack at source”. This means that D&L will have the ability to process the raw materials and package them closer to finished consumer-facing products. This will enable D&L to move a step closer to its customers by providing customized solutions and simplifying their supply chain, which is of high importance given global logistical challenges and concerns.
While the pandemic is still ongoing, D&L believes that the Batangas expansion is coming at an opportune time given the strong demand for high-value coconut-based products in the export market. Moreover, the company is now in a far better position to thrive in an adverse environment and a potentially protracted economic recovery period. As the majority of the products that the company manufactures cater to basic essential industries such as food, oleochemicals, plastics and cleaning chemicals, the company sees continued strong demand ahead. With all of the company’s business segments posting significant recovery YoY in 1Q21, recurring net income for the period increased by 35% YoY to P695mn. Including a one-time gain of P29 million related to the retroactive implementation of the CREATE Act in the year 2020, total net income for the quarter stood at P724 mn, up 41% YoY. Assuming that 1Q21 income holds steady in the next
couple of quarters, the company is set to at least reach its net income level in 2019.