Del Monte Pacific swings to profitability
CAMPOS family-led food and beverage conglomerate Del Monte Pacific Ltd. (DMPL) returned to profitability in its full fiscal year ending April, boosted by higher global sales alongside one-time gains arising from retirement plan and working capital adjustment in its US operation.
DMPL posted a net income of $51.5 million for the full year, inclusive of one-off net favorable adjustments of $31.7 million after tax mainly due to US unit Del Monte Foods Inc. (DMFI)’s retirement plan and working capital adjustment, which had offset expenses from the closure of a plant in North Carolina.
But even after excluding non-recurring items, DMPL’s core or recurring net income in the fiscal year amounted to $19.8 million, a turnaround from the $43.2 million reported loss in the previous year, as the group improved cost structure and unlocked better margins as it grew global sales.
The group achieved cash flow of $235.2 million for the full year, buoyed by a 4-percent growth in revenues to $2.3 billion.
Barring unforeseen circumstances, DMPL expects to remain profitable in fiscal year 2017. In the short- to mid-term, it plans to improve financial performance by strengthening its core business, riding on procurement synergies and rationalizing operational costs. The closure of the North Carolina plant was part of this streamlining effort.
“During the past year, we continued to lay the foundation for future growth and this is reflected in the sales and financial performance of Del Monte Pacific in full year 2016,” said Joselito Campos Jr., managing director and group chief executive officer of DMPL in a disclosure to the Philippine Stock Exchange (PSE).
“We drove improvements in our cost structure and better aligned operations with our strategic direction to gain market share, increase margins and expand into adjacent categories as part of a long-range plan to grow sales and profits for the company in the years ahead.”
DMPL produces food under two heritage brands – Del Monte and S&W – which originated in the USA in the 1890s as premium quality packaged fruit and vegetable products. It has exclusive rights to use the Del Monte trademarks for packaged products in the United States, South America, the Philippines, Indian subcontinent and Myanmar, while it also owns S&W globally except Australia and New Zealand. Its US subsidiary DMFI owns other trademarks such as Contadina, College Inn, Fruit Naturals, Orchard Select and SunFresh.
DMFI, which accounted for 78 percent of group sales, generated revenue of $1.8 billion, 4 percent
better than prior year. DMFI increased its market share in the US canned vegetable and fruit segments amid industry contraction.
The Philippine market, on the other hand, delivered a record performance for the full year with sales rising 6 percent. All product categories – packaged fruit, beverage and culinary – posted higher sales, which the company attributed to expanded user base and household penetration. In addition, DMPL said the market continued to benefit from the resurgent beverage segment.
Sales of the S&W branded business in Asia and the Middle East also grew by 10 percent on higher sales from both the fresh and packaged segments while China generated strong growth in fresh, driven by distribution expansion.
The group’s gross margin for the full year improved to 21.2 percent, higher than the 18.7 percent in the same period last year with lower trade spending in DMFI alongside cost optimization initiatives to mitigate the impact of lower pineapple output from El Niño, particularly in the first half of the financial year.
