Food ingredient and specialty plastic additive manufacturer D&L Industries grew its first quarter net profit by 19 percent year-on-year to P314 million as the company deliberately chased higher margins rather than larger sales volumes.
Three-month revenues fell by 27 percent to P2.3 billion from a year ago, which was attributed to the group’s strategic moves to sell less of its big-volume-low margin refined vegetable oils in favor of its high margin specialty products.
High-margin products now account for 69 percent of overall sales from 67 percent at end-2012.
“The drop in sales also mirrors the pass through of lower raw material costs, given the downtrend in prices of coconut oil and palm oil,” D&L said in a statement.
“The company maintained steady progress towards growing its high-margin specialty business as new markets are explored and more new higher margin products are rolled out,” it added.
D&L likewise reported that commodity prices softened during the period, benefiting overall margins. Gross profit margin grew to 19.2 percent from 12.8 percent last year while net income margin rose from 8.3 percent to 13.5 percent.
“In the coming quarters, earnings growth is expected to accelerate as income from new businesses, like the Showa Denko deal announced in January, are recognized,” it said.
D&L Industries has teamed up with Japan’s leading chemical engineering company Showa Denko to produce a new line of eco-friendly materials that can replace conventional non-biodegradable plastic bags that are banned in some Philippine cities and municipalities.
“Overall, the company remains in line with expectations this year,” it said.
Food ingredients subsidiary Oleo-Fats Inc. closed the quarter with a net income of P107 million, 11 percent higher than the previous year as it continued to scale back on its low- margin commodity products as well, hence recording volume losses on the refined vegetable oil business and some lower-margin, generic specialty products.
Meanwhile, higher margin specialty fats and oils business accounted for 57 percent of first quarter sales.
For plastics, D&L reported that given exceptional growth in the comparative first quarter of 2012 due to businesses gained from the 2011 tsunami in Japan and flooding in Thailand, volume in the first quarter of this year was relatively subdued. As a result, sales were down 18 percent to P585 million.