SCREENGRAB from www.delmontepacific.com
Philippine food conglomerate Del Monte Pacific Ltd. (DMPL) plans to pare down debt related to its big US acquisition by $520 million through a series of public common stock, perpetual preferred shares and stock rights offering.
From May to July this year—the first quarter of DMPL’s fiscal year of 2015—the company of the Campos family posted a net loss of $21.9 million due to expenses incurred in acquiring the consumer food business of American corporation Del Monte Foods (DMFI) for $1.675 billion. That deal allowed the Philippine firm to break into the American market and reunite with its mother brand in the United States.
No comparative year-on-year figure was given as DMPL, following the completion of its US acquisition, recently changed its fiscal year to end on April 30 instead of December 31. The Philippine company decided to change its financial year to align it with that of DMFI.
In a disclosure to the Philippine Stock Exchange on Friday, DMPL said that during the quarter ending July, sales reached $446 million, with $340 million contributed by DMFI. Sales of Del Monte in the Philippines and S&W branded products throughout Asia rose by 10 percent year-on-year.
Its cash flow before acquisition expenses and non-recurring expenses as measured by earnings before interest, taxes, depreciation and amortization (Ebitda) stood at $21.5 million during the period, DMPL said.
On the other hand, costs escalated due to higher interest expenses arising from a long-term loan to acquire DMFI and short-term bridge financing of DMPL, which will be refinanced with an equity offering in the Philippines, the company said.
“The planned ordinary share public offering will be followed by a perpetual preference share offering and, thereafter, a rights offer,” the group reported.
Borrowings will then be reduced by about $520 million, to lighten DMPL’s balance sheet as it pays down its short term bridge financing.
Group Ebitda before acquisition expenses and non-recurring expenses is expected to strengthen later this year.
“While first quarter sales decreased by 1 percent versus the prior year period, this was a marked improvement from the 17 percent decline during the transition period of February to April 2014, where sales were affected by inherited higher product pricing and changes to product labels,” said Nils Lommerin, chief executive officer of Del Monte Foods Inc.
“We have taken corrective measures by adjusting the price of our products to competitive levels, reintroducing the well recognized classic label and undertaking aggressive promotional campaigns in an effort to regain market share. In the packaged vegetable and tomato segments, we have stabilized market shares, while in packaged fruit, we have improved it,” he added.
DMPL expects cost saving measures to improve gross margin in fiscal year 2016 and beyond. Also, sales generated by Del Monte in the Philippines and the Indian subcontinent, as well as S&W in Asia and the Middle East, generated $120.6 million in sales, and $6.4 million in net profit.