Food and plastics input manufacturer D&L Industries grew its first quarter net profit by 16 percent year-on-year to P512 million as revenue was helped up by volume growth in food ingredients and oleochemicals.
The company would have performed even better had it not been for the disappointing performance of its specialty plastics food business, which historically contributed about a quarter of net profits, D&L chief finance officer Alvin Lao said in a briefing Tuesday.
The specialty plastics business grew by a meager 2 percent in the first quarter and was the segment most affected by the local port congestion.
But the group is confident that the plastics business will start to recover by the third quarter of this year, Lao said.
For the full year, D&L expects to meet its net profit, which coincides with most analysts’ forecast of P2.4 billion—about 20 percent higher than that of last year.
In the first quarter, its revenue even expanded by 15 percent year-on-year to P4.84 billion.
To date, D&L’s capacity utilization stands at only 52 percent. This means that it can step up production without increasing capital spending.
The company is looking to invest in big new projects in the future and may even engage in regional expansion. It now seeks to raise its authorized capital to P18 billion from P4 billion.
Part of the capital increase will be covered by a 100 percent stock dividend declaration, which will bring its subscribed capital to P7.14 billion, from P3.57 billion, Lao said. D&L expects to see the initial increase in capital by August this year, during which shareholders and regulators’ approvals would have been obtained.
In the first quarter, commodities outgrew specialty products, resulting in a 16.9-percent drop in gross profit margin from that of the same period last year.
After the acquisition of Chemrez Technologies in October 2014, the company generated return on equity and return on invested capital of 17.8 percent and 16.9 percent, respectively.
D&L reported that, since the latter half of 2014, congestion at the ports had created a challenging operating environment for the specialty plastics business. Sales were down 14 percent year-on-year, although the group still managed to increase net profit by 2 percent.
Oleochemicals continue to drive D&L’s volume and margin growth. Biodiesel’s performance is still strong as emphasis on sustainability in home care and personal care industries, as well as health and wellness, gains greater momentum worldwide.