DMPL targets return to full-year profitability

CAMPOS family-led food producer Del Monte Pacific Ltd. (DMPL) is seen on track to achieving its goal to return to full-year profitability in its current fiscal year that will end in April 2016.

As part of the group’s plan to reduce debt stock, DMPL affirmed plans to issue $360 million worth of US dollar-denominated perpetual preference shares in the first half of 2016. The company’s debt increased when it acquired in 2014 the consumer food business of privately-held American corporation Del Monte Foods (DMFI) for $1.675 billion. This deal allowed the local firm to break into the US market and reunite with its mother brand.

For the six months ending October, DMPL generated a net income of $41.3 million, a turnaround from the comparative period’s loss of $21.7 million, the company disclosed to the Philippine Stock Exchange.

The turnaround seen in the first six months of its fiscal year was attributed mainly to the improvement in DMFI’s results plus the one-time favorable adjustment arising from DMFI’s retirement plan amendment of $39.4 million and the absence of inventory step-up adjustments. Excluding this one-off gain, the group’s recurring net income would have been $6 million, still a turnaround from the loss position last year.

The group posted a six-month cash flow—as measured by earnings before interest, taxes, depreciation and amortization—of $130.5 million, of which DMFI accounted for $97.2 million.

The group generated sales of $1.1 billion, up by 14 percent year-on-year during the six-month period from the level in the previous year. DMFI generated $915.9 million or 81 percent of group sales.

Sales from the Philippine market rose by 11 percent year-on-year in peso terms and by 7 percent in US dollar terms. However, the S&W-branded as well as non branded exports of packaged pineapple were lower due to supply problems arising from the El Niño weather pattern.

DMFI’s gross margin in the first six months improved to 20.5 percent compared to 17 percent in the same period last year.

For the quarter ending October, DMPL generated a net income of $53.3 million, substantially higher than the $0.2 million in the same period last year. Excluding one-time adjustments, the group’s recurring net income would have been $18 million, still significantly higher than last year and a turnaround from two years of acquisition and transition-related losses since the acquisition of DMFI.

Sales for the second quarter amounted to $658.3 million, up by 20 percent from the level in the previous year, as its key branded business in the United States and the Philippines under the Del Monte brand and the rest of Asia under the S&W brand, delivered better performance.

“The El Niño weather pattern is not expected to abate in the second half of the fiscal year which will continue to impact the group’s pineapple supply although the group expects an improvement in pineapple output versus the first half,” the company said.