D&L nets P1.93B on strong sales, higher prices

Food and plastic input manufacturer D&L Industries grew its nine-month net profit by 19 percent year-on-year to P1.93 billion as revenue was boosted by higher commodity prices and sales volume.

Excluding one-off items arising from tax and filing costs related to the increase in authorized capitalization in June 2015, recurring net profit was up by 16 percent in the first nine months to P1.93 billion.

The nine-month performance translated to a return on equity of 19.4 percent and a return on invested capital of 20 percent, D&L reported to the Philippine Stock Exchange Tuesday.

D&L’s year-to-date revenue was up by 10 percent year-on-year to P15.95 billion on the back of a broad-based increase in sales volume and higher prices of palm oil and coconut oil in the third quarter.

High-margin specialty products accounted for 61 percent of revenue, bringing the overall gross profit margin to 18.7 percent from 17.8 percent. The second quarter of 2016 was particularly strong due to election spending and timing of the Easter holiday.

Going into the second half of the year, D&L reported that all businesses were operating on solid ground and contributing to earnings growth. Backed by investments in research and development, which since 2012 has increased by 43 percent, the company said it continued to focus on key opportunity areas in specialties in food ingredients, chemicals, plastics and aerosols.

For food ingredients, year-to-date specialties volume grew by double-digits. This included a higher volume base for specialty ingredients in the third quarter of 2015 due to customers’ limited time offerings, as well as a seasonal bump in the second quarter of 2016. Commodities, meanwhile, have started to stabilize. Overall, revenue was higher by 11 percent, partially benefiting from the increase in vegetable oil prices. Net income rose by 12 percent.

Oleochemicals’ nine-month volume increased moderately from last year, even with the exceptionally strong comparative period for biodiesel. Within this segment, the mix is shifting toward oleochemical specialties, whose end markets are faster growing, higher margin and less volatile.

Higher coconut oil prices contributed to revenue increasing by 7 percent in the nine-month period.

Overall margins are still higher year-on-year, with biodiesel margins beginning to normalize, as expected. Net income from this segment was up 15 percent.

On the specialty plastics business, year-to-date volume was up double-digits while revenues were 9 percent higher year-on-year. Gains in margins were posted across the board, growing net income by 25 percent.

For aerosols, growth accelerated in the third quarter, led by margin gains and solid volume growth. Moving into the seasonally strong second half, personal care such as body sprays posted all-time high sales volume in July. In addition, the company delivered good results in home care and a mix-driven growth in maintenance chemicals and others. Net income was substantially higher, growing by 42 percent year-on-year on the back of a 19-percent rise in revenue.

Inventories have come down from June levels and with the improvement in working capital, D&L generated P787 million and P160 million in positive free cash in the third quarter and nine-month period, respectively. This was a reversal from the negative P627 million free cash in the first half of the year.

D&L also continued to pare down debt, resulting in lower borrowings in the third quarter.