D&L nets P2.64B

FOOD and plastic input manufacturing group D&L Industries grew net profit by 15 percent last year to P2.64 billion on higher commodity prices and sales volume.

This 2017, D&L expects net income to sustain a mid- to high-teen growth “as long as the Philippine economy continues to grow well,” D&L president Alvin Lao said on Tuesday.

For full-year 2016, the company generated a return on equity of 18.8 percent and a return on invested capital of 19.9 percent.

Revenue last year rose by 14 percent P22 billion on the back of a broad-based increase in sales volume and higher prices of raw materials.

High margin specialties accounted for 61 percent of revenue while commodities accounted for the remaining 39 percent.

Despite the volatility in foreign exchange and commodity prices, D&L reported that group-wide gross profit margin was maintained at 18 percent. High-margin specialty products posted a 0.7-percentage point (ppt) improvement in gross profit margin to 24.8 percent.

Meanwhile, commodities saw a slight gross profit margin compression of 1.4-ppts to 6.6 percent.

For the food ingredients group, this unit entered into an exclusive distribution agreement with publicly listed firm Bunge Ltd., providing the company with a broader range of oil products to offer to the local food service market. This move added its competitiveness within the rapidly growing premium oils segment in the Philippines, as well as elsewhere in the region, the company said.

The food ingredients group also started its partnership contract with Ventura Foods, allowing D&L to begin exporting and selling specialty oils and food ingredients to this leading US manufacturer last year.

For the full year 2016, the food ingredients group posted a 13 percent increase in net income, driven by a 13 percent increase in volume.

The oleochemicals group posted a 5 percent net income growth for the period, driven by a 1-percent increase in sales volume and a 0.7-ppt improvement in overall gross profit margin.

Ongoing efforts to strengthen commercial and operational execution improved the performance of the other specialty chemicals segment, resulting in a 2-percebt volume growth in 2016 after several years of volume decline.

“Revenue mix within the group is also becoming more favorable, as it shifts towards higher margin specialty chemicals that cater to faster growing and less volatile end markets,” the company said.

In line with the expected recovery this year, specialty plastics posted a net income growth of 20 percent. This was attributed to the 8 percent increase in volume coupled with a 4.4-ppts improvement in overall gross profit margin.

Specialty plastics benefited from the continued growth in disposable income, as per capita consumption continued to increase. Moreover, wire harness-related exports posted strong results as port congestion-affected businesses started to recover.

Over the medium-term, D&L expects specialty plastics business to be boosted by new opportunities within the toy industry. Earlier this year, the company announced that it has developed a key material used in the toy sensation Hatchimals. The specially developed material is used in its eggshell-like casing, which is strong enough to withstand shipping and handling but also fragile and breakable enough to allow the toy to hatch open over time.

Meanwhile, the aero-pack group posted the highest net income growth for the period at 44 percent. This was led by the 24 percent growth in volume and 4.4-pts improvement in gross profit margin. Within the group, personal care is the fastest growing segment, posting a 32 percent increase in revenues and 42 percent increase in volume.

The Company expects the segment’s strong growth momentum to continue as aerosol penetration in the Philippines remains low. Moreover, the segment is seen to benefit from the increasing consumer demand across all categories, due to rising levels of disposable income in the country.