Del Monte Pacific swings to profitability

Campos-led food and beverage conglomerate Del Monte Pacific Ltd. (DMPL) turned profitable in the quarter ending July compared to a net loss in the same period last year as robust Asian businesses made up for the slack in its US operations.

In a disclosure to the Philippine Stock Exchange on Thursday, DMPL reported $700,000 in net profit for the May to July period – the first quarter in its fiscal year and seasonally the weakest for its US business – a turnaround from the $7 million net loss in the same period last year.

Barring unforeseen circumstances, DMPL expects to remain profitable for full fiscal year 2018 on a recurring basis.

DMPL reported first quarter sales of $473.8 million, up by a modest 1 percent year-on-year, as strong performance of S&W in Asia and the Middle East offset lower sales in the United States.

US subsidiary Del Monte Foods Inc (DMFI) contributed $336.5 million or 71 percent of group sales, down by 4 percent year-on-year, due to reduced sales in private label and regional brands in foodservice, in turn attributed to competitive pricing. Lower pricing also gnawed on sales of USDA fruit and pineapple concentrate.

The key retail segments of canned vegetable, canned fruit, and plastic fruit cup all grew sales and market share during the quarter, despite some declines in some categories.

DMFI expanded the adult fruit cup snacking segment with the launch of Del Monte Fruit & Chia, combining luscious chunks of fruit with wholesome chia. DMFI also launched College Inn Organic Chicken and Beef Broth, as well as the College Inn Broth Concentrate, in a more convenient packaging format.

The first quarter is seasonally DMFI’s weakest quarter accounting for only 19-21 percent of full year sales. As such, the first quarter is generally the least profitable quarter for DMFI, the disclosure said.

“In the US, we are responding to shifts in consumer demographics, tastes and shopping preferences through new product introductions, increasing our capability in e-commerce and realigning our marketing strategies with these changing consumer trends,” said Joselito Campos, Jr., managing director and chief executive officer of DMPL.

“Our aim is to rationalize non-profitable businesses and to also focus on our joint efforts with Fresh Del Monte Produce, to develop new business opportunities that will provide consumers with more premium quality and healthy products,” he added.

DMFI’s sluggish quarter was offset by higher sales of the group’s second largest subsidiary, Del Monte Philippines Inc (DMPI), which grew first quarter sales by 14 percent year-on-year to $131.4 million. DMPI’s sales comprise of sales in the Philippines and exports.

Sales in the Philippines, the largest market of DMPI, were up in peso terms, driven by expanded
penetration and increased consumption of packaged pineapple fruit. The group reported improvement in supply, coupled with higher sales of culinary products.

Foodservice sales in the Philippines also continued to expand, riding on the rapid expansion of quick service restaurants and convenience stores with partnerships and menu creation with major accounts.

Sales of the S&W business, the fastest growing business of DMPI in Asia and the Middle East,
continued its strong performance achieving double digit growth, mainly due to strong sales of fresh
pineapple on the back of improved supply and expansion into Turkey, a new market for packaged
products.

The group’s gross margin for the first quarter increased to 20.7 percent from 20.4 percent in the same period last year.

“Our business in Asia continued its strong momentum in the first quarter driven by DMPI’s growth through S&W’s significant progress as it expanded its business in existing markets and broke ground in new markets. In the Philippines, we continued to drive increased consumption frequency amongst a wider base of consumers through sustained investments in advertising, product innovation and expanded trade availability,” Campos said.