MANILA, Philippines — Food and plastic input manufacturer D&L Industries saw a 1 percent year-on-year growth in first quarter net profit to P748 million as an increase in high-margin business and tighter lid on expenses made up for softer selling prices.
D&L is now reviewing its full-year guidance given the softer first quarter results.
“There’s a chance that we may not hit double-digit (full-year profit growth),” D&L president Alvin Lao said in a recent press briefing.
“We saw negative consumer sentiment from last year spill over to the first quarter. This, combined with government underspending, affected our volume growth. However, macroeconomic indicators show that the business environment will improve going forward,” Lao also said.
The delay in the legislation of the government’s 2019 budget – which meant that about P1 billion of daily spending had been foregone in the first few months – gnawed on the macroeconomy alongside the lagged impact of the higher-than-expected inflation seen in the previous year, Lao said.
But Lao noted D&L’s margins have gone up significantly as the high-margin specialty product business now accounted for a record-high 69 percent of total business, rising from 63 percent last year. Margins from this segment also improved to an all-time high of 25 percent, up by 1.3 percentage points from the same period last year.
The improvement in margins was cited as a reflection of the company’s investments in research and development (R&D) to move up the value chain. Overall gross profit margin improved by 3.1-percentage points to 21 percent.
The commodity segment, accounting for 31 percent of total revenues, recorded a blended margin of 12.7 percent, up by 6.2 percentage points year-on-year. This was attributed to the company’s efforts to consciously focus on margin-accretive commodity sales. But given the nature of commodities, Lao said these double-digit margins were unlikely to be sustained.
Exports as percentage of total revenues stood at 19 percent year-on-year in the first quarter. In peso terms, export revenues declined by 19 percent, mainly due to lower global commodity prices which were passed on to customers. Coconut oil and palm oil average prices were down by 43 percent and 19 percent year-on-year, respectively.
Return on equity and return on invested capital stood at 17 percent and 21 percent, respectively.