Campos family-led food conglomerate Del Monte Pacific Ltd. (DMPL) incurred a net loss of $38.3 million in the quarter ending July, a reversal of the net profit of $3 million a year ago, mainly due to sluggish sales in the United States alongside some one-off items.
Excluding extraordinary items, DMPL posted a recurring net income of $4.1 million in the first quarter of its fiscal year 2020, a turnaround from the $3.7-million net loss in the same period last year, the company disclosed to the Philippine Stock Exchange on Friday.
Barring unforeseen circumstances, the group expects to be profitable this fiscal year 2020 on a recurring basis. Certain one-off expenses, however, are expected from the streamlining of its US operations.
Last month, American subsidiary Del Monte Foods Inc. (DMFI) announced the closure and sale of facilities in four out of its 10 locations. Most of the production in these locations will be transferred to other facilities within the United States, thus optimizing the capacity of its remaining plants.
“The restructuring is a necessary step for us to remain competitive in a rapidly changing marketplace,” Joselito Campos Jr., DMPL managing director and chief executive officer, said in a statement. “Our asset-light strategy will lead to more efficient and lower cost operations,” he added.
For the quarter ending July, DMPL’s sales declined by 14 percent year-on-year to $375.9 million, mainly due to lower sales in the United States, partly offset by higher sales in the Philippines and S&W business in Asia.
DMFI contributed $241.4 million, or 64 percent of group sales. The US business declined by 22 percent mainly due to the divestment of the Sager Creek business and reduced sales of low-margin nonbranded business. Gross margin, however, improved by 7.4 percentage points to 20.3 percent compared to a year ago.
Reversing a decline in fiscal year 2019, sales in the Philippine market grew by 2 percent in peso terms and 4 percent in dollar terms in the quarter ending July 2019 due to peso appreciation.
Sales of the S&W branded business in Asia and the Middle East grew by 19 percent in the first quarter, mainly driven by higher sales of fresh pineapple in North Asia. Fresh sales of both branded and nonbranded businesses improved by 28 percent.
Recurring operating profit increased by 114 percent year-on-year to $22.4 million.
Cash flow as measured by earnings before interest, taxes, depreciation and amortization (Ebitda) surged to $36.6 million, almost double last year’s level of $18.8 million. This quarter’s Ebitda included $2.1 million of one-off expenses mainly related to severance and loss on partial disposal of assets of a plant in Crystal City, Texas. —DORIS DUMLAO-ABADILLA