Food and plastic input manufacturer D&L Industries Inc. plans to double its capital outlays this year to about P3 billion, mostly for its expansion program in Batangas province.
“As a company, we continue to focus on initiatives that will allow us to grow the business while building resilience. The construction of our next-generation expansion facilities, which will be the foundation of our next leg of growth, is on-track and set to be operational by the second half of 2021,” D&L president Alvin Lao said.
The new manufacturing facilities in Batangas are seen to set the stage for future growth.The company saw an 18-percent drop in net profit last year amounting to P2.6 billion as the delayed passing of the government budget and the US-China trade war dampened demand.
In the fourth quarter alone, net income fell by 25 percent year-on-year to P590 million, D&L disclosed to the Philippine Stock Exchange on Thursday.
“The company faced a tough year in 2019, brought on by a confluence of external factors,” Lao said.
But Lao said there were reasons to be more optimistic for this year given the early passage of the government budget and the extension of the validity of 2019 budget, expectations of further cuts in interest rates, and the easing of the US-China trade war tensions.
“However, we are also cognizant of the fresh risks brought on by the COVID-19 outbreak, which may have implications on the global economy that may be hard to quantify at this point,” Lao said.
“We continue to believe in the long-term prospects of the business and we see the current selloff in the stock as a limited window of opportunity for shareholders who, like us, seek long-term value,” Lao said.
D&L’s revenue fell by 16 percent to P22.39 billion last year. In the fourth quarter alone, revenue fell by 8 percent year-on-year to P5.83 billion.Food and aerosols business continued to recover while the performance of the Chemrez and specialty plastics business remained muted.
The late passage of the 2019 budget resulted in lower public infrastructure spending, thus curbing demand for industrial and construction-related chemicals, of which Chemrez is a supplier. The budget delay also had an indirect impact on general economic activity and consumption. Meanwhile, the slowdown in the global auto industry put pressure on the company’s specialty plastics business. About half of revenue from specialty plastics comes from export-oriented raw materials used in wire harnesses for automotive applications.
Despite a challenging year, D&L made progress in strategic initiatives that will benefit future growth. Investments in research and development translated to margin recovery in several business segments.
Another area of progress is the improvement in high margin specialty product sales contribution, which stood at 69 percent in 2019. The company continues to focus on growing this high-margin side of the business.