D&L sees “reasonable” recovery by Q4

D&L president Alvin Lao

Plastic and food input producer D&L Industries sees “reasonable” business recovery coming by the fourth quarter of this year amid challenges arising from the coronavirus pandemic and the consequent lockdown protocols.

As quarantine restrictions are gradually eased, D&L sees volumes improving.

“The past couple of months have been extremely challenging due to various operational restrictions and as demand dried up in many industries. The month of April is likely the worst month as it’s the only month that was under 100 percent ECQ (enhanced community quarantine) to date. In May, we saw a pick-up in activity due to pent-up demand and as some restrictions were eased by the middle of the month,” D&L president and chief executive officer Alvin Lao said in a press statement on Thursday.

“We expect further recovery in June as more and more of our customers are ramping up operations under GCQ (general community quarantine).”

Metro Manila and nearby provinces have shifted from ECQ to modified ECQ last May 15, and subsequently to GCQ starting June 1.

The government has also eased restrictions on food establishments in regions under GCQ. Restaurants and fast food chains are now allowed to utilize 30 percent of their dine-in capacity starting June 15. This is seen to translate to better volume for D&L’s food ingredients business, which saw a significant drop in demand from the hotel/restaurant/caterer (HoReCa) sector during the first few months of the quarantine period.

In addition, the resumption of construction activities and public transportation, albeit on a limited scale, is seen to shore up volumes of other specialty chemicals and biodiesel segments under Chemrez.

“We saw steep declines in most of our businesses in the first quarter when we only had two weeks of quarantine. It is likely that the second quarter will not be any better considering strict lockdown measures were in effect for the months of April and May. We are optimistic that improvements might be seen in the third quarter, but may still be below pre-COVID levels,” Lao said.

“A reasonable recovery might be more probable in the fourth quarter as Christmas period in the Philippines sets in as early as September. In addition, Filipino culture is very social. We love gatherings and meeting up with friends and family. I can sense that there’s still a lot of pent-up demand right now. So this could be positive once restrictions are eased further. This should help the country recover faster than most countries. A possible monkey wrench, however, is a second wave that can return us to a stricter quarantine,” Lao added.

Despite current disruptions, D&L reported that its export business remained relatively resilient in the first quarter. This pertained to the export of coconut-based products under food and oleochemicals.

The interest in coconut oil is seen gaining traction in the global market due to its perceived natural antiviral and antibacterial properties. This is also seen as an organic and sustainable substitute for many petroleum-based raw materials used in personal and home care products.

D&L sees coconut oil exports remaining strong, which it expects to offset some of the weakness in the domestic market in the near term. The company vowed to capitalize on this trend by developing more oil products and penetrating more markets globally.