D&L eyes P1B H2 profit
Food ingredients, oleochemicals and specialty plastic manufacturer D&L Industries expects to book P900 million to P1 billion in net profit this second semester as businesses pick up pace after the initial shock caused by the coronavirus (COVID-19) pandemic-related lockdown protocols.
In the second quarter, D&L’s net profit dropped by 57 percent year-on-year to P287 million. This brought first semester net profit to P802 million, down by 43 percent year-on-year.
“We don’t think things could be as bad anymore in the second half and we believe we can do a lot better in the second half than what happened in the second quarter. That’s where the P900 million to P1 billion net income expectation comes from for the second half,” D&L president Alvin Lao said in a virtual press briefing on Wednesday.
“It should be a lot better than the second quarter and more or less close to what we made in the first quarter,” he said.
Even if the modified enhanced community quarantine (MECQ) were to be prolonged, Lao said most businesses have adjusted better to restrictions compared to the early stages of the first lockdown, adding that the government was willing to be more flexible this time around to get the domestic economy going.
In the first half, D&L’s revenues down by 8 percent year-on-year to P10.2 billion. For the second quarter alone, revenues declined by 13 percent year-on-year to P4.5 billion.
“Results for the second quarter didn’t come as a surprise as the months of April and May were placed under strict lockdown measures. The month of April was likely the worst month for our business as it was the only month to-date when Metro Manila was under 100 percent ECQ. Nonetheless, our business remained profitable in April, and we didn’t have any month in the first half where net income was negative,” Lao said.
“In June, we started seeing a pick up in activity, albeit still lower than pre-quarantine levels, due to pent-up demand and as the government started easing restrictions by shifting Metro Manila to a general community quarantine (GCQ). Despite the challenging first half of the year, we remain optimistic and see a gradual recovery as restrictions ease in the country. We continue to sense that things are getting better each month as more and more of our customers are able to ramp up operations under the new normal. A possible monkey wrench, however, is a second wave that can return us to a stricter quarantine, ” Lao added.
One bright spot was the company’s export business, which saw a 41 percent year-on-year growth in second quarter sales, bringing first semester growth to 25 percent. Export contribution to total revenues in the first half expanded to 26 percent compared to just 19 percent in the same period last year, driven by coconut-based products under food and oleochemicals.
Coconut oil continued to gain traction in the global market during the pandemic due to its perceived natural antiviral, antibacterial, and anti-fungal properties, the company reported. In addition, coconut-based products are seen as great organic and sustainable substitutes for many petroleum-based raw materials used in personal hygiene and home cleaning products.
D&L sees coconut oil exports remaining robust, which may offset some of the weakness in the domestic market in the near term.
By business segment, D&L food ingredients segment – which serves many food retailers which suspended dine-in operations during the lockdown period – suffered a 60-percent drop in first semester net profit. The oleochemicals and specialty chemicals segment reported a 36 percent year-on-year decline in net profit, while earnings from specialty plastics went down by 37 percent year-on-year.
On the other hand, the aerosols segment experienced significant growth in its business, as demand for sanitation chemicals such as disinfectant sprays and alcohol surged. Net income from this business jumped by 20 percent year-on-year in the first half.
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