D&L Industries Inc., a food and plastics manufacturing giant whose products are found across restaurant chains and consumer goods, sees business picking up this year with the revival of economic activity but risks from surging inflation remain.
“In the short-term, it looks like the increased demand is having a bigger positive impact than the negative impact of higher costs,” D&L president and CEO Alvin Lao told reporters on Wednesday.
The company disclosed that full-year 2021 net income had jumped by 31 percent to P2.64 billion as it recovered during the second year of the pandemic. Sales surged by 42 percent to P30.85 billion.
But higher commodity costs are eating into profits as D&L exceeded prepandemic earnings in 2021. Profit margins last year dropped to 14.8 percent from 18.4 percent in 2020 as prices of key raw materials such as coconut and palm oil rallied last year.
Lao said margins would “go back to what they were” once prices stabilize.
Geopolitical crisisLao declined to provide specific forecasts for 2022, admitting that earlier assumptions had to be abandoned due to the uncertain environment, which included the Russia-Ukraine war.
“While Russia and Ukraine are not a significant part of our supplier or customer base, the ongoing conflict poses a threat to global recovery and has sent prices of key commodities skyrocketing over a short span of time,” Lao said in a separate statement.
Nevertheless, he said there was mounting evidence that critical business segments would ramp up with increased spending alongside the boost provided by the 2022 elections.
“We have pent-up demand. So revenge travel, revenge spending looks like it’s real,” Lao said, pointing to restaurants that have exceeded prepandemic volumes.
“It’s not just the recovery of dine in but takeaways. The deliveries added to their business during COVID and it looks like this is continuing,” he added.
Food ingredients accounted for a third of D&L’s profits. Other major contributors were the Chemrez Group and speciality plastics.