D&L 1st quarter profit down 24%

MANILA  -D&L Industries Inc., the Lao family’s food ingredients and plastics manufacturing company, is looking to recover sales momentum this year after weaker volume contributed to a 24-percent drop in first quarter profit to P594 million.

D&L CEO Alvin Lao said the decline was mainly caused by customers who front loaded their orders and overstocked their inventories last year amid worries over supply chain and logistics bottlenecks.

This helped boost D&L’s profits to a record high last year but the excess inventory also meant customers ordered less of their products in the latter part of 2022. This spilled over into the first two months of 2023, Lao said.

“Customers had to go through that excess inventory. That is almost done so as you can see March is almost back to normal,” he said.

Despite signs of recovery, Lao signaled it would be a challenge to beat their historic-high profit of P3.3 billion in 2022 given the weaker first quarter performance.

“As a company, we try to grow net income but with the handicap of [January and February] it might be challenging,” Lao said.

During the quarter, D&L recorded a 4-percent improvement in gross profit to P1.4 billion with the increase in the contribution of high-margin products.

The so-called sales mix deteriorated in favor of low margin products during the COVID-19 pandemic. During the first quarter of 2023, high margin specialty product contributions surged to 64 percent from 51 percent last year.

This also resulted in a 3.2 percentage point increase in blended gross profit margin.

“That is a trend we expect to maintain, our higher gross profit margins,” Lao said.

Meanwhile, free cash flow turned positive for the first time in two years as the company substantially completed a brand new Batangas manufacturing plant, which will open by the middle of 2023.

D&L’s debt level also eased to P15 billion from P15.5 billion last year.

“As there are no other major [capital spending commitments] planned aside from the expansion plan in Batangas, the improvement in the [free cash flow] gives the company the financial flexibility to further reduce debt level over time,” D&L said.

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