D&L allocates P8 billion to construct new plants

D&L Industries, Inc. (DNL) is pouring in about P8 billion to build new plants and storage tanks in Batangas to triple its current capacity, as the company targets to grow its export business in the following years.

DNL President and Chief Executive Officer Alvin D. Lao said the expansion will include the construction of two plants inside a 26-hectare property in First Industrial Township — Special Economic Zone in Tanauan, Batangas. One plant will be used by its food ingredients segment, while the other will be for the oleochemicals and downstream packaging division.

The expansion will further include over 50 new storage tanks that can carry up to 2,000 cubic meters each, or more than 100,000 cubic meters for the entire program.

“The P8 billion will be spent on machinery and equipment, as well as buildings, plant-related buildings specific to the manufacturing, and all other type of capex related to manufacturing. It doesn’t include the cost of the land, because that is leased,” Mr. Lao told reporters in a press briefing in Taguig City last week.

Mr. Lao answered in the affirmative when asked whether this will triple DNL’s capacity, adding that “compared to what we have now, it’s more than double. It’s for all kinds of oils and chemicals, so food and non-food.”

DNL’s existing plants in Quezon City are currently running at about 70% utilization rate.

With this expansion, Mr. Lao said the company’s capacity will be enough for the next 10 years.

The listed firm looks to complete the project by 2020. About 70% of the capex will be financed through debt, while the 30% balance will be taken from internally generated cash.

The company also noted its low level of debt, with net gearing at about eight percent by the end of the third quarter. The borrowings to be incurred for the expansion is expected to bring net gearing up to 16%.

“We don’t anticipate gearing to go up very high, it’s likely go up 16%. That’s the maximum, so we’re not heavily geared yet,” Mr. Lao said.

The expansion is in line with the company’s goal to ramp up its export business by 2025.

“We’re hoping more from exports. That’s why the expansion is being done on a PEZA (Philippine Economic Zone Authority) zone so that we can really cater to the growing export markets for our products,” Mr. Lao said.

DNL’s exports accounted for 23% of its total revenues by endSeptember. The company earlier said its export business should generate half of its revenues by 2025.

Mr. Lao said the company is working on formulations and talking to customers in new markets in Asia, mostly in the Southeast Asian region.

DNL’s net income attributable to the parent climbed 13% to P2.40 billion in the first nine months of 2018, while revenues inched up by a percent to P20.17 billion for the period.