D&L targets ‘low-teens’ profit growth this year
‘There are at least three catalysts on the horizon to look forward to in 2024 such as the moderating inflation, prospects of lower interest rates, and the planned implementation of a higher biodiesel blend by July’
The country’s top producer of specialty food ingredients and oleochemicals anticipates net income growth within the low-teens or somewhere between 10 and 15 percent this year.
During a press briefing on Thursday, D&L president and CEO Alvin D. Lao expressed optimism for the company’s upward growth trajectory.
He cited the projected increase in production resulting from the commercial launch of their multibillion peso manufacturing facility in Batangas as a key growth factor.
“On a macro level, there are at least three catalysts on the horizon to look forward to in 2024 such as the moderating inflation, prospects of lower interest rates, and the planned implementation of a higher biodiesel blend by July,” Lao told reporters.
“While 2023 was challenging on several fronts with the incremental expenses from the Batangas plant coming in during a tough economic environment, we are encouraged by the gradual ramping up of operations at this new facility and the early signs of an economic recovery,” Lao said.
Charting growth path
Despite a challenging 2023, D&L banked on the increased High Margin Specialty Products, or HMSP, volume growth to sustain growth momentum.
Notably, in the last quarter of 2023, HMSP volume had a substantial 40 percent year-over-year increase.
D&L reported a recurring income of P2.3 billion in 2023, representing a 31 percent decline from the previous year.
The recognition of depreciation expenses and interest expenses associated with the Batangas plant, which previously had been capitalized in the company’s income statement, occurred following the declaration of commercial operations at the plant in July 2023.
Excluding the impact of these additional expenses, D&L’s profits for 2023 would have been a moderate 15 percent decline year-over-year, reaching P3 billion.
To date, the new plant has successfully fulfilled several orders for both local and export customers. Several audit and certification processes are ongoing to onboard more customers.
Lao said the Batangas plant has already surpassed by 175 percent its first-year export commitment to the Philippine Economic Zone Authority.
Longer term he said, the facility can put D&L in a very good position to capitalize on global recovery.
New prospect
Recently, the Department of Energy released a draft circular that requires an increase in biodiesel blend from two percent to three percent this year. This development has a positive impact on the business outlook for D&L.