Del Monte Pacific swings back to profit

DEL MONTE Pacific Ltd. returned to profitability during the fiscal year ended April, following adjustments in retirement and capital expenses along with the uptick in sales from the United States, the Philippines and other markets.

In a disclosure to the Philippine Stock Exchange (PSE) on Wednesday, the company reported an annual net income of $51.5 million, a reversal of the $43.2-million net loss recorded in the previous year.

Del Monte attributed its improved financial performance to one-time gains of $31.7 million mainly from the amendment of the retirement plan of its US subsidiary Del Monte Foods, Inc. (DMFI) in the second quarter and the adjustment of the working capital in the fourth quarter.

The adjustments offset expenses from the closure of a plant in North Carolina, according to the company.

Del Monte, however, managed to post positive financial results even without the nonrecurring items, as the company’s core or recurring net income amounted to $19.8 million.

“During the past year, we continued to lay the foundation for future growth and this is reflected in the sales and financial performance of Del Monte Pacific in FY2016,” Del Monte Managing Director and Group Chief Executive Officer Joselito D. Campos, Jr. was quoted as saying in the statement.

Del Monte booked $2.3 billion in sales, a 4% increase from the year-ago figure. DMFI, which accounted for 78% of total sales, generated a 4% higher revenue amounting to $1.8 billion.

The Philippine market posted a record performance, according to Del Monte, as increased sales across all product categories pushed the full-year result 6% higher. This was supposedly driven by an expanded user base and household penetration.

Del Monte likewise cited record sales of the S&W branded business in Asia and the Middle East which rose 10% on the performance of both fresh and packaged segments. In particular, the expanded distribution in China drove sales of fresh products.

The company also managed to improve its gross margin to 21.2% from 18.7% due to lower trading spending in DMFI and cost optimization initiatives to mitigate the impact of lower pineapple output brought by the El Niño in the first half.

“We drove improvements in our cost structure and better aligned operations with our strategic direction to gain market share, increase margins and expand into adjacent categories as part of a long- range plan to grow sales and profits for the company in the years ahead,” Mr. Campos said.

In the fourth quarter alone, Del Monte posted a net income of $19.2 million, including a one- time net gain of $ 8.4 million. Sales, however, dropped by 3% because of a 7% decrease in sales from DMFI due to unsuccessful government and co- pack contract bids.

The “commendable” performance of the Philippine business partly offset the lower sales from the US, according to Del Monte.

Sales from the Philippines jumped 6%, as household penetration increased following advertising campaigns. The S&W branded business in Asia and the Middle East, meanwhile, generated 8% higher sales, with the Korean and Japanese markets growing significantly on improved sales of canned beans and tropical fruits.

As part of its deleveraging plan, Del Monte said it plans to issue dollardenominated perpetual preference shares on the Philippine capital market. It targets to launch the offering this year subject to regulatory approvals and market conditions.

The proposed issue will amount to $ 360 million, with $ 250 million issued initially and the balance within three years.

The company has already received pre-effective approval from the Securities and Exchange Commission (SEC) and now awaits the approval of its listing application and the offering from the PSE and the Bangko Sentral ng Pilipinas, respectively.

“As this is the first ever dollardenominated preference shares to be issued and listed on the PSE, the platform is being set up. The PSE has approved and endorsed its amended Dollar Denominated Securities rules to the SEC for its concurrence,” Del Monte noted.

The company expects to sustain its profitability into the next financial year ending April 2017.

In the short- to medium-term, Del Monte plans to improve its financial performance by strengthening its core business, leveraging procurement synergies and optimizing general and administrative costs. The company also intends to shift to a “leaner” organizational model in the US.

Shares in Del Monte closed 78 centavos or 6.85% higher at P12.16 on the local bourse on Wednesday. The company is also listed on the Singapore Exchange’s main board. —