Del Monte swings to profit in Q2

DEL MONTE Pacific Limited (DMPL) swung to profitability in the second quarter of its fiscal year 2019, as prices increases in the Philippines offset the lower sales for the period.

In a disclosure to the stock exchange on Thursday, the listed fruit products manufacturer said net profit for the August to October period reached $8.4 million, versus a net loss of $2.8 million in the same period a year ago.

DMPL attributed the positive performance to the implementation of prices increases for its local operations, accompanied by lower trade spend in the United States. The company also benefited from the reduction of tax rates in the US to 21% from 35% at $2 million.

This came amid a 7.5% decrease in gross profit to $118.7 million, dampened by lower prices of pineapple juice concentrate (PJC) and higher product costs.

Sales for the period went down by 11% to $556.3 million, with sales from US unit Del Monte Foods, Inc. (DMFI) dropping by 14% due to its planned divestiture of the Sager Creek vegetable business in September 2017. This forms part of the company’s plan to deprioritize non-profitable businesses.

Without Sager Creek’s sales, the decline would have been slower at 6%.

In the Philippines, sales slid by 8% in dollar terms and by 3% in peso terms. DMPL attributed the slowdown to the general trade and mixed fruit category, noting that it continues to address operational issues for the segment.

Meanwhile, sales from the S&W brand, which sells fresh pineapple, picked up by 17% during the quarter due to its strong performance in North Asia. The packaged segment however continued to be affected by competition with cheaper brands.

On a six-month basis, DMPL’s net profit stood at $11.4 million, a reversal of last year’s net loss of $2.1 million during the same period. Meanwhile, sales went down 9.6% to $993.5 million.

Excluding one-off items, DMPL’s net income for the six months ending October would have been at $3.6 million.

DMPL said it continues to strengthen its balance sheet, as gearing improved to 2.8x equity as of Oct. 31, versus 3.4x in the same period a year ago. The company purchased $225 million worth of loans by DMFI from the fourth quarter of 2018 to the first quarter of 2019, helping reduce interest expenses.

Its issuance of $100 million worth of preference shares in 2017 also help the firm raise equity and reduce debt.

DMPL said it expects to be profitable for the entire fiscal year 2019.

“The Group will continue to strengthen its core business by focusing on its innovation strategy, growing its branded business and reducing non-strategic, non-branded business segments. The Group also continues to review its manufacturing and distribution footprint in the US to improve operational efficiency, further reduce costs and increase margins,” the company said in a statement.

Shares in DMPL dropped 2.22% or 15 centavos to close at P6.60 each at the local stock exchange on Thursday. The firm is also listed at the Singapore Stock Exchange under the ticker DMPL.