D&L to miss growth target as H1 profit drops 7.5%

Food and chemicals manufacturer D&L Industries Inc. does not expect to hit its 10 percent income growth this year, but remains hopeful of an improved performance in the second half of the year.

In a media briefing yesterday, D&L reported a 7.5 percent drop in its net income in the second half of the year to P1.4 billion from P1.5 billion the previous year. This was pulled down by the 15 percent profit decline in the second quarter to P665 million.

D&L president and chief executive officer Alvin Lao said total volume for the first half of the year fell by nine percent, with high margin specialty products (HMSP) and commodities posting declines of four percent and 14 percent, respectively.

Lao attributed the drop to last year’s higher base as well as the impact of the US-China trade war which dampened global trade.

“We don’t think it can get worse (in the next half). We’re hoping that things should stabilize, but its really hard to project how the second half will look like” Lao said.

He added that if growth remains flat in the second half of the year, its net income growth rate would be down to single digit.

“We’re tyring our best to do what we can,” Lao said.

“If the second half is flat, full year 2019, we will be down two percent. That’s one possible scenario,” he added.

The company earlier targeted to hit a 10 percent growth in profit for 2019.

Total sales in the first half dropped 17 percent to P11 billion from P13.3 billion in the same period last year.

Export revenues declined by 25 percent to P2.1 billion from P2.8 billion last year due to a combination of the negative sentiment due to the trade war and lower commodity prices which were passed on to customers.

Lao said that prices of coconut oil and palm oil, which are the main ingredients for its products, declined by 40 percent and 19 percent, respectively.

The company said while exports sales were down in the first half of the year, it remains as one of the key pillars of growth. D&L said it remains optimistic that it would reach its longterm target export contribution of 50 percent.

It added that the ongoing construction of its new plants in export zones is expected to be completed in 2021.

“This will add a significant amount of capacity, focusing mainly on higher value and higher margin products which will allow the company to cater to more customers in both local and overseas markets,” the company said.

In line with the expansion of its new plants, Lao said the company has been ramping up its capital expenditure spending in the first half of the year, with a capex of P1.1 billion compared to the P873 million spent in the same period last year.

“While unfavorable macro factors have weighed down our growth for the period, we believe that this is more of a one-off event, rather than something that is structural in nature,” Lao said.

“Looking into the second half of this year, there are more reasons to be optimistic given lower inflation, expectation of a more accommodative monetary policy, and ramp up in government spending with the Build Build Build program,” he added.