LISTED company D&L Industries, Inc. posted a 31% decline in net income for the first quarter as demand for its high margin specialty products slid with the implementation of lockdown measures due to the coronavirus pandemic.

The Lao-led manufacturer of plastics, food ingredients and specialty chemicals reported a net income of P515 million in the first quarter, down from P748 million in the same period last year.

Sales slipped 3% to P5.67 billion as its sales mix tilted towards commodities against high margin specialty products.

“It’s really a buyer’s market at the moment for most of our commodity businesses, especially food ingredients,” D&L President and Chief Executive Officer Alvin D. Lao said in an online briefing. “Wala masyadong bumibili ng mga (There aren’t many customers for) high margin food ingredients. It’s focusing mostly on the basics.”

For the past quarters, D&L has been focusing on getting more revenues from its high margin business and lower revenues from commodities or low margin products, as it said this would help improve the risk management of the company.

Its sales mix in the first quarter was 64% against 36% in favor of high margin specialty products, skewing the ratio from 69%-31% in 2019 and 63%-37% in 2018.

“We only have two weeks of ECQ (enhanced community quarantine) in the first quarter. In the second quarter, we’re going to have at least six weeks of ECQ. Because of that, it is likely this 36% will expand,” Mr. Lao said.

Food ingredients comprised the bulk of D&L’s sales in the first quarter with a total volume growth of 22% year-on-year. Volume of aerosols also increased 12%, while oleochemicals and specialty plastics dropped 26% and 8%, respectively.

But in terms of net income, only the aerosols business posted a growth of 44%. Food ingredients, oleochemicals and specialty products fell 34%, 36% and 28%, respectively.

An added effect of the ECQ to D&L is the suspension of construction works at its 26-hectare facility in Batangas. The plant was originally scheduled for completion in the first half of 2021, but Mr. Lao said this may be moved to the third or fourth quarter next year.

“Even after ECQ is lifted…it will take time for the mobilization to start again. We’re looking at the minimum probably three months of delay. But we don’t want to delay this any further,” he said, noting the facility’s long-term benefits to the company’s operations.

D&L maintains a P6-billion budget for capital expenditures through 2021, which might spill over mostly to next year, Mr. Lao said.

Mr. Lao also said the company expects the worst is over for the pandemic, as port congestion has started to ease and businesses are gradually resuming operations.

However, given the lack of an anti-viral drug for coronavirus disease 2019 (COVID-19), he said it was difficult to provide an outlook for the company in the months to come. “I’m not able to give a projection but what I can tell you is mukhang (it seems) the worst is over,” he said.

“[COVID-19] is nowhere near as bad as the Spanish Flu. So I think from that you can see that recovery, at worst, [would take] two years, then things should be back to normal after,” Mr. Lao added.

Shares in D&L at the stock exchange slipped four centavos or 0.76% to P5.19 each on Tuesday. — Denise A. Valdez