Del Monte Pacific recurring earnings post first-quarter turnaround

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Del Monte Pacific Ltd. (DMPL) said recurring first-quarter net income attributable to the company’s owners was $4.15 million, reversing losses amounting to $3.73 million a year earlier.

The listed company said in disclosure to the exchange Friday that including one-off items, it posted a net loss of $38.26 million, after a profit of $3.02 million in the same period last year. The company’s first quarter ends in July. Its reporting currency is US dollars.

Sales during the quarter slipped by 14% to $375.86 million mainly due to lower sales in the US, although this was partly offset by higher sales in the Philippines and the S&W branded business in Asia.

US subsidiary Del Monte Foods, Inc. (DMFI) contributed $241.4 million or 64% of the group sales. Its sales declined by 22% after it divested the Sager Creek business and the reduced sales of low-margin non-branded business. Gross margin improved by 7.4 percentage points to 20.3%.

“Del Monte continued to diversify beyond the canned goods aisle and introduced innovative products in the growing categories of refrigerated produce and frozen to cater to demand for health and wellness, snacking and convenience,” the company said.

Reversing a decline a year earlier, sales in the Philippines grew by 2% in peso terms and 4% in dollar terms due to the peso’s appreciation.

“Retail sales grew by 4% in volume and 9% in peso sales value. Non-retail food service declined due to a change in a customer’s procurement policy. Price increase and lower direct promotion spend saw a positive contribution of 4.8% to net sales growth, driven by a series of price adjustments across all categories mostly in 2019,” it said.

In retail, sales in the general trade segment, which accounted for about 50% of Philippine sales, grew by 4% year-on-year, and by 20% quarter-on- quarter, as the group continued to make progress in improving its distributor business, which dampened results in the past year.

Sales in the modern trade segment, which made up about 30% of domestic sales, increased by 7%.

During the quarter, the company posted a gross profit of $91.1 million, up 17% from a year earlier, and much improved gross margin of 24.3%, up 6.5 percentage points.

It said the improvement was “mainly due to increased prices in the USA and Philippines, higher sales of fresh pineapple, divestiture of the low-margin Sager Creek vegetable business and reduced sales of low-margin private label, thus improving sales mix.”

DMPL, which is dually listed on the Singapore Main Board and Philippine Stock Exchange, recorded earnings before interest, tax, depreciation and amortization (EBITDA) of $36.6 million, significantly higher than the $18.8 million previously.

The quarter’s EBITDA included $2.1 million of one-off expenses mainly related to severance and loss on partial disposal of assets of a plant in Crystal City, Texas.

Without the one-off expenses related mainly to plant closures in the US, the group’s recurring EBITDA would have been $38.7 million, the company said. The comparative EBITDA in the previous year was $27.3 million.

On Friday, Del Monte Pacific shares slipped 1.01% to close at P5.89. – Victor V. Saulon