DEL MONTE Pacific Limited (DMPL) swung to profitability in its fiscal year 2019, even as sales fell due to its divestment from its Sager Creek business in the US.
In a regulatory filing, the listed canned fruit manufacturer said net profit attributable to the parent stood at $20.32 million in the fiscal year ending April 2019, versus an attributable loss of $36.49 million in the previous year.
DMPL delivered an 11% decrease in sales to $1.95 billion, 73% of which came from its US unit Del Monte Foods, Inc. (DMFI). The company attributed the decline to “the divestiture of the Sager Creek vegetable business in September 2017, lower volume of retail branded products due to promotion reduction and distribution losses.”
The closure of the Sager Creek business was part of the company’s strategy to improve operational efficiencies and streamline operations. It also shuttered its Plymouth, Indiana tomato production facility in its fiscal year 2018. These resulted to one-off expenses worth $8.5 million.
One-off adjustments from the mentioned divestments were offset by one-off gains worth $13 million from the additional purchase of DMFI’s second lien loan worth $105.5 million at a discount from the secondary market.
Excluding the one-off items, DMPL’s recurring net income stood at $15.8 million, 32% higher than the $12 million it booked in the previous year.
“We have proactively reduced costs within our control amidst headwinds of rising tin prices. We are pleased to deliver a full year net income for DMPL, driven by our results in Asia, while we invest in transforming our US business,” DMPL Chief Executive Officer Joselito D. Campos, Jr. said in a statement.
“We are encouraged by the accelerated pace of innovation and new product launches especially in the United States, taking us into new categories and formats outside the can which is not growing.”
Meanwhile, sales in the Philippines also went down by 4.2% and 8% in peso and US dollar terms, respectively, as the firm transitioned to new distributors in a bid to enlarge and strengthen its distributor network.
“Decline in sales was further driven by unfavorable sales mix in the Philippines and higher direct promotion spending. These were partly offset by price increases implemented across several categories in line with inflation,” the company explained.
Its S&W brand in Asia and the Middle East saw a 19.6% increase in sales of fresh pineapple products in the same period.
Moving forward, the company expects to be profitable in its fiscal year 2020 on a recurring basis.
“The Group will continue to expand its existing branded business in Asia, through the Del Monte brand in the Philippines, where it is a dominant market leader,” the company said.
Shares in DMPL jumped 2.55% or 14 centavos to close at P5.64 each at the stock exchange on Friday. — Arra B. Francia