DNL Q1 profit driven by non-food business

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D&L INDUSTRIES, Inc. (DNL) posted a double-digit growth in earnings in the first three months of the year on the strength of its non-food business units.

The listed food and chemicals manufacturer chalked up a 12.3% rise in net income to P744 million in the first quarter of 2018 from P663 million a year ago, according to a disclosure to the stock exchange on Thursday.

Revenue growth was muted at 2% to P6.4 billion for the three-month period from P6.3 billion in the prior year on the back of the 25% decline in coconut oil prices during the period.

However, the “lower cost and expenses as well as higher other income from foreign exchange gains” helped boost earnings, DNL President and Chief Executive Officer Alvin D. Lao said in a briefing in Makati City.

Two-thirds of earnings now come from the non-food business consisting of oleochemicals, specialty plastics and aerosols, allowing DNL to weather the flat growth in the food ingredients business as a result of lower commodity sales.

“We expect the domestic business to continue to be strong. The indication from customers is malakas pa rin. They plan to open more stores and add more items in their menu. The direction is may growth pa rin,” Mr. Lao said.

“Even if inflation has gone up, 20 years ago we were used to seeing inflation above 10%. Yes, inflation is higher now but at the same time you’re seeing good growth: the economy is growing 6%, our company is growing 12%, return on equity is almost 19%. When you look at things from that perspective, hindi nakakatakot,” Mr. Lao said.

Given the robust domestic sales, exports as percentage of total revenue fell to 22% in the first quarter of 2018 from 24% a year ago. Export revenues dropped 5% to P1.4 billion year on year, normalizing from above-average growth last year.

The high-margin specialty product (HMSP) segment grew volumes by 13% year on year, beating the historical average of 7%. As a result, its revenue contribution improved to 64% from 58% in the entire 2017, providing DNL a steady source of recurring revenues.

The commodity business accounted for the remaining 36% of revenues. Blended commodity margins stood at 6.5% during the period from 3% a year ago, pushing overall gross profit margin by 1.2 percentage points year on year to 17.9%.

Shares in DNL shed 20 centavos or 1.87% to settle at P10.50 per share. — Krista Angela M. Montealegre