DEL MONTE Pacific Limited (DMPL) swung to a net loss for the fiscal year ending April 2018, dragged by the closure of two plants in the United States.
The listed canned fruit manufacturer said its net loss reached $28.2 million in the 12 months ending April, against a net profit of $24.4 million the year before. The performance for the year was weighed down by one-off expenses amounting to $74 million after the company closed down two plants in the US.
The closure of the plants was part of the company’s efforts achieve operational efficiencies among its plants and reduce costs from the US subsidiary, Del Monte Foods, Inc.
DMPL also wrote off deferred tax assets following a change in US tax rates.
Excluding one-off items, DMPL said it would have booked a net income of $12 million, still a 50% drop from the year before.
Meanwhile, the group’s sales slowed down by 2.5% to $2.2 billion for the fiscal year, with lower sales in the US dampening growth in Asia.
The Philippine unit, Del Monte Philippines, Inc. (DMPI), recorded $540.5 million or P27.6 billion in revenues for the period. This represents a 6.7% uptick in peso terms. Local sales accounted for two-thirds of DMPI’s sales, while the remaining portion comes from exports under the S&W brand and private label.
For the fourth quarter alone, DMPL’s net income surged 324% to $12.3 million, from the $2.9 million reported the year before. The increase was achieved after the company’s purchase of DMFI’s loans at a discount in the secondary market. Without this, the firm would have recorded a loss of $2.1 million due to lower export sales and reduced prices.
Sales for the fourth quarter were also lower by 8.5% to $499 million, due to lower sales in the US alongside the lower, cyclical pineapple juice concentrate prices in international markets and decreased exports of processed pineapple.
“The Group has been shifting to more branded consumer beverage given the volatile nature of industrial and commodity PJC,” the company said.
As part of efforts to strengthen its balance sheet and reduce leverage, the company raised $300 million from two tranches of preferred shares in April and December 2017. The funds raised were used to repay debt.
The company also purchased $124.9 million out of the total $260 million in second lien loans of DMFI at a discount in the secondary market this week. The purchase of the loans will allow it to save $8-10 million in interest payments for fiscal year 2019, as it is the group’s highest interest-bearing loan with a current rate of 9.5% per annum.
Moving forward, DMPL said it expects to be profitable in the next fiscal year given the programs in place to improve its operational efficiencies.
“With the divestiture of Sager Creek and closure of plants in USA, this will lead to improvement in margins starting FY2019 as well as stronger cash flow through lower inventories. The Group continues to review its manufacturing and distribution footprint in the US to improve operational efficiency and further reduce costs,” the company said.
Shares in DMPL dropped 38 centavos or 4.75% to close at P7.62 each at the stock exchange on Friday. — Arra B. Francia