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SINGAPORE (Sept 12): Del Monte Pacific reported a 1Q19 earnings of US$3 million ($4.1 million). This is higher than US$0.7 million in 1Q18 and was the result of a one-off gain from the purchase of DMFI loans.
The group had purchased US$99 million of DMFI loans at a discount in the secondary market, which further lowered group debt, reduced interest expense and trimmed gearing to 2.5x equity from 3x last year.
Excluding one-off items of US$6.8 million post-tax, the group would have incurred a net loss of US$3.7 million versus a profit of US$1.2 million in the prior year period due to lower sales in the US, lower exports of processed pineapple, significantly lower pineapple juice concentrate (PJC) prices and higher product costs that were partly offset by price increase in the Philippines and lower trade spend in the US.
The group generated 1Q19 sales of US$437.2 million, 8% lower than prior year quarter mainly due to lower sales in the US and lower exports of processed pineapple products.
DMFI contributed US$308.3 million or 71% of group sales. DMFI sales declined by 8% due to lower volume across categories, mostly from branded tomato products and private label, as well as lower pricing in foodservice for PJC. The decline in sales was in line with DMFI’s strategy to deprioritise non-profitable businesses including private label.
DMFI also booked additional one-off expenses of US$8.4 million in the first quarter of FY2019, mostly for the underperforming Sager Creek vegetable business in FY18.
Sales in the Philippines domestic market were flat in peso terms and down 5.3% in US dollar terms due to peso depreciation.
Sales of the S&W business declined in the first quarter mainly due to lower sales in North Asia and Turkey. Increased competition from cheaper canned pineapple products from Thailand and Indonesia continued to impact S&W’s business. But despite lower sales, the S&W business was able to deliver higher operating profit and a 5.5 percentage point increase in operating margin due to lower costs.
Barring unforeseen circumstances, the group expects to be profitable in FY19 on a recurring basis. The group says it will continue to grow its branded business and reduce non-strategic, non-branded business segments. The group will also continue to review its manufacturing and distribution footprint in the US to improve operational efficiency, further reduce costs and improve margins.
Year to date, shares in Del Monte Pacific have fallen almost 40% to 17 cents on Wednesday close.