D&L sees better H2 with strong growth in exports

Published August 5, 2020, 4:11 PM

by James A. Loyola

D&L Industries, the country’s largest specialty foods ingredients, plastics and oleochemicals firm, expects the second half of the year to be much better than the first semester, noting that sales have been recovering since hitting bottom last April due to the pandemic lockdown.

 “Despite the challenging first half of the year, we remain optimistic and see a gradual recovery as restrictions ease in the country,” D&L President and CEO Alvin D. Lao said during an online press briefing.

He noted that, “We continue to sense that things are getting better each month as more and more of our customers are able to ramp up operations under the new normal. A possible monkey wrench, however, is a second wave that can return us to a stricter quarantine.”

“In June, we started seeing a pick up in activity, albeit still lower than pre-quarantine levels, due to pent-up demand and as the government started easing restrictions by shifting Metro Manila to a General Community Quarantine (GCQ),” Lao added.

He said that, earnings in the second half is expected to reach P900 million to P1 billion, approximating the firm’s performance in the first half of the year which marked only two weeks of lockdown.

D&L reported a recurring income of P802 million in the first six months of 2020, 43 percent lower than last year. Earnings before interest and taxes was lower by 37 percent year-on-year at P1.2 billion.

In the second quarter alone, net income fell 57 percent y-o-y to P287 million. Earnings before interest and taxes for the quarter was lower by 49 percent y-o-y at P454 million.

“The weak earnings for the period mainly stemmed from the unprecedented economic disruptions caused by the COVID-19 pandemic. Results for the second quarter didn’t come as a surprise as the months of April and May were placed under strict lockdown measures,” said Lao.

He noted that “The month of April was likely the worst month for our business as it was the only month to-date when Metro Manila was under 100 percent Enhanced Community Quarantine (ECQ).

Nonetheless, our business remained profitable in April, and we didn’t have any month in the first half where net income was negative.”

While the domestic business has faced adversities on various fronts, the company’s export business continues to show resilient growth.

In the second quarter alone, export sales grew by 41 percent YoY, bringing first half 2020 growth to 25 percent YoY.

Export contribution to total revenues in the second quarter posted a record high of 31 percent. This brings first half 2020 export contribution to 26 percent compared to just 19 percent over the same period last year.

Coconut-based products under food and oleochemicals were the main drivers behind the robust export growth. Coconut oil continues to gain traction in the global market due to its perceived natural antiviral, antibacterial, and antifungal properties.

In addition, coconut-based products are great organic and sustainable substitutes for many petroleum-based raw materials used in personal hygiene and home cleaning products.

The company sees continued strong coconut oil exports, which should offset some of the weakness in the domestic market in the near term.

For the first half of the year, the company saw its sales mix tilt towards commodities as demand focused on basic raw materials. Commodity sales accounted for 37 percent of total revenues, compared to just 31 percent in full-year 2019. The remaining 63 percent of revenues were accounted for by the High Margin Specialty Products (HMSP) segment.(

 
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