D&L Industries Inc., the country’s largest specialty foods ingredients, plastics and oleochemicals firm, posted a strong recovery in the third quarter with the gradual reopening of the local economy as well as growth in its export sales.
In a press briefing, D&L President Alvin Lao said recurring earnings in the third quarter of the year doubled quarter-on-quarter (q-o-q) to P573 million.
“The recovery in the third quarter confirms that we’ve survived the worst of this pandemic. Our income for the third quarter doubled from the income recorded in the second quarter, and even managed to surpass our first quarter income which was not fully impacted by the pandemic yet,” said Lao.
He added that, “the imposition of the second Modified Enhanced Community Quarantine (MECQ) in August did not have a material impact on our business, and we continued to see an improvement each month.”
“While third quarter 2020 net income was still lower by 7 percent on a year-on-year (y-o-y) basis, there was a tremendous improvement from the 57 percent y-o-y decline in profits recorded in second quarter of 2020,” he noted.
This brings net income for the first nine months of 2020 to P1.37 billion, down by 32 percent y-o-y, coming from a higher 43 percent y-o-y earnings decline reported in the first half of the year.
Aside from the recovering domestic business, D&L reported that its export sales continued its positive momentum in the third quarter as it jumped 58 percent y-o-y, bringing nine-month growth to 37 percent y-o-y.
Export contribution to total revenues in the third quarter of 2020 posted again another record high of 32 percent. This brings nine-month export contribution to 28 percent compared to just 20 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 sustainable substitutes for petroleum-based raw materials used in many applications such as personal hygiene and home cleaning products.
With the gradual easing of restrictions and economic reopening, all the segments of the company witnessed a meaningful bounce in volume on a quarter-on-quarter basis.
In addition, Chemrez, Specialty Plastics and Consumer products ODM (previously referred to as Aerosols), which combined account for 75 percent of total earnings, are already operating either close to or above pre-COVID levels.
Consumer Products ODM (original design manufacturer), which was previously referred to as the Aerosols segment, is the key performer this year, with its income for the quarter exceeding year-ago pre-COVID level by 72 percent y-o-y.
This was mainly driven by the massive increase in demand for various sanitation products due to the pandemic.
For Chemrez, which is composed of Oleochemicals and Other Specialty Chemicals, the improvement in earnings was fuelled by the gradual reopening of the economy and strong demand for high value coconut-based products in the international market.
For Specialty Plastics, the improvement mainly stemmed from the higher demand for additives and colorants for plastic packaging applications. The pandemic resulted in a massive increase in parcel delivery which requires a great deal of packaging materials.
On the engineered polymer side, which are predominantly export-oriented raw materials for automotive wire harnesses, demand seems to be gradually coming back as more customers are reportedly going back to a regular 5-day work week with 24-hour shifts.
The food ingredients segment, which now accounts for 25 percent of total income, saw a significant quarterly improvement with third quarter 2020 profits higher by 421 percent from a really low base in the second quarter.
This was largely due to sequential recovery in both volume and margins as more food establishments were able to operate during the quarter and with the corresponding increase in capacity utilization for dine-in under GCQ.