D&L posts strong Q4 rebound, sees 2021 growth

Published March 3, 2021, 3:25 PM

by James A. Loyola

D&L Industries, the country’s largest specialty foods ingredients, plastics and oleochemicals firm, reported full recovery in the fourth quarter of 2020 and expects earnings to return to pre-COVID levels this year

 In a media briefing, D&L President Alvin D. Lao said “recovery continued in the fourth quarter, with earnings growing 8 percent year-on-year (YoY) to P637 million, likely representing an inflection point in earnings growth.”

D&L President Alvin D. Lao

This brings the second half 2020 net income to P1.2 billion, which is 51 percent higher than the P801 million earnings recorded in the first half last year, surpassing the company’s P1 billion target for the period.

Overall, net income for the full year of 2020 (FY20) stood at P2 billion, down by 23 percent YoY, coming from a higher 32 percent YoY earnings decline reported in the first nine months of the year.

Lao said “2020 was a challenging year to say the least. But at the same time, these extraordinary conditions further built our resilience and strengthened our conviction in our long-term strategies.”

“It demonstrated the highly relevant nature of our businesses’ catering to basic industries, and our operational adeptness as even in the worst of times, even at the peak of the lockdown, the company never saw negative net income,” he added.

Lao noted that,
“In the final quarter of 2020, we managed to surpass pre-COVID performance, with our net income growing 8 percent YoY. This accompanied the gradual opening of the economy and inspires confidence, as it shows that earnings growth is gradually coming back.”

“With better visibility on recovery and with the company being in a stronger operational position, there is reason to believe that our 2021 results will likely be better than 2020,” he said.

With this confidence, Lao said the firm is allotting P3.5 billion for capital expenditures this year and P500 million to P1 billion for 2022 to fund the expansion of its manufacturing facilities in Batangas.

“As a sign of our confidence, we remain committed to our expansion plan in Batangas and the Lao Family continues to buy shares in D&L. The family has acquired about 91 million shares or 1.3 percent of outstanding shares so far since the pandemic started,” he said.

The company’s optimism largely stems from the highly encouraging performance of it’s non-food businesses. As of the fourth quarter of 2020, Chemrez, Specialty Plastics, and ODM for Consumer Products (previously referred to as Aerosols), which combined account for 75 percent of total earnings, are already operating above pre-COVID levels. 

Chemrez Technologies’ improvement in earnings was fuelled by the gradual reopening of the economy and the strong demand for high value coconut-based products in the international market.

Boosted by higher demand for sanitation products,
Consumer Products ODM, which was previously referred to as the Aerosols segment, was a strong performer in 2020, with its income for the year growing by 35 prcent YoY.

Demand for packaging materials continues to rise
For Specialty Plastics, the recovery mainly stemmed from the higher demand for additives and colorants for plastic packaging applications.

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 wire harness customers are reportedly going back to a regular 5-day work week with 24-hour shifts.

The food ingredients segment showed sequential recovery continued in the fourth quarter with volume and earnings growing by 3 percent QoQ and 7 percent QoQ, respectively. 

Export sales continued its positive momentum in 4Q20 as it jumped 29 percent y-o-y, bringing 2020 growth to 34 percent YOY. Coconut-based products under food and oleochemicals were the main drivers behind the robust export growth.