D&L Industries, the country’s top producer of customized food, chemicals and consumer products, reported that its export business is projected to account for 50 percent of revenues on robust growth amid the pandemic.
In a disclosure to the Philippine Stock Exchange, the firm said that, from a net importer since practically its inception, the company has now become a net exporter of goods, and is positioned to marginally benefit from a stronger US dollar.
D&L’s exports sales in the first half of the year more than doubled from the pre-pandemic level in 2019 and increased by 70 percent versus 2020, allowing the the company’s dollar inflow to overtake the dollar value of its imported raw materials.
As of the first half of the year, D&L’s export sales accounted for 33 percent of its total revenues. Meanwhile, imported raw materials accounted for 47 percent of total raw material costs.
“Our strategic focus on growing our exports business has started to bear fruits. It is something that we take pride in,” said D&L President and CEO Alvin Lao.
He noted that, “From a relatively small and unknown manufacturing and R&D company in the Philippines, our export customers are starting to recognize us as a quality, reliable, and world-competitive supplier of various food and chemical raw materials.”
“Looking ahead, especially with the much anticipated commercial operations of our facility in Batangas, we see various opportunities that we can now take advantage of given the new capacity and capabilities that we will have. We see exports accounting for at least 50 percent of our total revenues in the next few years,” Lao added.
The strong export performance and outlook were driven by products where D&L has a competitive advantage in. These are mainly coconut-based products under food and oleochemicals which continue to gain traction in the global market due to coconut oil’s perceived natural antiviral, antibacterial, and antifungal properties.
The shift towards more sustainable consumption trends is also benefiting these products, as coconut derivatives serve as non-toxic substitutes for petroleum-based raw materials used in many applications such as personal hygiene and home cleaning products.
While global recovery continues to be threatened by macro risks such as rising energy costs and worldwide supply chain disruptions, D&L sees itself as well-insulated amidst these challenges.
“The essential nature of our businesses, our low fixed cost structure, and our ability to adjust our prices regularly places us in a very solid position to weather emerging risks to recovery,” said Lao.
He pointed out that, “While ocean freight has been historically high, we’re able to grow our exports business given the specialty nature of the products that we export and the strong demand from our customers, making freight costs a secondary consideration.”
“In addition, as a percentage of our total costs and expenses, both our shipping costs and power costs only account for about 1 percent,” Lao said.
While fresh risks have emerged, Lao said they remain optimistic that the Philippine economy has likely bottomed out.
“We see various catalysts on the horizon that can support recovery in the near to medium-term such as the continued reopening and the anticipated spending boost coming from the Presidential elections and Christmas season,” he said.
The country’s vaccination rate has also been picking up with approximately 55 percent and 23 percent of Metro Manila and of the entire country’s population already fully vaccinated, respectively.
“Overall, we should still be on track to reach at least the same level of pre-pandemic income booked in 2019,” Lao concluded.