D&L posts record H1 profit despite rising costs

Published August 10, 2022, 11:46 AM

by James A. Loyola

D&L Industries, the country’s largest green chemicals and food ingredients firm, posted a record P1.6 billion net income in the first half of 2022, up 17 percent from the P1.4 billion earned in the same period last year despite the Omicron surge and rising costs.

In a press briefing, D&L President and CEO Alvin D. Lao noted that profit for the period is also above pre-COVID income levels booked in the first half of 2019 and 2018 (the company’s best year so far).

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In the second quarter of 2022 alone, net income was higher by 22 percent year-on-year at P851 million. The better-than-expected earnings were mainly driven by the continued economic reopening which was felt in all of the company’s segments.

Lao said that, “While COVID cases are on the rise again, most cases are mild and the government’s shift away from a lockdown strategy should bode well for continued economic growth and business optimism.”

D&L Industries President Alvin D. Lao

“Our record first half 2022 results demonstrate that despite various global macroeconomic headwinds, our company is benefiting from renewed business momentum amidst economic reopening and pent up demand from the past two years. Barring any unforeseen event, we will likely at least match our record full-year income booked in 2018,” he said.

The company’s food ingredients segment saw a sharp increase in earnings of 28 percent in the second quarter alone, bringing first half earnings growth to 5 percent and reversing the 19 percent earnings decline recorded in the first quarter of 2022.

“While COVID cases are picking up again, most cases are mild. Moreover, the new government explicitly indicated in the recently concluded state of the nation address (SONA) that there will be no more lockdowns. This should bode well for the continued economic recovery and business optimism,” said Lao.

D&L maintains its ability to weather the volatility in raw material prices, as the company adjusts its selling prices regularly to reflect higher input costs.

While margins have experienced temporary contraction given the rapid increase in commodity prices over a short period of time and the 30-45 day time lag before the company can adjust its selling price, margins are expected to normalize and recover once commodity prices start to stabilize.

Beyond the margin recovery from the normalization of commodity prices, the company sees ample room for margins to go up further over the long term.

Export continues to be a bright spot for the company with revenues jumping 69 percent YoY for the period. Export contribution to total revenues in first half 2022 stood at 34 percent, evidencing the company’s commitment to diversifying its revenue base by strategically growing its international customer base.

Coconut-based products under food and oleochemicals were the main drivers behind robust export growth in the period. Going forward, the company expects its foothold in coconut oil-based exports to strengthen especially as the company builds its capabilities to serve a wider array of international customers.

Exports are seen to grow further once D&L starts commercial operations of its Batangas expansion in January 2023. Lao said this will allow them to serve existing and new customers who are just waiting for D&L to increase its capacity.

 
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