D&L Industries Inc., the country’s top specialty food ingredients and oleochemicals producer, sees potential for export growth with its new Batangas plant now operational even as plant-related costs continued to weigh on earnings in the first nine months of 2023.

In a media briefing, D&L President and CEO Alvin D. Lao said, “the third quarter marks the beginning of a new era in the history of D&L Industries, with the commercial operations of its new plant in Batangas which issued its first invoice last July.”

He also said the company has "upgraded capabilities (to) the highest standards and a footprint that will more than double the company’s existing manufacturing capacity”

In the first nine months of the year, D&L Industries’ recurring income reached P1.8 billion, lower by 29 percent from the same period last year mainly due to the challenging business environment with the lingering effects of high inflation coupled with the incremental expenses related to the commercial operations of its Batangas plant. 

Excluding the Batangas plant, earnings would have declined by just 11 percent year-on-year to P2.3 billion for period.

“While incremental expenses are more apparent at the start of operations of a new plant, we have confidence that this will be a huge benefit to the company, as what we have seen multiple times over the past 60 years,” Lao said.

He noted that, “we see the near-term weakness in earnings masking the potential of the new plant. At the same time, we see an opportunity with the concurrent weakness in share price for long-term and value investors like us. The family, through Jadel holdings, continues to buy shares of the company as what you’d see in our recent disclosures.”

“We believe that there has never been a more exciting time for D&L. Our Batangas plant will allow us to explore opportunities that were previously beyond our existing capabilities. With the new plant, we will open new markets, expand our range of higher value added products, and deepen innovations that will further push our boundaries. We are profoundly inspired by its potential and we are steadfast in our commitment to see it to fruition,” Lao said.

D&L targets export sales to account for at least 50 percent of total revenues in the long-term.

While the environment remains tough given the lingering effects of high inflation and generally cautious consumer sentiment, Lao said sequential recovery continued with third quarter 2023 earnings ex-Batangas plant up 11 percent compared to the second quarter. 

This was mainly driven by a rebound in High Margin Specialty Products (HMSP) and commodity volumes which were up 11 percent quarter-on-quarter and 23 percent quarter-on-quarter, respectively.

On a year-on-year basis, food ingredients, specialty plastics, and aerosols have all posted higher earnings for the quarter. 

For food ingredients, the improvement was mainly coming from better margins given the normalization of commodity prices after a period of volatility and a pick up in HMSP volume as the food industry continues to recover. 

For specialty plastics, the normalization of semiconductor supply globally has prompted a bounce back in the demand for engineered polymers used for automotive applications. 

For consumer products ODM, the continued opening up of the economy and resumption of face-to-face activities have resulted in a surge in demand for various personal care products.

Meanwhile, Lao said they also see strong growth potential with the government’s plan to increase the coco-biodiesel blend by 50 percent to three percent from the current two percent. 

D&L, through its subsidiary Chemrez, is a big player in the biodiesel industry. Benefits of a higher biodiesel blend include lower pollution, import substitution, value adding of coconut oil, and mileage improvement.