D&L Industries Inc., the country’s top specialty food ingredients and oleochemicals producer, expects to beat last year’s P2.3 billion profit in 2024 as its financial performance is usually strong the fourth quarter.
In a media briefing, D&L President and CEO Alvin D. Lao said the firm’s net income amounted to P1.8 billion in the first nine months of the year ad they need to earn P520 million to match 2023’s profit.
“We did P493 million in the third quarter. Fourth quarter should be better, especially for the food segment because it’s the ‘Ber’ months (Christmas season)… So we should see 2024 better than last year,” he added.
However, Lao said it is still too early to tell how big the jump in earnings will be from the third quarter to the fourth quarter but he noted that, despite higher prices, there still seems to be a lot of consumer activity.
D&L’s recurring income grew by one percent year-on-year to P1.8 billion in the first nine months of 2024.
In the third quarter alone, earnings stood at P493 million, down 11 percent YoY largely due to higher cost base resulting from newly commissioned lines inside the firm’s new Batangas plant.
On a year-to-date basis, the new plant remains almost at break even despite higher costs for the quarter.
“What we are seeing now is the natural cycle of operating a new plant. As we further ramp up operations, cost base will increase but this should be offset by the new business that we expect to come in,” remarked D&L President and CEO Alvin Lao.
He noted that, “Strong export sales continue to drive overall business amidst the generally cautious consumer sentiment in the domestic market. So far this year, export is outpacing domestic performance. Export sales are up 38 percent YoY with gross profits up 24 percent YoY.”
“At current export growth levels, we believe we are still barely scratching the surface. We expect exports to continue to increase its relevance to the overall business. From this perspective, our Batangas plant becomes more strategic as it allows us to go after exports more aggressively,” Lao added.
He pointed out that, “We believe the near-term cost drag coming from the new plant masks its long-term potential. What we are witnessing is the very early stages of a long-term structural growth story of the company.”
Exports continued its positive momentum well into the first nine months of the year booking a total sales of P9.2 billion, which is higher by 38 percent YoY. Meanwhile, export gross profits jumped by 24 percent YoY over the same period.
This comes in as a bright spot amidst a generally cautious consumer sentiment in the domestic market in which sales only grew 12 percent YoY while gross profits grew 5 percent YoY.
Lao said they may hit their target of exports accounting for 50 percent of revenues in five years although this is not definite since the domestic market is also seen to grow further on the back of easing inflation.
In terms of gross profit margins (GPM), the export business also has better margins (17.1 percent versus 15.7 percent for the domestic market) as the company mainly focuses on exporting higher value-added products where it has the competitive advantage in.
Natura Aeropack Corporation (NAC) and D&L Premium Foods Corp (DLPF), the operating companies behind D&L’s Batangas plant, are aggressively pushing high-value added coconut oil-derived ingredients and finished products for the food, personal hygiene, and home care segments in the export market.
Despite a still challenging overall macroeconomic environment, the company managed to book double-digit volume growth in both its High Margin Specialty Products (HMSP) and commodity segments. HMSP volumes were up 18 percent YoY while commodity volumes were up 44 percent YoY in the first nine months of the year.
The food ingredients division continues to deliver solid volume growth. In the first nine months of the year, total volumes grew 38 percent YoY.
After a challenging year for Chemrez, things have finally started to improve with nine-month 2024 earnings up 11 percent YoY. In the third quarter alone, earnings were up 49 percent YoY.
The recovery was largely fuelled by the one percent increase in biodiesel blend to 3 percent (B3) which was implemented last October 1, 2024. This has positively impacted the biodiesel sales for the period as oil companies have started pipelining prior to the October 1 implementation date.
The Specialty Plastics division delivered strong results in the first nine months of 2024 with earnings growing by 32 percent YoY. Total volume for the period was up by 11 percent YoY while margins were higher by 4.9 ppts YoY.
Improvements in the global auto industry translated to higher demand for engineered polymers for auto wire harness application while there were successful market share grabs during the period.