D&L Industries Inc., the country’s top specialty food ingredients and oleochemicals producer, reported a six percent growth in recurring income to P1.32 billion in the first half of the year from the P1.24 billion earned in the same period of 2023.

In a media briefing, D&L President and CEO Alvin D. Lao said its earnings rose as its new Batangas plant has turned profitable in the second quarter of 2024—a year ahead of target, while exports hit a record high level. 

On a quarter-on-quarter basis, momentum continues to build up with profits up 13 percent in the second quarter of 2024 to P698 million from P618 million in the first quarter, and up eight percent from P646 million in the second quarter of 2023.

“The second quarter of this year marks the turning point in our Batangas operations as it booked a quarterly profit for the first time since we started commercial operations in July 2023," said Lao.

“As we further ramp up operations and onboard new customers, we see gradually increasing earnings contribution from this new plant over time,” he added.

He also noted that “for this year, we are keeping our guidance at low double-digit growth in earnings. At the same time, we continue to monitor macro developments that may potentially dampen business sentiment such as the higher-for-longer interest rates, lingering effects of inflation, depreciating peso and even the potential hard landing or recession in the US.”

“While there are uncertainties in the near-term macroeconomic environment, we remain optimistic on the long-term prospects of our business. Our investments over the past couple of years are starting to bear fruit and we see higher and more sustainable growth coming from it. Moreover, our Batangas plant puts us in a very good position to capture opportunities not just in the Philippines, but globally,” Lao concluded.

The new Batangas plant booked a net profit of P149 million for the second quarter of 2024. This represents a consistent quarter-on-quarter improvement in operations, from a peak loss of P315 million in the first quarter of commercial operations.

To date, the new plant has successfully fulfilled several orders for both local and export customers. Several audit and certification processes are ongoing in order to on-board more customers.

While the past couple of quarters have been characterized by macro headwinds coupled with incremental expenses coming from the commercial operations of the Batangas plant, earnings are once again gaining momentum as volumes continue to improve and as the Batangas plant starts to contribute to the bottom line.

For the High Margin Specialty Products (HMSP) segment alone, which is the key earnings driver of the company, volumes were up 33 percent year-on-year (YoY) in the second quarter of 2024. This is the fourth consecutive quarter that this segment posted higher volume growth. 

In the second quarter of 2024, export sales accelerated further growing by 75 percent YoY. This brings the total export sales growth to 57 percent YoY for the first half of the year. 

Meanwhile, export sales as a percentage of total sales stood at 33 percent in the first half of 2024 which is already at par with the record-high export sales contribution reported in 2021.

The growth in exports was primarily driven by both existing and new export customers. With the commercial operations of the Batangas plant, the company has been more aggressive in growing its exports business given that it now has the capability and capacity to be able to supply to bigger export customers. 

D&L’s food ingredients division continued its stellar performance in the second quarter, with earnings growing by 30 percent YoY, bringing first half earnings growth to 27 percent YoY despite incremental expenses associated with the Batangas plant. 

This was largely driven by the 46 percent volume growth for the period as both HMSP and commodity segments posted higher volumes. New customers and market share grab in both local and export markets have fuelled the volume growth for the period. 

Although first half income is still down by three percent YoY, there are signs that things are gradually improving for Chemrez. For instance, in the second quarter alone, on a YoY and quarter-on-quarter basis, earnings are already higher by three percent and 13 percent, respectively.

While the past year was challenging for this division, management believes that Chemrez is well-positioned to capitalize on long-term opportunities with new capacities in Batangas and the expected increase in the biodiesel blend.

The Specialty Plastics division delivered strong results with earnings growing by 51 percent YoY. Total volume for the period was up by 12 percent YoY while margins were higher by 6.3 ppts YoY.

Improvements in the global auto industry translated to higher demand for engineered polymers for auto wire harness application, which the company manufactures under this division. In addition there were successful market share grabs during the period.