D&L Industries Inc. said margins may get squeezed in the near term due to rising prices of commodities.
Prospects, however, remain as the company recorded a 31-percent increase in profit in 2021 to P2.6 billion from the prior year’s P2.01 billion, matching its pre-new coronavirus disease 2019 income of P2.62 billion.
Alvin Lao, D&L president, said coconut and palm oil have rallied significantly in the past couple of months. Prices of coconut oil and palm oil are either near or have breached their all-time highs and are up another 23 percent, coming from over 60 percent increase for both commodities in 2021.
“While D&L is able to adjust its selling price regularly to reflect higher input prices, there is a time lag of 30 to 45 days before the company can fully pass on price changes. In an environment of rapid price increases, temporary margin contraction is possible. However, management sees this as temporary and expects margins to recover once commodity prices start to stabilize,” D&L said.
The drag may take a bite off the company’s businesses, particularly exports, which at present amount to 33 percent of group sale.
In 2021, D&L export hit P10.2 billion, up 62 percent from the previous year.
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, which should offset some of the weakness in the domestic market in the near term,” D&L added.
