Del Monte Pacific Ltd. posted a $38.26-million loss in the first quarter of its fiscal year ending July, a turnaround from P3.02 million profit last year.
Sales reached $375.86 million, down 14 percent from P436.23 million last year, to lower sales in the US partly offset by higher sales in the Philippines and S&W business in Asia.
“Excluding one-off items, the Group would have posted a recurring net income of $4.1 million, a turnaround from the net loss of $3.7 million in the prior year quarter,” it said.
The company said it posted a gross profit $91.15 million, up 16.5 percent from the prior year’s $78.03 million.
Profit margin stood 24.3 percent, up 6.5 percentage points (ppts) from the prior year mainly due to increased prices in the US and Philippines, higher sales of fresh pineapple, divestiture of the low-margin Sager Creek vegetable business and reduced sales of low-margin private label, thus improving sales mix.
“The Group reported an EBITDA (earnings before interest tax depreciation and amortization) of $36.6 million, significantly higher than the prior year quarter’s EBITDA of $18.8 million,” Del Monte said.
“This quarter’s EBITDA included $2.1 million of one-off expenses mainly related to severance and loss on partial disposal of assets of a plant in Crystal City, Texas. Without the one-off expenses related mainly to plant closures in the US, the Group’s recurring EBITDA would have been $38.7 million, also better than the prior year quarter’s recurring EBITDA of $27.3 million,” it added.
Recurring operating profit was at $22.4 million, up 114 percent from the prior year’s $10.5 million.
Of the company’s topline, Del Monte’s US subsidiary, Del Monte Foods, Inc (DMFI), contributed $241.4 million of Group sales. Sales declined by 22 percent mainly due to the divested Sager Creek business and reduced sales of low- margin non-branded business.
Gross margin significantly improved by 7.4 ppts to 20.3 percent versus the prior year quarter’s 12.9 percent.
“Del Monte continued to diversify beyond the canned goods aisle and introduced innovative products in the growing categories of refrigerated produce and frozen to cater to demand for health and wellness, snacking and convenience,” it said.
Reversing a decline from last year, sales in the Philippines market meanwhile grew by 2 percent in peso terms and 4 percent in US dollar terms due to peso appreciation.
Retail sales grew by 4 percent in volume and 9 percent in peso sales value. Non-retail foodservice declined due to a change in a customer’s procurement policy.
“Price increase and lower direct promotion spend saw a positive contribution of 4.8 percent to net sales growth, driven by a series of price adjustments across all categories mostly in 2019,” Del Monte said.
“In retail, sales in the general trade segment, which accounted for about 50 percent of Philippines sales, grew by 4 percent year on year, and by 20 percent quarter on quarter, as the Group continued to make progress in improving its distributor business that had impacted results in the prior year. Sales in the modern trade segment, which accounted for about 30 percent of Philippines sales, increased by 7 percent,” it added.
Sales of the S&W branded business in Asia and the Middle East meanwhile posted a 19 percent growth mainly driven by higher sales of fresh pineapple in North Asia.
“Fresh sales, both branded and non- branded, improved by 28 percent. S&W packaged product also delivered higher volume and sales. The S&W business generated a much higher operating income, up 22 percent due to higher volume,” Del Monte said.
The company said it will continue to strengthen its product offerings and enter new categories, in line with market trends for health and wellness, snacking and convenience.
“The Group will grow its branded business and reduce non-strategic, non-branded business segments. The Group also continues to review its manufacturing and distribution footprint in the US to further improve operational efficiency, reduce costs and increase margins amidst expected cost headwinds including rising metal packaging prices and impact of tariffs imposed by the US,” it said.
In August, DMFI announced the closure and sale of facilities in four locations. Most of the production in these locations will be transferred to other facilities within the US. The company looks to fully utilie the capacity of its existing plants after the restructuring.
“The restructuring is a necessary step for us to remain competitive in a rapidly changing marketplace. Our asset-light strategy will lead to more efficient and lower cost operations,” said Joselito Campos, Jr., Del Monte chief executive officer.