Del Monte Pacific reverses into the red in 1Q20 on lower sales and one-off tax expense

SINGAPORE (Sept 6): Del Monte Pacific reported a net attributable loss of US$38.3 million, or loss of 2.22 US cents per share, for 1Q20 ended July, compared to earnings of US$3 million in 1Q19, on lower sales and one-off tax expense.

Revenue for 1Q20 came in at US$375.9 million, down 14% from a year ago mainly due to the divestiture of the Sager Creek vegetable business in September 2017, lower sales in the US and lower exports of processed pineapple products, partly offset by higher sales in the Philippines and S&W business in Asia.

Stripping out Sager Creek’s sales, Del Monte Pacific said group revenue for 1Q20 would have been lower by just 9.2%.

In preparation for its capital raising initiatives, Del Monte Pacific’s Philippine subsidiary, Del Monte Philippines Inc, also declared a dividend to its parent company which was taxed at US$39.6 million - an amount that contributed to its net loss.

Excluding one-off items, Del Monte Pacific would have posted a recurring net income of US$4.1 million, a turnaround from the net loss of US$3.7 million in 1Q19.

Geographically, Del Monte Pacific’s US subsidiary, Del Monte Foods, Inc (DMFI) generated US$241.4 million or 64.2% of group sales. The drop of 21.7% from US$308.3 million a year ago was mainly driven by the Sager Creek divestiture, and lower private label and USDA sales. Volume decline in packaged fruit was due to the impact of pricing.

Reversing a decline in FY19, sales in the Philippines domestic market grew by 2% in peso terms and 4% in US dollar terms due to peso appreciation. Retail sales grew by 4% in volume and 9% in peso sales value.

Sales of the S&W branded business in Asia and the Middle East grew strongly by 19% in the first quarter mainly driven by higher sales of fresh pineapple in North Asia. Fresh sales, both branded and non-branded, improved by 28%. S&W packaged product also delivered higher volume and sales. The S&W business generated a much higher operating income, up 22% due to higher volume.

In its outlook statement, Del Monte Pacific expects to be profitable in FY20 on a recurring basis.

Apart from strengthening its product offerings and entering new categories, Del Monte Pacific said it will grow its branded business and reduce non-strategic, non-branded business segments.

The group will also continue to review its manufacturing and distribution footprint in the US to further improve operational efficiency, reduce costs and increase margins amid expected cost headwinds including rising metal packaging prices and impact of tariffs imposed by the US.

Meanwhile, certain one-off expenses are expected in FY20 from streamlining of operations. On Aug 20, 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 restructuring is a necessary step for us to remain competitive in a rapidly changing marketplace,” says Joselito D Campos, Jr, DMPL’s managing director and CEO, “our asset-light strategy will lead to more efficient and lower cost operations.”

Del Monte Pacific did not declare dividends in 1Q20, with the last dividend declaration being in June, based on FY19 results.

As at 1.20pm, shares in Del Monte Pacific are trading at 14 cents, down 4 cents year to date.