Del Monte Pacific swings back into the black in 2Q on absence of one-off expenses

SINGAPORE (Dec 13): Del Monte Pacific (DMPL) reported a 2Q earnings of US$8.4 million ($11.5 million), a turnaround from the US$2.8 million loss last year. This brings 1H earnings to US$11.4 million, reversing from the loss of US$2.1 million last year.

DMPL generated second quarter sales of US$556.3 million, 11% lower than prior year quarter mainly due to the planned divestment of the Sager Creek vegetable business in September 2017 and lower sales in the United States. Stripping out Sager Creek’s sales, second quarter group sales would have been lower by 6%.

US subsidiary Del Monte Foods Inc (DMFI) contributed US$418.5 million or 75% of group sales. DMFI sales declined by 14% mainly due to the divestment of Sager Creek and lower retail sales including private label, in line with DMFI’s strategy to shift its focus away from non-profitable businesses.

DMPL ex-DMFI generated lower sales of US$147.9 million. Sales in the Philippines domestic market decreased by 3% in peso terms and by 8% in US dollar terms as the group continues to address operational issues in the general trade and mixed fruit category. Sales of the S&W branded business in Asia and the Middle East improved by 17% in the second quarter due to strong sales of fresh pineapple in North Asia.

The group’s EBITDA of US$46.3 million was 62% higher than prior year quarter’s EBITDA of US$28.6 million. This quarter’s EBITDA included a US$1.3 million one-off credit from sale of assets written down from the closures of several facilities in the US.

In the same period last year, these plant closures and Sager Creek divestiture also resulted in one-off expenses amounting to US$23.6 million pre-tax.

In its outlook, DMPL says it faces headwinds due to shifts in consumer demographics, shifts in the way US consumers are eating and shopping, as well as shifts in consumer preferences. However, the group is expected to be profitable in FY2019.

Year to date, shares in DMPL are down nearly half to close at 15 cents on Wednesday.