Del Monte Pacific swings back to black in FY19 with US$20.3 mil earnings

SINGAPORE (June 21): Del Monte Pacific (DMPL), the F&B producer and distributor, swung back into profitability in FY19 with earnings of US$20.3 million ($27.5 million) after 4Q earnings came in at US$6.3 million, more than double from a year ago.

In a Thursday night filing, DMPL says the improvement to its 4Q bottomline was supported in part by a higher gross margin of 15.9% for Del Monte's US subsidiary DMFI (Del Monte Foods Inc), compared to 13.3% in the same period last year.

The improved gross margin was driven by a strategic upward revision of its retail list prices, lower trade spend and the favourable impact of the divestiture of the low-margin Sager Creek vegetable business in September 2017.

Excluding one-offs, DMPL would have registered a recurring net income of US$9.2 million, a turnaround from the net loss of US$2.9 million from a year ago.

Revenue for the full year was down 11% to US$1.95 billion while turnover for 4Q came in 13.3% lower at US$432.6 billion due to the divestment of the Sager Creek vegetable business in Sept 2017 and lower sales in the US and the Philippines.

In the quarter under review, DMFI contributed US$308.3 million or 71% of group sales. Sales declined by 19% mainly due to the divested Sager Creek business, lower branded volume as a result of price increase, and reduced sales of low-margin non-branded business in line with strategy. EBITDA margin without one-off items improved by 4 ppts versus the prior year quarter.

Del Monte says it continues to diversify beyond the canned goods aisle, a declining category, and introduced four new innovative products in the growing categories of refrigerated produce and frozen to cater to demand for health and wellness, snacking and convenience.

Geographically, sales in the Philippines domestic market decreased by 8.5% in 4Q mainly due to the transition to new distributors while sales of the S&W business rose 20% in the fourth quarter due to higher sales of both fresh pineapple and packaged products.

The board has approved a final dividend of 0.52 US cents per share representing 50% of FY19 net profit.

In its outlook statement, DMPL says it will continue 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.

“Barring unforeseen circumstances, the DMPL Group is expected to be profitable in FY2020 on a recurring basis,” it adds.

Shares in DMPL closed at 12 cents on Thursday before the announcement.