Net income US$51.5 million
Del Monte Pacific back in the black
DMFI increased its market share in the US canned vegetable and fruit segments amidst industry reduction. The Philippine market delivered a record performance for the full year with sales up 6% as all product categories –packaged fruit, beverage and culinary –posted higher sales, driven by an expanded user base and household penetration. In addition, the market continues to benefit from the resurgent multi-serve beverage segment, behind trade expansion and digital-based awareness building initiatives forthe1-litre Tetra Juice Drink line. The food service or institutional channel also performed strongly.
Sales of the S&W branded business in Asia and the Middle East also posted a record performance, growing by 10% on higher sales from both the fresh and packaged segments. China generated strong growth in fresh, driven by distribution expansion.
The Group’s gross margin for the full year improved to 21.2%, higher than the 18.7% in the same period last year with lower trade spend in DMFI and cost optimisation initiatives to mitigate the impact of lower pineapple output from El Niño, particularly in the first half of the financial year. The Group achieved an EBITDA of US$235.2 million and a net income of US$51.5 million for the full year, inclusive of one-off net favourable adjustments of US$31.7 million after tax mainly due to DMFI’s retirement plan amendment in the second quarter and the working capital adjustment in the fourth quarter, which offset expenses from the closure of a plant in North Carolina.
Even after excluding non-recurring items, the core or recurring net income in FY2016 of US$19.8 million is a significant improvement from the US$43.2 million reported loss last year. “During the past year, we continued to lay the foundation for future growth and this is reflected in the sales and financial performance of Del Monte Pacific in FY2016,” said Joselito D Campos, Jr, Managing Director and Group CEO of DMPL. “We drove improvements in our cost structure and better aligned operations with our strategic direction to gain market share, increase margins and expand into adjacent categories as part of a long-range plan to grow sales and profits for the company in the years ahead.” In the fourth quarter, the Group reported an EBITDA of US$78.2million and a net income of US$19.2million, inclusive of one-time net gain of US$8.4 million after tax, continuing the improved profitability achieved in the last two quarters. The Group, however, generated sales of US$520.1 million in the fourth quarter, down by 3% due to lower sales in DMFI by7% mainly from unsuccessful government and co-pack contract bids.
The company is reviewing its strategy for these unbranded channels going forward. Lower sales in the US were partly offset by the commendable performance in the Philippines, up 6% with expanded household penetration from advertising campaigns. Meanwhile, the S&W branded business in Asia and the Middle East generated 8% higher sales. Korea and Japan markets grew significantly on improved sales of canned beans and tropical fruits.
The Group’s gross margin in the fourth quarter improved to 21.3% from 20.0% in the same period last year on the back of productivity enhancements and cost optimisation initiatives. DMPL’s share of loss in the Field Fresh joint venture in India was lower at US$0.5 million from US$0.6million in the prior year period due to a 13% growth in sales driven by the robust performance of Del Monte packaged business, led primarily by improved volume in juices and the culinary segment. Higher sales and production efficiencies resulted in Field Fresh sustaining its positive EBITDA trend for the quarter.
As part of the Group’s deleveraging plan, DMPL intends to issue US dollar denominated perpetual preference shares in the Philippine capital market, to be listed on the Philippine Stock Exchange(PSE). The Group expects to launch the offering this year subject to regulatory approvals and market conditions. The Company has received pre-effective approval from the Philippine SEC earlier and is awaiting the approval of its listing application and the offering from the PSEand the Bangko Sentral ng Pilipinas(Central Bank), respectively. As this is the first ever US$-denominated preference shares to be issued and listed on the PSE, the platform is being set up. The PSE has approved and endorsed its amended Dollar Denominated Securities rules to the SEC for its concurrence. The proposed issue will be up to US$360 million (with an initial tranche of up to US$250 million and the balance issuable within three years) that will result in a further improvement of the Group’s leverage ratios.
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