Del Monte Pacific reports fiscal 1Q19 net profit surged four times due to one-off gain

Philippine 50-peso notesPhilippine 50-peso notes

Del Monte Pacific reported on Wednesday that its fiscal first quarter net profit surged 308.4 percent on-year to US$3.02 million due to one-off items despite a decline in sales.

A one-off gain of US$12.5 million post-tax was due to the additional purchase of US$99.0 million of 89.4 percent owned U.S. subsidiary Del Monte Foods Inc.’s (DMFI) second lien loan at a discount in the secondary market, Del Monte Pacific Ltd. (DMPL) said in a filing to SGX after the market close on Wednesday. Including a loan bought back in fiscal 2018, the total loan buyback has amounted to US$225 million out of a total US$260 million, it said.

The net finance expense fell to US$5.2 million in the quarter, from US$24.4 million in the year-earlier period, it said.

But without the one-off items, DMPL would have reported a net loss of US$3.73 million for the quarter ended 31 July, swinging from a year-earlier net profit of US$1.24 million excluding one-offs, it said.

Turnover for the quarter fell 7.7 percent to US$437.23 million, mainly on lower sales across categories in the U.S. and lower exports of processed pineapple products, it said. DMFI generated 70.5 percent of group sales, it said.

DMFI’s sales declined by 8.4 percent to US$336.5 million on lower volumes across categories, especially branded tomatoes and private label sales as well as an unfavorable impact from lower pricing in foodservice for pineapple juice concentrate.

“The decline in sales was in line with DMFI’s strategy to deprioritise nonprofitable businesses, including private label,” it said. “Continued investments in consumer advertising and insights are paying dividends as DMFI’s market share in canned vegetable, canned fruit and fruit cup snacks continue to grow.”

DMPL’s ex-DMFI sales were US$140.9 million, it said, noting that sales in the Philippine domestic market were flat in peso terms, but down 5.3 percent in U.S. dollar terms due to peso depreciation.

“Sales were lower mainly due to decreased exports of processed pineapple products, and significantly lower pineapple juice concentrate (PJC) pricing as a result of the oversupply situation in Thailand, the main exporter of PJC. The group has been shifting to more branded consumer beverage given the volatile nature of this industrial and commodity PJC,” it said.

In its outlook, Del Monte Pacific pointed to continuing challenges.

“DMFI faces headwinds due to shifts in consumer demographics, shifts in the way American consumers are eating and shopping, as well as shifts in consumer preferences,” it said. “It will continue to build on its Del Monte brand heritage and will realign its business with those consumer trends over time. Its plan focuses on business segments which are on-trend and will rationalise non-profitable businesses, in particular the non-branded segment.”

It said that the group was expected to be profitable for fiscal 2019 on a recurring basis.

Del Monte Pacific added that it plans to sell 20 percent of its stake in wholly owned subsidiary Del Monte Philippines via a public offering on the Philippine Stock Exchange, but it noted the offering had been delayed due to volatile market conditions.

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