Del Monte Pacific reported on Thursday a fiscal second quarter net profit of US$8.42 million, swinging from a net loss of US$2.82 million in the year-ago period, despite lower sales, as margins rose and expenses fell.
Sales for the three months ended 31 October fell 11 percent on-year to US$556.28 million, it said in a filing to SGX before the market open on Thursday.
That was due to lower sales in the U.S. and the planned divestment of the Sager Creek vegetable business in September 2017, Del Monte Pacific said.
Stripping out Sager Creek sales, fiscal second quarter sales would have fallen 6 percent, it said.
The net profit margin was 1.5 percent in the quarter, compared with a negative 0.5 percent in the year-ago period, it said. The operating margin was 5.4 percent in the quarter, up from 1.2 percent in the year-ago quarter, Del Monte Pacific said.
The U.S. subsidiary, Del Monte Foods (DMFI) had sales of US$418.5 million, or 75 percent of the group’s sales, it said, adding that was a 13.8 percent on-year decline due to the Sager Creek divestment, lower volume in general, but particularly in branded tomatoes, and private label sales, as well as lower pricing for foodservice for PJC.
Philippine domestic market sales fell 3 percent in peso terms and 8 percent in U.S. dollar terms in the quarter, mainly due to the general trade and mixed-fruit segment as the company works to address operational issues, it said.
But it added, “Foodservice sales in the Philippines remained strong, riding on the rapid expansion of quick service restaurants and convenience stores with partnerships and menu creation with major accounts.”
The S&W business’ sales improved by 17 percent in the quarter amid strong sales of fresh pineapple in North Asia, which offset declines in packaged pineapple, Del Monte Pacific said.
“Competition from cheaper canned pineapple products from Thailand and Indonesia continued to impact S&W’s packaged business,” it said.
But it added, “pasta sauces from the Philippines, sold in S&W’s Asian markets, continued to do well. S&W also started selling its S&W Tomato Juice to Singapore Airlines for inflight consumption.”
Distribution and selling expenses fell 14.1 percent on-year in the quarter to US$54.31 million, while general and administration expenses fell 27.0 percent on-year to US$35.43 million, it said.
In its outlook, it said DMFI faced headwinds from shifting consumer demographics and preferences, and the way U.S. consumers eat and shop.
“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,” the filing said.
“In sync with consumer trends for healthier options and convenience, DMFI continued to expand the new Del Monte Fruit & Oats snack cups, the first shelf stable oatmeal item containing real fruit,” it said.
This article was originally published on Thursday 13 December 2018 at 8:56 A.M. SGT; it has since been updated.