UPDATE: Del Monte Pacific swings to fiscal 3Q net profit despite lower sales

U.S. one-dollar currency notes; taken September 2018.U.S. one dollar bills.

This article was originally published on Friday, 8 March 2019 at 8:38 A.M. SGT; it has since been updated with more detail.

Del Monte Pacific reported on Friday it swung to a fiscal third quarter net profit of US$2.58 million, from a year-ago net loss of US$38.67 million, despite lower sales, as expenses fell and the gross margin rose.

Turnover for the quarter ended 31 January fell 11.8 percent on-year to US$528.72 million, the company said in a filing to SGX on Friday before the market open.

The lower sales were mainly on mainly on the divestment of the Sager Creek vegetable business in September 2017, lower sales in the U.S., lower exports of processed pineapple produces and lower pineapple juice concentrate (PJC) pricing, Del Monte Pacific said.

Stripping out Sager Creek, sales for the quarter would have been 6 percent lower, it said.

One-off expenses fell to US$700,000 from US$11.2 million in the year-earlier quarter, the filing said; net of tax, the one-off expense was US$500,000.

The U.S. subsidiary, Del Monte Foods Inc. (DMFI), which generated 73 percent of group sales, posted a 14.5 percent on-year sales drop to US$451.5 million on the Sager Creek divestment, lower private label sales and lower pricing in food service for PJC.

But DMFI’s gross margin increased to 17.9 percent in the quarter from 15.1 percent in the year-ago period, amid lower trade spending and the favorable impact of divesting the low-margin Sager Creek vegetable business.

In its outlook, the company said it was on-track for a full-year net profit, in line with previous guidance, but it had some words of caution.

“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,” the filing said, noting it was working to shift strategy with those trends.

DMFI’s new product, Del Monte Fruit & Oats snack cups, a ready-to-eat oatmeal with a serving of fruit, received 2019 Product of the Year in the Breakfast Category in the U.S., it said.

“The Product of the Year award is especially significant and meaningful to us as consumer response directly led to the honor,” said Bibie Wu, chief marketing officer of Del Monte Foods. “We take enormous pride in our innovation, and this recognition further validates our continued efforts to prioritize consumer response for every new product.”

The company said it launched in February the Del Monte Citrus Bowls, which are a grapefruit and citrus salad in juice with a longer shelf life than fresh cut fruit, in the refrigerated produce section.

The filing added that DMFI is finalizing business plans for joint ventures with Fresh Del Monte Produce in chilled juices, guacamole and avocado products, and retail food and beverage outlets; a venture for prepared refrigerated fruit snacks is already being executed, it added.

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