Del Monte Pacific reports fiscal 4Q net profit jumped 59 percent

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

Del Monte Pacific reported Thursday its fiscal fourth quarter net profit jumped 59.2 percent on-year to US$6.30 million amid lower capital expenditure and higher gross margins. The company also reported an impact from U.S. trade tariffs.

Turnover fell 13.3 percent on-year in the quarter ended 31 April to US$432.61 million, mainly due to divesting the Sager Creek vegetable business and lower sales in the U.S. and Philippines, and lower pineapple juice concentrate pricing, the canned food processor said in a filing to SGX.

That was partly offset by 20 percent higher sales in the S&W business in Asia, as sales of both fresh pineapple and packaged products rose, Del Monte Pacific said.

“There was increased distribution of fresh pineapple in Tier 1-3 cities in China, and expansion in North Asia with new customers for canned fruit. S&W continues its sales of S&W 100% Pineapple Juice in carton format in China’s Tmall e-commerce portal of Alibaba,” Del Monte Pacific said.

The gross profit margin for the quarter rose to 18.9 percent from 17.4 percent in the year-ago period, Del Monte Pacific said.

Capital expenditure fell 59 percent on-year to US$17.72 million, the filing said. The impairment loss on provisions for asset impairment, mainly on Sager Creek assets, narrowed to US$581,000 from US$2.23 million in the year-ago period, the filing said.

The company also posted a net gain on the disposal of fixed assets of S$3.65 million, mainly on plant closures, compared with a year-ago net loss of US$514,000.

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Del Monte Foods Inc. (DMFI), the U.S. subsidiary, contributed US$308.3 million, or 71.3 percent, to group sales, but that was down 19.0 percent on-year due to the Sager Creek divestment and lower private label sales, which was due both to the company’s strategy and lower pricing of pineapple juice concentrate in food service, the company said.

Sales in the Philippine domestic market fell 8.5 percent, mainly in the general trade, beverage and culinary categories, on the transition to new distributors, the filing said.

“Del Monte 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,” the filing said.

It pointed to the February launch of Del Monte Citrus Bowls in the refrigerated produce section, as well as the frozen-segment launch of Del Monte Veggieful Bites and Contadina Pizzettas.

Trade war impact

Joselito Campos Jr., CEO of Del Monte Pacific, was upbeat in his outlook.

“We are encouraged by the accelerated pace of innovation and new product launches especially in the United States, taking us into new categories and formats outside the can which is not growing,” he said in the statement. “At the same time, we have proactively reduced costs within our control amidst headwinds of rising tin prices.”

The company pointed to trade war impacts on the business, saying metal packaging prices were rising, and it faced an impact from U.S.-imposed tariffs.

Del Monte Pacific said it would reduce non-strategic, non-branded business segments, and that it continued to review its manufacturing and distribution operations in the U.S. for operational improvements.

The company said it expected to be profitable in fiscal 2020.

For the full fiscal year, Del Monte Pacific reported net profit of US$20.32 million, swinging from a year-ago loss of US$36.49 million. Turnover for the full year fell 11 percent to US$1.95 billion, while the gross margin increased to 20.2 percent from 19.7 percent a year earlier, the filing said.

The company declared a final dividend of US$0.0052 a share; it didn’t pay a dividend a year ago.

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