Del Monte Pacific reports fiscal 1Q net loss on US plant closures

Can of Del Monte brand pineappleCan of Del Monte brand pineapple

Del Monte Pacific, or DMPL, reported Friday a fiscal first quarter net loss of US$38.26 million, swinging from a year-ago net profit of US$3.02 million on one-off items related to closing plants in the U.S.

Revenue for the quarter ended 31 July fell 14 percent on-year to US$375.86 million, the canned fruit and vegetable producer said in a filing to SGX. That was mainly on lower sales in the U.S., partially offset by higher sales in the Philippines and the S&W business in Asia, DMPL said.

Fresh pineapple sales rose 28 percent on-year, the filing said.

Recurring operating profit more than doubled to US$22.4 million, from US$10.5 million in the year-ago quarter, while recurring net profit was US$4.1 million, swinging from a year-ago loss of US$3.7 million, DMPL said.

The U.S. subsidiary, Del Monte Foods (DMFI) contributed US$241.4 million, or 64 percent, of the group’s sales, but that was down 22 percent on-year, mainly on the divestment of the Sager Creek business and lower sales from the low-margin non-branded business and lower USDA sales, the filing said.

One-off expenses for closing plants and severance for DMFI were US$1.4 million, including tax, while an intercompany dividends tax was US$40.9 million, DMPL said.

Sales in the Philippine market rose 2.2 percent on-year in peso terms and 4.1 percent on-year in U.S. dollar terms as the peso appreciated, the filing said, adding price increases and lower direct promotion spend boosted net sales growth.

Outlook

While the company expects one-off expenses this year from streamlining operations, the full fiscal year is expected to be profitable on a recurring basis, DMPL said.

In its outlook, DMPL said it would continue to strengthen product offerings and enter new categories to meet market demand for health, wellness, snacking and convenience.

“With consumers gravitating towards fresh, healthy food and away from physical retail stores, Del Monte had to rethink its products and how to get them in front of customers,” the company said. “Over time, the product portfolio in the USA will no longer be mostly canned but will have increasingly meaningful contribution from non-can formats such as cups, cartons and pouches. New categories of frozen and snacking will be further developed.”

In May, Del Monte introduced new product Del Monte Fruit Crunch Parfaits and Del Monte Veggieful Bites and Contadina Pizzettas in the freezer segment, the filing said. The company said it started shipping Del Monte bubble fruit and new flavors of Del Monte Fruit & Oats in June.

It added it would continue to review its U.S. manufacturing and distribution operations to improve efficiency and reduce costs as it expects challenges from rising metal packaging prices and tariffs imposed by the U.S.

In August, the company announced it would close and sell facilities in four U.S. locations, transferring production to other facilities within the U.S.

“The restructuring is a necessary step for us to remain competitive in a rapidly changing marketplace,” Joselito D Campos, Jr., DMPL’s CEO and managing director, said in the statement. “Our asset-light strategy will lead to more efficient and lower cost operations,”

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