CANNED food brand Del Monte Pacific on Wednesday (Dec 13) posted a net loss of US$8.5 million for the second fiscal quarter ended October, a reversal from earnings of US$49.5 million in the year-ago period. 

 

On a per-share basis, the group&rsquo s losses came in at US$0.0044, versus earnings per share of US$0.0246. 

 

This took the group&rsquo s net losses for the first half of its fiscal year to US$21.6 million, versus a net profit of US$69.2 million in the corresponding year-ago period, which excludes one-off items.

 

Del Monte said it expects to post a loss for the full year, a reversal from the guidance the group gave in its Q1 financial results announcement in early September. The company had said then that it expects to achieve a net profit for the remainder of FY2024, and reiterated its full-year guidance for higher year-on-year earnings. 

 

There was no dividend declared for the quarter under review, unchanged from the previous year, as the company pays out dividends at the end of its fiscal year. 

 

Turnover for Q2 was down 4.6 per cent to US$667.1 million from US$698.9 million. 

 

Sales for Del Monte&rsquo s US subsidiary, Del Monte Foods Inc (DMFI), which accounts for 74 per cent of the group&rsquo s turnover, fell 2.3 per cent to US$494.6 million.

 

Excluding DMFI, the remainder of the group posted sales of US$178.7 million, down 13.6 per cent from US$206.9 million. 

 

Del Monte said sales in international markets also declined for both reduced fresh and packaged sales. 

 

Speaking at a call on Wednesday to discuss the company&rsquo s latest financial results, Del Monte&rsquo s chief financial officer Parag Sachdeva said that the group&rsquo s profitability has been challenged by higher costs and interest expenses, inflationary pressures, and lower pineapple supply.

 

Interest expenses for the quarter came in at US$49.2 million, up from US$29.2 million in the year-ago period.

 

This was driven by higher interest rates in the Philippines and US, but partially offset by savings from refinancing.

 

Del Monte said its net debt as at end-October is up 21.6 per cent year on year to US$2.5 billion, while its gearing levels stands at 677.9 per cent. 

 

In response to several questions on how the group will bring down its debt levels, Sachdeva said Del Monte&rsquo s margins have been &ldquo challenged&rdquo &ndash due in part to increased costs from higher inventory levels.

 

&ldquo We do think that as we work through inventory reductions, in particular, these increased operating costs will be reduced,&rdquo he said.

 

A 100 basis point reduction in interest rates, Sachdeva said, will help the group shave US$15 million to US$20 million off its current debt amount.

 

He estimated that about half of the group&rsquo s loans are on a floating rate basis, while the remainder are on a fixed-rate basis.

 

The group&rsquo s cash burn rate in Q2 came in at US$91.8 million, down from US$158.4 million in the year-ago period.

 

Sachdeva said the group is looking to taper its inventory levels by US$200 million to US$250 million over the next two years, which would help its margins and debt levels.

 

Looking ahead, the company said the global environment remains uncertain with consumers being more cautious with their spending while inflation has not abated to normal levels. 

 

&ldquo We will remain vigilant in managing our operating expenses throughout the supply chain from production to distribution with better operational and energy efficiency, optimised packaging, and reduced wastage,&rdquo it said. 

 

Del Monte said it is addressing the high carry-over inventory levels from last year by reducing the pack in the US for the next two years. 

 

&ldquo Reducing leverage and interest expense is a key imperative, and we are exhausting all options to strengthen our capital structure,&rdquo the company added. 

 

CANNED-FOOD brand Del Monte Pacific : D03 0% on Wednesday (Sep 6) posted a net loss to US$13.1 million for the first fiscal quarter ended July, narrowing from its net loss of US$30.5 million in the corresponding year-ago period.

 

The latest figure was due primarily to higher inflation levels and interest rates, which had hit the group&rsquo s margins adversely, the company said. 

 

Loss per share stood at US$0.0067, down from US$0.0165 in Q1 FY2023.

 

Despite the net loss, the group said it expects to achieve a net profit in the remainder of FY2024 it reiterated its full-year guidance for a higher year-on-year net profit for the fiscal year.

 

The group&rsquo s Q1 turnover was up 13.2 per cent to US$516.7 million from US$456.6 million. This was driven primarily by higher sales in the US, and higher exports of fresh pineapple. Gross margin fell to 21 per cent from 28.9 per cent operating margin came in at 5.1 per cent, from 11 per cent. 

 

Del Monte&rsquo s US subsidiary, Del Monte Foods Inc (DMFI), booked a 17.8 per cent increase in turnover to US$356.4 million, accounting for 69 per cent of the group&rsquo s turnover. This came from pricing actions and the development of the company&rsquo s branded-product portfolio in both traditional and emerging channels, Del Monte said. 

 

DMFI posted a gross profit of US$64.7 million, down 17.4 per cent from US$78.4 million, due to inflationary factors from sales of high-cost FY2023 pack inventory. DMFI implemented a 4 per cent price increase on Jul 31, and launched a number of cost-saving moves to restore margins in the subsequent quarters.

 

Excluding DMFI, Del Monte booked sales of US$166.9 million, 3.9 per cent lower than the US$173.7 million in the year-ago period.

 

The higher export sales of S& W fresh pineapples, favourable pricing across almost all segments, and higher volume from the Philippine market were offset by lower sales from exports processed business. Its gross margins were, however, affected by higher product costs arising from lower plantation yields and inflationary factors. 

 

Del Monte&rsquo s net debt against its adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) rose to 7.2 times from five times last year gearing was up to six times from 4.2 times. 

 

These came from higher loans from the redemption of Del Monte&rsquo s US$100 million Series A-2 preference shares in December 2022, the acquisition of Kitchen Basics, as well as higher working capital, mainly from DMFI&rsquo s inventory.

 

Del Monte said although its debt levels have risen, the refinancing of the US$300 million preference shares with bank loans at an average interest rate of 6.8 per cent &ndash versus the preference share coupon of 10 per cent on a step-up basis if not redeemed &ndash saves the company about US$10.5 million annually. 

 

The group also announced a &ldquo strong debt-reduction programme&rdquo . It will optimally use internally generated cash for debt repayment, and is also considering the issuance of appropriate equity instruments to increase its capital. 

 

Looking ahead, Del Monte said the global environment remains unstable, with consumers being more cautious with their spending, even as inflation has not abated to normal levels. It is all the more imperative to offer superior brand and product value to consumers, it said. 

 

&ldquo We will remain vigilant in managing our operating expenses throughout the supply chain from production to distribution, with better operational and energy efficiency, optimised packaging and reduced wastage in order to improve our margins,&rdquo the company added.