CANNED food brand Del Monte Pacific : D03 -6.98% on Tuesday (Jun 20) posted a net loss of US$11.9 million for its fourth quarter ended Apr 30, compared with a net profit of US$20 million in the same period last year.

 

This took the group&rsquo s full-year earnings to US$16.9 million, down 83.1 per cent from earnings of US$100 million in FY2022.

 

Del Monte&rsquo s board has approved a final dividend of US$0.0013 per share, down from its US$0.017 per-share payout for FY2022. 

 

Turnover inched up 2.6 per cent to US$584.6 million in Q4 from US$569.5 million a year ago, on the back of higher sales in the US and fresh pineapple exports.

 

The group attributed the weaker bottom line chiefly to a 5.7 percentage point fall in its gross margin to 20.2 per cent from 25.9 per cent in Q4 FY202. 

 

During a call on Tuesday to discuss the company&rsquo s latest financial results, Del Monte&rsquo s chief financial officer Parag Sachdeva said that Q4 was when the group felt the &ldquo full impact of commodity headwinds&rdquo . 

 

He explained that the group was, in Q4, selling inventory from the &ldquo current pack&rdquo which has significantly higher costs and an unfavourable sales mix due to the higher number of multipacks &ndash which have lower margins. 

 

Other factors that crimped the margins for both the group&rsquo s US subsidiary, Del Monte Foods Inc (DMFI) and Del Monte PhiIippines Inc (DMPI) included a higher cost of fertilisers, higher packaging costs, as well as lower productivity. 

 

In a bid to protect itself against these unfavourable factors, Del Monte had implemented price hikes, mainly in the Philippines, in &ldquo smaller tranches and multiple times&rdquo . Sachdeva said that the &ldquo favourable impact&rdquo from the price hikes on the group&rsquo s price hikes came in at the range of 5.7 per cent to 6 per cent. 

 

Sachdeva shared that the group is confident of seeing a margin recovery from the second quarter of 2024 in the range of 300 basis points to 500 basis points due to its &ldquo proactive pricing actions&rdquo and &ldquo strong cost measures&rdquo . 

 

One particular point of concern for Del Monte is its gearing levels. As at end-April, the group had a negative working capital of US$199.1 million, while net debt for Q4 rose to US$2.3 billion from US$1.5 billion in the year-ago period. 

 

The increase in interest expense was driven by higher market rates in the Philippines and the US, which resulted in higher debt-servicing costs as the group redeemed its preference shares with bank loans.

 

Del Monte&rsquo s gearing stood at 584.2 per cent as opposed to 312.4 per cent in Q4 FY2022.

 

Sachdeva said that the group is working to lower its leverage, and its &ldquo No 1 priority&rdquo would be to slash inventories by US$75 million to US$100 million across its different business units. 

 

Based on operating improvements, without any capital structure initiatives, leverage in FY2024 is expected to fall to the range of 4.5 to five times, from over six times currently. 

 

&ldquo Our internal goal is even more aggressive,&rdquo noted Sachdeva. &ldquo In terms of our overall policy, we want to be less than two times from a leverage perspective.&rdquo He added that the group has a slew of other capital structure initiatives &ldquo which should lower the group&rsquo s leverage by another one to three times&rdquo . 

 

Barring unforeseen circumstances, Del Monte said, it expects to generate a higher net profit in FY2024. Company executives said that the group will continue to manage certain cost pressures, and will also look to address consumers that are becoming more cautious about spending amid a volatile macroeconomic environment. 

CANNED-FOOD brand Del Monte Pacific : D03 0% on Thursday (Mar 9) posted a net profit of US$9.8 million for the quarter ended Jan 31, down 62 per cent from the US$25.9 million it posted over the same period a year earlier.

 

This came despite turnover increasing by 3.3 per cent to US$681.2 million, from US$659.4 million the year before.

 

The group attributed the decline in net profit to lower operating results and increased interest expense from higher bank loans, with the redemption of preference shares.

 

Notably, Del Monte&rsquo s net debt for the quarter rose 50.9 per cent to US$2.2 billion, giving the group a gearing of 582.5 per cent.

 

In the third quarter, sales in the group&rsquo s US subsidiary, Del Monte Foods (DMF), rose by 5.8 per cent to US$495.7 million.

 

This came on the back of higher retail-branded sales of canned vegetables, canned fruit and tomatoes, as well as from incremental sales from its recently acquired Kitchen Basics ready-to-use stock and broth business.

DMF&rsquo s gross profit improved by 1.1 per cent to US$98.8 million, but gross margin fell 93 basis points to 19.9 per cent.

 

The company attributed this to higher conversion and logistics costs as a result of inflationary pressures, which more than offset its pricing adjustments to address inflation.

 

Excluding DMF, the rest of the group&rsquo s business recorded a lower gross margin &ndash 26.1 per cent from 32.5 per cent the year before. Del Monte cited commodity headwinds, which drove up costs in areas such as raw materials, packaging, farm inputs and fuel.

 

&ldquo This was further aggravated by the negative impact of the (Filipino) peso devaluation on all imported products, including local sales,&rdquo the group said.

 

As for the nine months ended Jan 31, the group&rsquo s net profit fell 64 per cent to US$28.9 million turnover rose 3.6 per cent to US$1.8 billion.

 

No dividend was declared for the quarter and the corresponding period the year before. The group generally declares dividends based on full-year results.

Del Monte posts 62% drop in Q3 net profit due to
increased interest expense

 

CANNED food brand Del Monte Pacific : D03 0% on Wednesday (Dec 7) posted a net profit of US$49.5 million for the second quarter ended Oct 31, up 38 per cent from a year ago.

 

The increase was driven by a notable rise in gross margin for its US subsidiary, Del Monte Foods Inc (DMFI), the group said in a filing on the Singapore bourse. DMFI&rsquo s gross margin went up from 24.9 per cent to 28 per cent, as a result of selected price increases in line with inflation, reduced sales of low-margin products, and expense reduction initiatives, Del Monte Pacific said.

 

In a call on Wednesday to discuss the earnings, company executives said that the group has been managing its operating expenses and embarked on cost-optimisation initiatives amid the current inflationary environment. 

 

Such moves include improving Del Monte&rsquo s sales mix and larger sales contributions from higher-margin categories in order to stave off &ldquo commodity headwinds&rdquo such as higher fertiliser prices and increases in packaging costs, said chief financial officer of Del Monte&rsquo s subsidiary Del Monte Philippines Inc (DMPI), Parag Sachdeva. 

 

The group&rsquo s overall gross margin improved by two percentage points to 29.4 per cent, fuelling a 15 per cent growth in gross profit for the quarter to US$205.3 million.

 

Net profit for the first half fell to US$19 million from US$54.1 million, due to the one-off redemption cost of US$50.2 million booked in the first quarter as DMFI refinanced its loan with a long-term credit facility. Sales for the second quarter went up 7 per cent to US$698.9 million, with better performance in key markets across the US, the Philippines, and other international markets.

 

DMFI logged sales of US$506.3 million, accounting for 72 per cent of the group&rsquo s turnover. DMFI&rsquo s sales grew 6 per cent on higher retail-branded sales of various canned foods. Its newly acquired Kitchen Basics ready-to-use stock and broth business also contributed to incremental sales of US$12.1 million. Market share has continued to grow across DMFI&rsquo s canned vegetable, fruit, fruit cup snacks and tomato product categories, the group said.

 

The Philippine market recovered from first-quarter declines, logging US$107.9 million in sales, up 8 per cent in US dollar terms. The group said that new innovations, such as in dairy and snacks, are gaining traction, and now account for 8 per cent of Philippine sales.

 

Sales in its international markets grew 13 per cent to US$84.9 million, driven primarily by strong performance of fresh pineapple exports.

 

Fresh sales grew 46 per cent on the back of higher demand and consumer promotions in North Asia and the Middle East, coupled with improved supplies this quarter, Del Monte Pacific said.

 

The group added that it expects to maintain revenue and income growth with its portfolio of health and wellness products. It plans to increase its MD2 fresh pineapple production substantially to support premium exports.

 

Del Monte will raise the prices of its products again, said Sachdeva. For the Philippines, the group will hike its prices again in January, while the company&rsquo s US unit will see prices go up from February. He noted that Del Monte has taken &ldquo multiple price increases&rdquo across its businesses this year. &ldquo We have taken price increases almost every three months of two to three per cent, rather than going for a big price increase (at) one go so that we are passing on the inflation just as we are experiencing it, and not burdening the consumer at one go,&rdquo Sachdeva said. 

 

The slate of price hikes typically means a company like Del Monte risks losing its market share in the countries it operates in to competitors who are selling the same products at cheaper prices. 

 

Greg Longstreet, chief executive of Del Monte&rsquo s US unit, said market share is driven primarily by strong commercial execution, an increase in distribution of core products and new products that a company introduces to its offerings. 

 

&ldquo We continue to expand our presence in new and underdeveloped channels&hellip many of which are not captured in market share data,&rdquo Longstreet said. In the current &ldquo tough US conditions&rdquo , he said that he is encouraged by the company&rsquo s approach to building its brand by taking its products to &ldquo where consumers are shopping&rdquo .   Price hikes in the US will be done in &ldquo selective categories&rdquo , Longstreet added, in a mindful manner which will help the company pass off some inflationary costs to consumers without risking market share. 

 

Meanwhile, the group also announced plans to redeem the US$100 million Series A-2 preference shares on Dec 15. These shares have a fixed rate of 6.5 per cent per annum, with a step-up rate if not redeemed. The redemption will be financed by bank loans, it said.