Del Monte Pacific sinks into the red in 2Q on one-off charges for US plant closures

SINGAPORE (Dec 9): Del Monte Pacific (DMPL), the Singapore- and Philippine-listed food and beverage company, reversed into the red in the second quarter due to one-off expenses.

In 2QFY2020 ended ended October, DMPL reported a loss of US$37.4 million ($50.9 million). This compared to a profit of US$8.4 million in the year before.

Second-quarter revenue inched up 0.4% to US$558.7 million. Gross profit grew 13% to US$134.1 million on improved gross margin by 270 basis points to 24% mainly due to higher sales of Philippines and S&W fresh pineapples, and lower sales of low-margin businesses in the United States.

Without one-off expenses, DMPL would have reported EBITDA of US$69.5 million, 55% better than the prior year quarter while operating profit would have come in 65% higher at US$47.2 million. Recurring net profit more than doubled to US$15.9 million.

However, EBITDA for 2QFY2020 included US$76.8 million of one-off expenses, mostly non-cash charges, due to the four plant closures in the United States. This resulted in an EBITDA loss of US$7.3 million.

For the 1HFY2020, the group reported a net loss of US$75.6 million due to one-off expenses and dividend tax amounting to US$95.7 million.

In its filing on Friday night, DMPL says its asset-light strategy of the group’s US subsidiary, Del Monte Foods, Inc (DMFI), has been a critical step in repositioning DMFI for the future.

DMFI contributed US$396 million or 71% of group sales. Sales declined by 5% mainly due to the divested low-margin Sager Creek business and reduced sales of low-margin non-branded businesses which DMFI is trying to reduce and eliminate. However, gross margin increased by 340 basis points to 21.2% versus the prior year quarter’s 17.8%.

"Execution of this strategy and other cost saving initiatives should improve the group’s EBITDA margin by an estimated 225–275 basis points (US$50-60 million) over the next 24 months," adds DMPL.

DMPL says a portion of these improved cost savings will be reinvested in the growth and expansion of DMFI’s iconic brands. It is also planning to tap rising demand of plant-based foods.

In its outlook statement, DMPL expects to remain profitable in FY2020 on a recurring basis.

As at 10.37am, shares in DMPL are trading at 14 cents, giving it a market cap of $262.4 million.