D&L Industries 1Q 2025 Earnings Up 10% YoY to P681 Million

​D&L Industries’ recurring income reached P681 million, or earnings per share of P0.095 in the first quarter of 2025. This is higher by 10% YoY, driven by the continued growth in exports and ramp up of operations in Batangas plant. Total volume growth for the period was strong although rising commodity prices tempered its potential positive effect on net income.

“The year started with strong momentum. However, the increasing global uncertainties have led to a noticeable slowdown and dampening of global business sentiment,” remarked D&L Industries President & CEO Alvin Lao. “Nonetheless, the Philippines may be one of the least affected countries given its import heavy trade balance. In addition, the lower proposed reciprocal tariff for the Philippines versus its neighboring countries may put the Philippines in an advantageous position. Despite the macroeconomic noise, D&L still managed to book a 10% YoY earnings growth for the quarter on the back of robust volume growth for both High Margin Specialty Products (HMSP) and commodities,” Lao added. 

“While volatility is likely to persist in the near-term, we remain unfazed and continue to focus on building resiliency and long-term growth strategies. We believe that with our product portfolio, the majority of which cater to basic and essential industries, we will continue to grow and be relevant in an ever-changing business environment and world trade order,” Lao concluded.

Batangas plant continues to ramp up operations; return ratios start to improve

D&L’s Batangas plant continues to ramp up operations well into the first quarter of the year with net income growing by 35% QoQ to P333 million. This positive momentum gives the company the confidence that, over time, its industry leading facilities in Batangas will continue to play an increasingly significant role in boosting its overall net income. D&L believes that it has only just begun to tap into the plant’s potential, given the vast opportunities it sees in both local and international markets.

To date, the new plant has successfully fulfilled orders for both local and export customers. Several audit and certification processes are ongoing in order to on-board more customers.

With the increasing income contribution from Batangas plant, the company’s return ratios have started to see improvements. ROE stood at 12.1% for the quarter, higher by 1.4ppts from FY24 level. Meanwhile, ROIC stood at 10% for the quarter, higher by 1 ppt from FY24 level. Management targets a steady improvement in both ratios to reach mid to high-teens in the medium-term. 

Total volume was up 33% YoY but rising commodity prices tempered potential boost to income

Total volume growth was robust for the period as both HMSP and commodities booked double-digit volume growth. HMSP was up 36% YoY while commodities were up 30%, bringing total volume growth for the quarter at 33% YoY. The buoyant volume growth was driven by a combination of the strong exports, new customer wins, market share grab, and positive regulatory development with the increase in mandated biodiesel blend from 2% to 3% starting October 1, 2024. 

The potential significant boost of the robust volume growth to net income, however, was tempered by the unprecedented increase in commodity prices for the period which led to a temporary margin contraction. Coconut oil, which is one of the key raw materials of the company, saw its average price increase by 74% YoY for the quarter and 37% YTD. 

While D&L passes on price changes to customers, it takes the company an average of 30-45 days to adjust its prices which normally leads to a temporary margin contraction or expansion in an environment of rapidly changing commodity prices. The substantial increase in coconut oil prices was largely due to increasing global demand at a time when supply is temporarily constrained due to the negative effects of El Niño last year on coconut tree yield. The seasonal harvesting period from May to July may bring relief on the tight supply-demand situation leading to softening of prices. D&L expects its margins to recover once commodity prices start to stabilize. 

Exports is a key growth driver 

Exports continued its positive momentum in 1Q25 booking a total sales of P4.8 billion, which is higher by 69% YoY. Meanwhile, export gross profits jumped by a whopping 90% YoY over the same period. Average gross profit margin (GPM) for exports which stood at 18.3% is notably higher than average GPM of 9.8% for the domestic business. This shows that exports remain a bright spot amidst increasing global uncertainty and volatility. 

With low hanging fruits and markets that have yet to be penetrated, D&L sees a significant potential upside for this segment. Over the medium-term, the company targets exports to account for 50% of total sales. In 1Q25, export sales contribution stood at a record level of 34%. 

Natura Aeropack Corporation (NAC) and D&L Premium Foods Corp (DLPF), the operating companies behind D&L’s Batangas plant, are aggressively pushing high-value added coconut oil-derived ingredients and finished products for the food, personal hygiene, and home care segments in the export market. With the increasing concern on the massive deforestation associated with the use of palm oil and the depletion of non renewable energy sources and high carbon footprint associated with the extraction and use of petroleum, coconut-derived ingredients offer an excellent natural, organic, and sustainable alternative for many industries and applications. 

Balance sheet remains strong; capex has started to trend lower

The company’s balance sheet remained in a solid position even with the huge capex over the past couple of years and unprecedented increase in commodity prices which translates to higher working capital requirements. As of end-March 2025 interest cover remained at a comfortable level of 4x with net gearing at 92%. Average cost of debt was slightly lower at 6.2% as of end-March 2025 vs 6.29% as of end-December 2024. With the generally dovish stance of the Bangko Sentral ng Pilipinas (BSP), there is room for the average cost of debt to go down in 2025. 

From a capex standpoint, the company does not expect any major capex spending in the near-term. As shown on the chart on the succeeding page, capex has started to taper off in 2023 with the completion of the Batangas plant. In 1Q25, capex stood at below P200 million, which if annualized will yield a sub-P1 bn capex for the year. 

D&L Industries is a Filipino company engaged in product customization and specialization for the food, chemicals, plastics and consumer products ODM industries. The company’s principal business activities include manufacturing of customized food ingredients, specialty raw materials for plastics, and oleochemicals for personal and home care use. Established in 1963, D&L has the largest market share in most of the industries it serves, as well as long-standing customer relationships with the Philippines’ leading consumer and manufacturing companies. It was listed on the Philippine Stock Exchange in December 2012.