D&L Industries, Inc. Maintains "PRS Aaa" Ratings with a Stable Outlook

Philippine Rating Services Corporation (PhilRatings) maintained its Issue Credit Rating of PRS Aaa, with a Stable Outlook, for D&L Industries, Inc.’s (D&L) total outstanding Fixed Rate Bonds amounting to P5.0 billion.

PRS Aaa-rated obligations have the best quality and the least amount of credit risk. The ability of the obligee to fulfill its financial obligations is quite strong. The highest rating given by PhilRatings is PRS Aaa. In contrast, a rating of Stable Outlook is given when it is anticipated to be maintained or not change during the course of the next year.

Given the following important factors, the rating and outlook were given: (1) strong market position in the industries in which D&L operates; (2) diversification of products offered and markets served; (3) innovation-driven specialty products that shield the company from fierce competition and guarantee customer demand; (4) relatively stable margins despite rising costs and expenses, including additional costs associated with the Batangas expansion facility; and (5) prudent debt management and sufficient cash flow generation.

The information that was available at the time the rating evaluation was completed provided the basis for PhilRatings' ratings. PhilRatings will keep a close eye on D&L-related developments and reserves the right to modify the rating and outlook at any moment if new information becomes available.

Since its incorporation in 1971, D&L pioneered and established its market leadership in various industries through product customization and specialization. The Company has four principal business segments, namely: Food Ingredients, Oleochemicals and Other Specialty Chemicals, Specialty Plastics and Consumer Products Original Design Manufacturer (ODM). Each of D&L’s business segments cater to numerous needs in various industries and serve customers belonging to different market segments. Moreover, D&L is able to offer both the specialized and more basic products that further broaden its presence in different consumer markets. D&L’s revenue sources are also geographically diverse as it caters to both the domestic and international markets. The Company’s export sales accounted for 27% of total sales in 2023. D&L is aiming to expand its export business to at least 50% of revenues in the long-term.

In July 2023, the Company officially commenced the commercial operations of its new Batangas Facility, and this expansion is expected to support the goal of D&L for its export business. Moreover, the Central Hub of the Batangas plant was awarded LEEDv4 Gold Certification in March 2024, the second highest in the LEED certification. The building design passed global standards of sustainability and efficiency that will benefit the Company in the long run.

D&L largely invests in strong research and development (R&D) capabilities in order to produce high quality High Margin Specialty Products (HMSP), and to keep up with the evolving demand of consumers. Given the unique technicalities of producing HMSP, clients tend to conduct business with the same suppliers, hence, ensuring continued demand for the products of the Company. The R&D-driven nature of the products being manufactured, likewise, limits the entry of potential players in the market. In 2023, total revenues consisted of 62% HMSP and 38% commodities, or the more basic and less specialized products.

D&L’s total revenues in 2023 went down by 23.0% to P33.5 billion on account of the challenging business environment given the lingering effects of high inflation. Net income declined by 30.8% to P2.3 billion in 2023, considering also the incremental expenses related to the completion of the Batangas facility. Net profit margin was 6.9%, lower than the 7.6% margin in 2022. D&L pointed out, however, that excluding incremental expenses related to the Batangas plant, net income will be at P3.0 billion, lower by only 15.3%, compared with P3.5 billion in 2022. Recomputed net profit margin will be at 9.0% in 2023, higher than 8.2% in 2022

Conservative debt levels were maintained as of end-December 2023, with the Company’s total debt to equity ratio remaining flat at 0.8x. Net operating cash flow was sufficient and largely used for the repayment of obligations, such as, borrowings and lease liabilities. D&L’s total debt stood at P17.1 billion as of end-2023, from P15.5 billion as of end-2022, due to net borrowings. On September 14, 2024, D&L is expected to settle its P3.0-billion Fixed-Rate bonds upon maturity. Given its conservative leverage position, as well as its profit and cash flow performance, the Company is seen to be able to comfortably service its maturing obligations.

As the economy continues to recover from the pandemic, D&L is positive that it is more capable to withstand adverse environments with the expertise it has learned through its years of operations. The Company strives to enhance its capabilities in order to maintain a strong market position. D&L is optimistic given the continued strong demand for its products as these mainly cater to essential industries and basic materials.

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.