D&L Industries, Inc. Reported Income of P1.3 Billion for H1-2024, an Increase of 6%

D&L Industries’ recurring income reached P1.3 billion, or earnings per share of P0.184, in the first half of 2024. This is higher by 6% YoY, with the Batangas plant turning profitable in 2Q24. On a quarter-on-quarter basis, momentum continues to build up with 2Q14 earnings up 13%.

“The second quarter of this year marks the turning point in our Batangas operations as it booked a quarterly profit for the first time since we started commercial operations in July 2023. As we further ramp up operations and onboard new customers, we see gradually increasing earnings contribution from this new plant over time,” remarked D&L President & CEO Alvin Lao.

“For this year, we are keeping our guidance at low double-digit growth in earnings. At the same time, we continue to monitor macro developments that may potentially dampen business sentiment such as the higher[1]for-longer interest rates, lingering effects of inflation, depreciating peso and even the potential hard landing or recession in the US,” Lao added.
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“While there are uncertainties in the near-term macroeconomic environment, we remain optimistic on the long-term prospects of our business. Our investments over the past couple of years are starting to bear fruit and we see higher and more sustainable growth coming from it. Moreover, our Batangas plant puts us in a very good position to capture opportunities not just in the Philippines, but globally,” Lao concluded.

Batangas plant turned profitable ahead of schedule

With steady and consistent ramp up in operations, the new plant in Batangas turned profitable in 2Q24, which was less than a year since the start of its commercial operations. This is ahead of the initial schedule of within two years of operations which was based on the performance of the older plants that the company had built over the years.

The new plant booked a net profit of P149 million for the quarter. This represents a consistent quarter-on[1]quarter improvement in operations, from a peak loss of P315 million in the first quarter of commercial operations to almost breaking even in 1Q24 to finally being profitable this quarter.

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

Earnings in 2Q24 were up both on a year-on-year (+8%) basis and quarter-on-quarter (+13%) basis. This was primarily driven by the higher volumes booked for the period which helped offset the higher cost base coming from the commercial operations of the Batangas plant.

In 2Q24, export sales accelerated further growing by 75% YoY. This brings the total export sales growth to 57% YoY for the first half of the year. Meanwhile, export sales as a percentage of total sales stood at 33% in 1H24 which is already at par with the record-high export sales contribution reported in FY21.

The growth in exports was primarily driven by both existing and new export customers. With the commercial operations of the Batangas plant, the company has been more aggressive in growing its exports business given that it now has the capability and capacity to be able to supply to bigger export customers. Over the medium-term, management is optimistic that it will reach its goal of having export sales account for at least 50% of total revenues.

With no wild upside swings in commodity prices and the continued normalization of capex, the company’s free cash flows (FCF) remained positive for the period. 1H24 FCF stood at P2.4 billion, which already exceeds the full-year FCF of P1.1 billion recorded in FY23.

As there are no major capex spending planned in the near term, the improvement in the FCF gives the company the financial flexibility to further reduce its debt level over time.

Meanwhile, net gearing for the period was lower at 60% from 67% in FY23. Interest cover stood at 5x while the average interest rate stood at 5.73%. The P5 billion maiden bond offering of the company issued in September 2021 is helping cushion the recent increase in interest rates. The bonds carry a coupon rate of 2.8% p.a. and 3.6% p.a. for 3-year and 5-year tenors, respectively. These would have been significantly higher at approximately 6.6% for the 3-year tenor and 6.8% for the 5-year tenor if the company were to issue the bonds today.

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.