LISTED D&L Industries Inc., the country’s largest customized food ingredients and oleochemicals firm, is targeting to continue its double-digit growth this year after posting net income growth of 12 percent to P2.28 billion in 2015.
In a press briefing on Tuesday, D&L executive vice president and chief finance officer Alvin Lao said the company expects profit growth to be across the board as all their businesses are expected to benefit from the momentum set during the second half of last year.
“The port congestion that held back performance in late 2014 and the first half of 2015 posed short-term challenges to the company but also created a tremendous long-term opportunity,” Lao said.
“While [port congestion was]a setback to the specialty plastics business, it highlighted the importance of having a strong domestic supplier like D&L, particularly in such highly dynamic markets such as consumer food and beverage,” he added.
D&L subsidiaries produce food ingredients for several of the country’s top food companies, biodiesel for local oil giants, as well as paints and paint colorants—all of which usually enjoy brisk sales during elections.
Meanwhile, Lao said D&L’s recurring net income, or income derived from the core business of the firm, rose 12 percent to P2.29 billion in 2015 from P2.03 billion in the previous year, resulting in earnings per share of P0.32 for full-year 2015.
Earnings before interest and taxes increased 13 percent year-on-year to P2.90 billion, while revenues declined by 5 percent mainly because of lower commodity prices although sales volumes registered strong growth.
Recurring profit does not include the one-time gain on the sale of its Chemrez property, tax and filing costs related to the increase in the authorized capitalization, inventory writedown, and income tax impact of the non-recurring items.
Volume growth of specialties, led by food ingredients, managed to very well offset the decline in commodities. In total, high margin specialties accounted for 62 percent of revenues.
Margin gains in both specialties and commodities drove overall gross profit margin from 15.8 percent in 2014 to 18.3 percent in 2015, a record high in the company’s 53-year history.
D&L realized P3.49 billion in free cash during the year, a reversal from the negative P157 million in 2014, as working capital benefited from the weak commodity price environment.
The strong cash flow allowed for the continued reduction in debt, with net gearing further declining to 0.08 times as of end of 2015 from 0.24 times from a year before.
Further, Lao said that the company’s income growth would allow them to pay more dividends. As previously announced, D&L’s dividend payout policy has been raised from 25 percent to 50 percent of the previous year’s recurring net income.
Despite the 10 percent decline in revenues due to lower vegetable oil prices, the improvement in the revenue mix of Oleo-Fats drove margins higher and resulted in a 19 percent increase in net income for 2015.
Oleochemicals grew in 2015, with oleochemical specialties adding customers and entering new markets.
With regard to biodiesel, said product benefited from favorable macroeconomic conditions and also saw strong growth in volume throughout the year.
Chemrez revenues were marginally up by 2 percent, while its net income was higher by 30 percent.