P360M capex set for next yr
D&L Industries Inc., a listed food ingredients and oleochemicals firm, expects to maintain its 15 to 19 percent earnings growth next year driven by the economy’s underlying strength even without the boost from election-related spending.
“The elections are over but people are realizing that the economy has underlying strength. The fourth quarter is doing good and we expect to grow earnings by 15 to 19 percent this year and next year if the economic growth continues,” D&L President Alvin Lao told reporters on Monday.
In 2015, D&L posted a net income of P2.28 billion, up 12 percent from 2014. It is projecting a net income of between P2.62 billion and P2.72 billion for full-year 2016.
Lao believes the income growth target for next year is doable given the company’s continued business growth and distribution deals, and despite uncertainties in the global economy due to looming interest rate hikes in the United States.
“We normally under promise but over deliver. We don’t want to be too optimistic,” the D&L president said.
“You never know if the Fed (US Federal Reserve) will raise rates maybe two to three times next year. This will make the US dollar more attractive and lead to the devaluation of the peso,” he added.
But Lao does not expect D&L to be affected too much by a weaker peso since their relationship with customers allows the company to pass on any increase in the cost of raw materials.
A stronger dollar will also help boost the company’s export revenues, which now account for about 18 percent of total revenues. While exports are posting rapid growth, Lao noted that their export volumes are still low and consist mostly of food ingredients.
But moving forward, he said the company sees faster export growth particularly in the food ingredients segment with the realization of the Ventura Foods and Bunge Ltd. distribution partnership agreements, both within the Asia-Pacific region.
Also for next year, Lao said the company will be allotting about P345 million to P360 million for capital expenditures, up from the P300 million budgeted for this year.
“We don’t have any large capex requirements in the next six months. The capex will be spread over all our businesses. We can easily borrow from our existing credit lines to fund our capex budget since our borrowing is very light,” Lao said.
Established in 1963 and listed in December 2012, D&L is engaged in the business of food ingredients distribution, specialty plastics, aerosols, and chemicals. Some of the company’s big clients include Jollibee, McDonald’s, KFC, and Nestle.