D&L Industries Inc. said its recurring net income reached P576 million for the first three months of the year, a 12-percent increase from the previous year’s P512 million.
The company said it used a recurring income as basis for its nonrecurring items last year, such as the P83 million from the sale of its Chemrez property, P14 million in inventory write-down and P25 million in tax impact of nonrecurring items.
Revenues for the period fell 4 percent to P4.63 billion from P4.82 billion during the previous year.
Alvin Lao, the company’s chief finance officer, said the drop was primarily driven by the fall in commodities-related products.
The lower revenues, however, has limited impact on earnings as it focused on the products that are low-margin nature.
“The company continues its favorable product mix shift to higher-margin specialty products. Contribution of high-margin specialties to revenues increased to 64 percent from 62 percent in full-year 2015,” the company said.
Earnings were driven by the strong growth of the specialty sector on the back of increasing volume and expanding margins.
As expected, specialty-plastics volume led growth, post-port congestion. Specialties volume also saw double-digit growth in food ingredients, aerosols and oleochemicals, as well as continued increase in margins.
“Commodity prices have remained soft for the first three months of the year and have had a positive effect on the company’s cash flow. The company generated P892 million in free cash during this period,” Lao said.
Within food ingredients, D&L said it is seeing a mix-driven transformation, in favor of high-margin specialties.
“Driving the shift are consumer trends, which are evolving very fast, thus, demanding shorter product development cycles, more differentiation and logistical benefits that having a well-established domestic supply chain enhances,” Lao said.
The oleochemicals and other specialty chemicals saw volume slightly rise, with the consistent double-digit increase in oleochemicals more than compensating for the persistent weakness in other specialty chemicals, D&L said.
Overall revenues remained largely driven considerably by margins, which continue to rise as the company seizes more value in its oleochemical exports.
“The first quarter of 2016 strongly indicated a recovery in specialty plastics, which had been adversely affected by port-congestion problems in the previous quarters. As the year progresses, this division should benefit positively from the normalization of port operations, which will allow the division to resume good growth momentum,” the company said.