CHEMICAL firm D&L Industries Inc. said its income for the first quarter of the year reached P748 million, a percent higher than last year’s P744 million as profits from its high-margin products reached record highs.
Revenues fell 8 percent to P5.87 billion for the three months ending March from last year’s P6.39 billion as prices of coconut oil declined. The company passes on price movements to its customers.
Coconut oil and palm oil average prices were down 43 percent, and 19 percent year-on-year, respectively. As a percentage of revenues, high margin specialty products (HMSP) reached an all-time high of 69 percent, from 63 percent last year.
“As a result, our gross profit margin reached 21 percent, an all-time high for the company,” said Alvin Lao, the company’s president.
“We saw negative consumer sentiment from last year spill over to the first quarter. This, combined with government underspending, affected our volume growth. However, macroeconomic indicators show the business environment will improve going forward,” Lao said.
Margins of the commodity segment, accounting for 31 percent of total revenues, stood at 12.7 percent, up 6.2 percentage points year-on-year. Its higher valued products had a margin of 25 percent, up by 1.3 percentage points from last year.
“This reflects the company’s efforts to consciously focus on margin-accretive commodity sales. However, given the nature of commodities, these double-digit margins are unlikely to be sustained. Nonetheless, this segment remains a vital part of the company’s overall business, given the strategic role it plays in developing and growing the HMSP business,” the company said.
In terms of total volume that the company sold last year, it said the recovery was tempered by macroeconomic factors, such as the delayed passage of the 2019 national budget, that have continued to weigh down aggregate demand.
For the period, total volume for the company only grew by 2 percent year-on-year coming from a high base last year where total volume grew by 13 percent, way above the historical average growth of 7 percent.
“Looking forward, however, positive economic developments such as continued easing in inflation given the oversupply of key food items such as chicken, pork, fish and even coconut oil, anticipated ramp up in government and consumer spending, given the passage of 2019 budget and elections in May, and a more accommodative monetary policy, should all translate to a better growth for the economy in general,” the company said.
Exports as percentage of total revenues stood at 19 percent for the period, but in peso terms, export revenues declined by 19 percent, mainly due to lower commodity prices passed on to customers.
“The company remains optimistic that it will reach its long-term target export contribution of 50 percent. The ongoing construction of its new plants in export zones is expected to be completed in 2021,” it said.