CHEMICAL firm D and L Industries Inc. (DNL) may tap the debt market to fund its P8-billion expansion facility in Batangas, but the company is waiting for interest rates to go down before it borrows.
Alvin Lao, the company’s president, said the company has spent only more than P1 billion for its new facility and another P6 billion to P7 billion remains to spent.
“Part of it will be internally generated, but a big chunk of it will be borrowings. We wait for the rate to go down and decide if it will be long-term fixed or just a short term,” Lao said.
He explained interest rates around the region are lower compared with the Philippines.
In Malaysia, for instance, interest rates hover around 4 percent compared with the Philippines at about 6 percent.
“It’s hard to pinpoint now how much we are going to borrow. So it could be zero to P6 billion,” he said.
Lao explained if commodity prices remained steady, and with its cash flow of about P4.5 billion, there may be a chance that the company may not tap the debt market at all.
DNL’s new facility will be located on a 26-hectare property in First Industrial Township-Special Economic Zone in Tanauan, Batangas.
The company is building two new plants—one for food ingredients, under D and L Premium Foods Corp., and an integrated facility to manufacture oleochemicals and downstream packaging, under Natura Aeropack Corp.
DNL said its net income declined 7 percent during the first half of the year ending June to P1.41 billion from last year’s P1.52 billion, mainly as a result of the ongoing trade war between China and the US—which dampened demand from the industries that it caters to—and the higher inflation rate of the country that spilled over in the second quarter.
Lao said the company’s profit slowdown may decline to a single-digit rate by the end of the year, or as much as 2 percent, as it is optimistic of the long-term prospects on the country’s economy.