US plant closures drag down Del Monte’s H1 bottom line

Del Monte Foods announced on Tuesday it will be closing its tomato processing facility in Plymouth. (Tribune Photo/MICHAEL WANBAUGH)

CAMPOS-led Del Monte Pacific Ltd. said it incurred a net loss of $2.8 million for its fiscal first half of 2018, from last year’s net income of $20 million, as it spent more on trade spending and marketing to strengthen its core business in the United States, while disposing some of its nonperforming units.

Earnings before interest, depreciation and amortization, or Ebitda, fell to $28.6 million, lower than last year’s $71.2 million.

Excluding one-off expenses of $23.6 million pre-tax and $13.1 million post-tax, Ebitda would have been $52.2 million and net income would have been $10.2 million, the company said.

“We have taken some challenging but necessary steps in the United States to realign our manufacturing footprint and strengthen our competitiveness in the long-term, amidst shifts in consumer tastes and shopping preferences,” said Joselito D. Campos Jr., the company’s managing director and CEO. “We have also invested in brand-building to support our heritage brands in the US and reinvigorate the categories we are in, while forging ahead with innovative products and entering new channels.”

The group generated sales of $1.1 billion, marginally lower versus the previous year period, as higher sales in Asia were offset by lower sales in the United States.

Sales of the S&W business, the fastest-growing business in Asia and the Middle East, delivered a strong double-digit growth in the first half, mainly driven by robust sales of fresh pineapple, new product launches in new packaging formats in North Asia, and expansion into Turkey, a new market for packaged products, the company said.

US unit Del Monte Foods Inc. contributed $485.6 million, or 78 percent, of group sales. Its sales declined by 1.6 percent, while volume was marginally higher, driven by the strong performance of the packaged vegetable and fruit segments ahead of the holiday season.

The canned fruit and plastic fruit cup categories both grew market shares by 3 percent during the quarter, driven by increased marketing investments, compelling innovations and strong execution against fundamentals at retail.

Its US unit, meanwhile, divested its underperforming Sager Creek vegetable business. This involved shutting the production facility in Siloam Springs, Arkansas.

Del Monte Foods also shut its Plymouth, Indiana, tomato-production facility to improve efficiency and streamline operations.

These resulted in one-off expenses amounting to $23.6 million pre-tax or $13.1 million post-tax in the second quarter .

On the other hand, the group’s second-largest subsidiary, Del Monte Philippines Inc., generated sales of $134 million, up 2 percent versus last year.

The said unit comprises Philippines sales and exports.

Sales in the Philippines were up in peso terms on better sales of packaged fruit, as well as the food-service channel.

Turning Points 2018
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