Del Monte expecting 'favourable' sales impact in US and Philippines amid Covid-19

FOOD and beverage company Del Monte Pacific on Monday said it is expecting "some favourable impact" on sales in the US and the Philippines, which is expected to offset the decline in sales in North Asia amid the global Covid-19 pandemic.

In a regulatory filing, the mainboard-listed firm said the virus crisis "did not have a material impact" on its financial results for the period ended Jan 31, 2020. The group said it has "some flexibility" to allocate products across markets and trade channels, and that its products are associated with health, wellness and nutrition; they also include stable shelf-life items. 

This comes as Del Monte more than doubled its net profit to US$6.7 million for the third quarter ended Jan 31, from US$2.6 million a year ago.

Del Monte said it had experienced "softer demand and some logistics hurdles" in China at the start of February, which accounts for approximately 3 per cent of group sales. The majority of its sales in China are fresh pineapples sold in retail channels, sales at which have been hit, with consumers staying at home, said the group. 

Del Monte is currently monitoring its supply chain, primarily in China, to minimise any potential impact on raw and packaging materials, and equipment sourcing.

The group also experienced a decline in sales of fresh pineapples in South Korea, which accounts for less than 1 per cent of group sales.

Over in the US, which contributes to 69 per cent of group sales, there has been "some increase" in demand for packaged fruit and vegetable products in the retail sector due to recent pantry loading by US consumers, said Del Monte. 

"The food service business, however, has experienced some softness with food consumed away from home declining; e-commerce sales are, however, improving," the group added. 

In the Philippines - which accounts for 18 per cent of group sales - there has been a rise in demand for packaged tomato and beverage products in the retail sector.

Del Monte said the Philippine market has been seeing some shift in demand for its products from the foodservice channel to retail,  given higher demand for food and beverage for home consumption, compared with out-of-home consumption. This changing demand is not only evident in Metro Manila - Del Monte's largest domestic market - but also in the rest of the country, said the group.

Del Monte Philippines Inc (DMPI), the second largest subsidiary of Del Monte, sources some of its raw materials from China. Del Monte said DMPI has alternative sources for some materials and has started testing new sources. 

"DMPI is monitoring its production, inventory and delivery of products in order to adequately address the demand of its trade partners, especially modern trade and general trade accounts," said the group. This comes after the Philippine government recently announced a community quarantine of Metro Manila from March 15 to April 14. 

DMPI will implement business continuity plan measures to minimise any potential risk to production. It has sufficient product inventory for Metro Manila during the quarantine period, and will implement measures in advance of a possible extension of this period by continuously replenishing its product inventory level versus market requirements, said Del Monte.

DMPI will also mitigate logistics risks related to product delivery to Metro Manila, although the quarantine allows transport of such products from outside the capital. It will work closely with its trade and business partners to ensure good customer-service levels and prevent any shortfall of stocks, particularly in modern trade and general trade accounts, the group added.

Overall, Del Monte has put in place standard temperature screenings and health monitoring for its employees, as well as a business continuity plan (BCP). Travel bans have since been implemented on high-risk countries based on latest guidelines, and travel to other countries requires clearance and self-quarantine.

"Due to the evolving situation and without knowing when Covid-19 will subside, the group is unable to predict if this will have an extended impact on its business. 

"In the meantime, it is implementing its BCP and optimising the mix of its markets and trade channels through product allocation in order to mitigate the risks," said Del Monte.

Del Monte shares closed down 0.1 Singapore cent - or 1 per cent - to 9.9 cents on Monday.