CANNED food brand Del Monte Pacific on Thursday (Sep 8) posted a net loss of US$30.5 million for the first quarter ended Jul 31, compared to a net profit of US$18.3 million a year ago, after a one-off US$71.9 million expense for the redemption of notes.
The company said US$26.3 million of the redemption cost was non-cash. Excluding the one-off cost, Del Monte would have generated a 7.2 per cent increase in net profit to US$19.6 million, after US subsidiary Del Monte Foods Inc's (DMFI) 67 per cent rise in net profit on lower interest expense.
The company posted a loss per share of 1.65 US cents, compared with an earnings per share of 0.69 US cent a year ago.
In May, DMFI took a US$600 million loan at an interest rate of adjusted Secured Overnight Financing Rate with a floor of 0.5 per cent plus 4.25 per cent. It used the proceeds to repurchase US$500 million of its senior unsecured bonds and pay the associated redemption fees and accrued interest.
The group expects to save US$20-30 million per year given the lower interest rate on the loan. The bonds had an interest rate of 11.875 per cent per annum and were originally due in 2025.
Del Monte, which is dual listed in Singapore and the Philippines, said Q1 revenue dipped 1.2 per cent to US$456.6 million due to lower revenue in the Philippines despite better performance in the US and international markets.
The Philippine market generated sales of US$75.3 million, 18 per cent lower year on year. Beverage and mixed fruits sales declined amid shifting consumer preferences, though Del Monte pointed to the increasing traction of new innovations in dairy and snacking. The segment now accounts for 8 per cent of Philippine sales.
DMFI had sales of US$302.4 million, representing 66 per cent of revenue. Sales rose 1.5 per cent on the back of higher retail branded sales of canned vegetable, tomato, broth and Joyba bubble tea. New products launched in the past 3 years contributed 6.8 per cent to DMFI's total sales in the first quarter.
Sales in international markets, led by S&W brand, grew 16 per cent to US$85.6 million. Fresh sales rose 20 per cent, driven by stronger demand in North Asia and better supply. S&W packaged sales improved by 49 per cent, mostly driven by North Asia.
Del Monte said it has started cost-optimisation initiatives, including consolidating its distribution centres and increasing the use of rail transport instead of trucks to save on fuel cost in the US. In the Philippines, it is adjusting its tin can packaging to lower costs.
Barring unforeseen circumstances, the group expects to generate a net profit in FY2023 after one-off redemption expenses.
The counter closed flat at S$0.34 on Thursday.