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Del Monte Q4 earnings double to US$6.3m on stronger US margins

FOOD and beverage player Del Monte saw earnings more than double to US$6.3 million for the fourth quarter ended April, compared to a year ago.

This was aided in part by a higher gross margin of 15.9 per cent for Del Monte's US subsidiary DMFI (Del Monte Foods Inc), compared to 13.3 per cent in the same period last year.  

The improved gross margin was driven by a strategic increase in retail list price, lower trade spend and the favourable impact of the divestiture of the low-margin Sager Creek vegetable business in September 2017.

Excluding one-off items, Del Monte would have registered a recurring net income of US$9.2 million, a turnaround from a net loss of US$2.9 million in the prior year period.

Meanwhile, Q4 sales dropped 13.3 per cent year-on-year to US$432.6 million, 13 per cent lower than the prior year's quarter. This was mainly due to the divestiture of the Sager Creek business and lower sales in the USA and the Philippines.

Sales in the Philippine domestic market fell by 8.5 per cent, mainly in the general trade, beverage and culinary categories, driven by the transition to new distributors in the Philippines.

For the full year, Del Monte posted earnings of US$20.3 million, a turnaround from the US$36.5 million loss a year ago. Without one-off items, net income would have been US$15.8 million for the year, compared to US$12 million for the prior year. 

Sales for FY2019 fell 11 per cent year-on-year to US$1.95 billion, 73 per cent of which was contributed by DMFI.  The fall was led by the divestiture of Sager Creek, the lower volume of retail-branded products with promotion reduction and distribution losses. Del Monte also saw a decline in non-branded products.

The company's board has approved a final dividend of US$0.0052 per share, representing 50 per cent of FY2019 net profit.

Looking forward, the firm is maintaining its strategy of diversifying beyond the canned goods aisle, a declining category. It introduced four new innovative products in the growing categories of refrigerated produce and frozen to cater to demand for health and wellness.

"We are encouraged by the accelerated pace of innovation and new product launches, especially in the US, taking us into new categories and formats outside the can which is not growing. At the same time, we have proactively reduced costs within our control amid headwinds of rising tin prices," Del Monte's CEO Joselito Campos Jr said in a press release.

Shares of Del Monte closed flat at S$0.12 on Thursday.