Del Monte swings to loss in Q1 on lower revenue

Singapore

DEL Monte Pacific swung to a net loss of US$38.3 million for its first quarter ended July 31, against a profit of US$3 million in the previous corresponding period.

The dual-listed, Philippines company said its revenue fell 14 per cent to US$375.9 million, mainly due to the sale of its Sager Creek vegetable business in September 2017, lower sales in the US and lower exports of processed pineapple products.

Stripping out Sager Creek's sales, revenue in the first quarter would have been lower by 9.2 per cent, the food and beverage group added.

In preparation for its capital raising initiatives, Del Monte's Philippine subsidiary, Del Monte Philippines, declared a dividend to its parent company which was taxed at 15 per cent (US$39.6 million) - an amount that contributed to its net loss, Del Monte said.

Loss per share widened to 2.22 US cents from 0.1 US cent a year ago. Excluding one-off items, Del Monte said it would have posted a recurring net income of US$4.1 million, turning around a net loss of US$3.7 million in the previous year.

The firm had in August announced the closure and sale of facilities in four US locations as it "looks to fully utilise the capacity of its existing plants after the restructuring".

"The restructuring is a necessary step for us to remain competitive in a rapidly changing marketplace," said Del Monte managing director and chief executive officer Joselito D Campos Jr. "Our asset-light strategy will lead to more efficient and lower cost operations."

Certain one-off expenses are expected in FY2020 from streamlining of operations, said Del Monte.

The group, which saw its net debt increased 4 per cent to US$1.56 billion from US$1.5 billion a year ago, said it is committed to improving its cash flow, further strengthening the balance sheet, and reducing leverage and interest. It expects to be profitable for FY2020 on a recurring basis.

The group's US subsidiary, Del Monte Foods, "faces headwinds from the long-term structural decline of canned categories in which it competes".

As US consumers gravitated towards fresh, healthy food and away from physical retail stores, Del Monte said it had to "think outside the can" to address these rapid changes.

It said it will continue to strengthen its product offerings and enter new categories, in line with market trends for health and wellness, snacking and convenience. Over time, it expects its US product portfolio to have less canned goods and more formats such as cups, cartons and pouches.

Del Monte shares ended unchanged at S$0.135 on Friday.