Del Monte swings to US$38.3m loss in Q1 on lower revenue

DEL Monte Pacific swung to a net loss of US$38.3 million for its FY2020 first quarter ended July 31, from a US$3 million net profit a year ago, the group reported in a bourse filing on Friday.

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

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

In preparation for its capital raising initiatives, Del Monte's Philippine subsidiary, Del Monte Philippines Inc, 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 was 2.22 US cents, compared with a loss per share of 0.10 US cent a year ago. Mainboard-listed Del Monte shares closed down S$0.002 or 1.5 per cent at S$0.135 on Thursday.

The group does not declare dividends in the first quarter, with the last dividend declaration being in June 2019, based on FY2019 results.

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 Pacific Limited 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, whose net debt increased 4 per cent to US$1.56 billion from US$1.5 billion a year ago, said it is committed to improve cash flow, further strengthen the balance sheet, and reduce leverage and interest.

It expects to be profitable in FY2020 on a recurring basis, Del Monte added.

The group's US subsidiary, Del Monte Foods Inc, "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.