Quezon City—(PHStocks)—D&L Industries’ (PSE: DNL) recurring net income reached PhP2.64 billion, or earnings per share of PhP0.37, in the full year 2016. This is 15% higher than last year. Earnings before interest and taxes were higher by 15% at PhP3.34 billion.
Revenues reached PhP22 billion, up 14% y-o-y on the back of a broad-based increase in sales volume and higher prices of raw materials. High margin specialties accounted for 61% of revenues while the remaining 39% was accounted for by commodities.
Despite the volatility in FX and commodity prices, group-wide gross profit margin was maintained at 18%. High margin specialty products posted a 0.7ppt improvement in gross profit margin to 24.8%. Meanwhile, commodities saw a slight gross profit margin compression of 1.4 ppts to 6.6%. Overall, net income margin was stable at 12%. For full year 2016, the company generated a return on equity of 18.8% and a return on invested capital of 19.9%.
The company’s balance sheet remained robust with net gearing at a modest 15% and comfortable interest cover at 26x. As of end-2016, net debt stood at Php2.07bn. The company generated a positive free cash flow of Php534 million for the year 2016. With a strong balance sheet and healthy cash flows, a total of Php1.43 billion was declared in dividends for the period, bringing the total dividend payout to Php3.22 billion since the company listed in 2012.
The Philippine economy grew by 6.8% in 2016, backed by higher investment and consumption. The continued growth in private consumption is attributed to high consumer confidence, modest inflation and interest rates, as well as the improving labor market. The government remains optimistic on the Philippine economy and targets a GDP growth of 6.5% to 7.5% in 2017. Given these positive macroeconomic factors, D&L Industries continues to see growth across all its business segments.
The Food Ingredients group saw several developments in 2016. Firstly, it entered into an exclusive distribution agreement with publicly listed firm Bunge Ltd (NYSE ticker: “BG”). This has provided the company with a broader range of oil products to offer to the local food service market. This move adds to OFI’s competitiveness within the rapidly growing premium oils segment in the Philippines, as well as elsewhere in the region.
2016 also witnessed the commencement of the partnership contract with Ventura signed in 2014. After two years of certification and audits, D&L started exporting and selling specialty oils and food ingredients to Ventura last year.
For the full year 2016, the Food Ingredients group posted a 13% increase in net income. This was largely driven by a 13% increase in volume backed by strong domestic business and as agreements with foreign principals such as Ventura and Bunge start to bear fruit. Going forward, the company remains confident on the growth prospects of this segment.
Oleochemicals & Other Specialty Chemicals
Oleochemicals group posted a 5% net income growth for the period. This was fueled by a 1% increase in sales volume and a +0.7 ppt improvement in overall gross profit margin. Ongoing efforts to strengthen commercial and operational execution improved the performance of the Other Specialty Chemicals segment, which saw a 2% volume growth in 2016 after several years of volume decline. Revenue mix within the group is also becoming more favorable, as it shifts towards higher margin specialty chemicals that cater to faster growing and less volatile end markets.
In line with the expected recovery this year, specialty plastics posted a net income growth of 20%. This was largely attributable to the 8% increase in volume coupled with a 4.4 ppts improvement in overall gross profit margin.
Specialty plastics benefited from the continued growth in disposable income, as per capita consumption continues to increase. Moreover, wire harness-related exports posted strong results as port congestion-affected businesses started to recover.
Over the medium-term, Specialty Plastics growth will be supplemented by tapping into new opportunities within the toy industry. Earlier this year, the company announced that it has developed a key material used in the toy sensation Hatchimals. The specially developed material is used in its eggshell-like casing, which is strong enough to withstand shipping and handling but also fragile and breakable enough to allow the toy to hatch open over time.
The Aero-Pack group posted the highest net income growth for the period, at 44%. This was led by the 24% growth in volume and 4.4 pts improvement in gross profit margin. Within the group, Personal Care is the fastest growing segment, posting a 32% increase in revenues and 42% increase in volume.
The Company expects the segment’s strong growth momentum to continue as aerosol penetration in the Philippines remains low. Moreover, the segment should benefit from the increasing consumer demand across all categories, due to rising levels of disposable income in the country.
About D&L Industries
D&L Industries is a Filipino company engaged in product customization and specialization for the food, plastics, and aerosol industries. The company’s principal business activities include manufacturing of customized food ingredients, specialty raw materials for plastics, and oleochemicals for personal and home care use. Established in 1963, D&L has the largest market share in each of the industries it serves, as well as longstanding customer relationships with the Philippines’ leading consumer and chemical companies. It was listed on the Philippine Stock Exchange in December 2012. For more information, please visit www.dnl.com.ph.