D&L Industries 9M18 earnings up 13.3%

November 9, 2018 – D&L Industries’ recurring income reached P2.4 billion, or earnings per share of P0.34, in the first nine months of 2018 (9M18). This is 13% higher than last year. Earnings before interest and taxes were higher by 12% at P3 billion.

In the third quarter alone (3Q18), earnings and volume growth continued to accelerate. Net income for the quarter increased by 13% y-o-y to P874 million. Meanwhile, High Margin Specialty Product (HMSP) volume grew 8% y-o-y and 4% q-o-q. HMSP revenue contribution was at 63% vs 58% in full year 2017. The growth in the high margin side of the business is a reflection of our investments in R&D which allow us to increase our market penetration and to develop more complex and customized products for our customers.

The remaining 37% of revenues was accounted for by the commodity business that saw its margins recover this year. Blended commodity margins improved to 8.4% in 9M18 from just 4.1% in full year 2017. As a result, overall gross profit margin for the company improved by 1.4 ppts y-o-y to 18.2%.

Exports as percentage of total revenues stood at 23% in 9M18, a slight increase from 21% contribution recorded in 1H18. In the third quarter alone, export contribution to total sales stood at 25%. In peso terms, export revenues declined by 8% mainly due to lower commodity prices which are eventually passed on to customers. Coconut oil and palm oil prices were down 44% and 18% year-to-date, respectively.

Food ingredients segment regained its position as the biggest export revenue contributor after its export sales increased by 65% q-o-q in 3Q18. Food ingredients contributed 36% to total export sales. This was followed by Oleochemicals which accounted for 33% of total export sales. Moving forward, the company continues to work towards its target of having export sales account for 50% of total sales.

The company’s return ratios remain healthy. In 9M18, Return on Equity (ROE) and Return on Invested Capital (ROIC) stood at 20.2% and 23.6%, respectively. Meanwhile, the balance sheet remains robust with net gearing at 8% and interest cover at a comfortable 22x. As of end-September 2018, net debt stood at P1.2 billion with average cost of debt at 4.64% (inclusive of DST). The company generated positive free cash flow of P4.3 billion for the period.

Food Ingredients

The food ingredients segment posted flat operating profits in the first nine months of the year as the 18% growth HMSP volume was offset by the 10% decline in commodity sales. Nonetheless, the pick-up in HMSP volume is encouraging as it represents the side of the business that is recurring and sticky. HMSP now accounts for 58% of total revenues, a meaningful improvement from just 51% in full year 2017.

Overall, net income for the food segment declined by 2% y-o-y in 9M18 due to higher interest expense. Meanwhile, blended gross profit for the group inched up by 0.9ppt as a result of higher HMSP contribution and higher commodity margins.

Oleochemicals and Other Specialty Chemicals

Chemrez delivered 28% earnings growth in the first nine months of the year. This was largely driven by the strong performance of the Oleochemicals segment which more than offset the weakness in the Other Specialty Chemicals segment.

Oleochemicals, for our purposes, are chemicals derived from coconut oil. This segment includes both high margin oleochemicals (surfactant, foaming agents, MCT oil) and commodity biodiesel. With increasing appreciation of coconut-based products globally, HMSP oleochemicals volume grew by 41% y-o-y in 9M18. Meanwhile, biodiesel saw its volumes recover, up 22% y-o-y in 9M18 vs. a decline of 18% in FY17.

Overall margins for the segment expanded by 2.9 ppts largely driven by the 5.8ppts margin expansion in the Oleochemicals space. This has more than offset the margin contraction of 4ppts on the Other Specialty Chemicals side of the business which was affected by higher prices of petrochemical-based raw materials.

Specialty Plastics

The specialty plastics group grew its net income by 24% y-o-y in 9M18. Total volume growth for the period stood at 2%. While 9M18 blended margin was down 0.4 ppt y-o-y, there was a sequential margin improvement of 3.4ppts recorded in the third quarter. Margins are expected to recover once raw material prices start to stabilize. The company’s price pass-through mechanism allows it to pass on changes in raw material prices and forex to customers. It normally takes the company 30-45 days to adjust its selling prices.


Aerosols group posted 6% y-o-y net income growth for the first nine months of the year. Volumes were up 21% y-o-y. Meanwhile, blended gross profit margin contracted by 5.1 ppts due to higher raw material prices. Similar to the other segments, margins are expected to recover once raw material prices start to stabilize.

D&L Industries is a Filipino company engaged in product customization and specialization for the food, chemicals, 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

Crissa Bondad
Investor Relations Officer- D&L Industries, Inc.
+632 635 0680 /