D&L Industries Report Full Year 2017 Results

March 06, 2018 – D&L Industries’ recurring net income reached P2.9 billion, or earnings per share of P0.41, in full year 2017. This is 10.6% higher than last year. Earnings before interest and taxes were higher by 12.3% at P3.7 billion.

 In the fourth quarter alone (4Q17), earnings and volume growth continued to pick up following lackluster growth in the first half of the year. Net income in 4Q17 increased by 12% y-o-y to P786 million. Meanwhile, high margin specialty products (HMSP) volume grew by 10.5% y-o-y, higher than the historical average of 7% growth.

 “We rounded off 2017 with double digit growth, showing full recovery from a tough start to the year.” President and CEO Alvin Lao commented. “We see that our full year results better reflect the long-term growth prospects of the business. Going forward, we will continue to exercise discipline and excellence in R&D as we continue to target opportunities in the growing Philippine economy, as well as in our rapidly expanding export segments.” 

In full year 2017 (FY17), export sales grew by 68% y-o-y. The contribution of exports to total sales now stands at 25%, from just 18% in full year 2016. With the company’s partnerships with Ventura and Bunge maintaining pace, the food ingredients segment is now the biggest contributor to exports. The segment contributed 45% to total export sales compared with just 19% in full year 2016.

Meanwhile, net income margins in FY17 compressed by 1.4 ppts y-o-y to 10.5%, largely due to lower commodity margins. Nonetheless, commodity gross profit margins showed signs of improvement, inching up by 0.9 ppt to 4.8% in 4Q17 from 3.9% in 3Q17. HMSP gross profit margins stood at 24.8% in FY17, up 0.2ppt y-o-y. HMSP accounted for 58% of total revenues while the remaining 42% was accounted for by commodities in FY17.   

 The company’s return ratios remain healthy. In FY17, Return on Equity (ROE) and Return on Invested Capital (ROIC) stood at 19.1% and 19.2%, respectively. Meanwhile, the balance sheet remains robust with net gearing at 25% and interest cover at a comfortable 24x. As of end-December 2017, net debt stood at P3.7 billion with average cost of debt at 3.6% (inclusive of DST). The company generated positive free cash flow of P147 million for the period.

Food Ingredients

 The food ingredients segment grew its earnings by 11% in FY17. In 4Q17 alone, net income for the segment grew by 23% y-o-y. Blended gross profit margin compressed by 1.1ppts due to lower commodity straight oil margins. Meanwhile, the high margin specialty product segments (specialty fats/oils and specialty ingredients) saw a 0.7ppt margin expansion. Over the long-term, continued investments in R&D as well as growing GDP per capita will drive margin expansion for the food ingredients business.

 2017 witnessed the first full-year contribution of the agreement with Ventura. Export sales of the food ingredients business grew by 292% y-o-y. Moving forward, growth prospects for exports remain healthy, given Ventura’s low penetration in the region and various opportunities in the export market. The contract with Ventura covers the entire Asia Pacific, while only four countries (China, Hong Kong, Japan, and Indonesia) are currently being serviced to date.

 Overall utilization for the food ingredients plant now stands at 65%. In November 2017, the company announced plans to put up a new food ingredients facility in order to sufficiently serve its growing domestic and export business. The new plant will be located in First Industrial Township, which is a Special Economic Zone in Batangas.

Oleochemicals and Other Specialty Chemicals

 Chemrez posted 9% increase in net income in full year 2017. The robust growth in the high margin oleochemicals business offset the weakness in biodiesel. Nonetheless, biodiesel recovered in the second half of the year with volume growing by 6% y-o-y. Biodiesel ended 2017 with a lower volume decline of just 18% compared to the 33% volume decline recorded in the first half of the year. Meanwhile, high margin oleochemicals and specialty chemicals posted 12% y-o-y volume growth.

 Moving forward, Chemrez’ growth is underpinned by the increasing appreciation of coconut-based products globally. The company announced in November 2017 that it is putting up new facilities dedicated for the manufacture of coconut oil fractions, coconut-based surfactants, and downstream consumer products which are sustainable, naturally-derived, mild and non-irritant. Product applications extend to health care, personal care, home care as well as baby care. The said facilities will also be located in First Industrial Township.

 Specialty Plastics

 The specialty plastics group grew its net income by 7% in FY17. Blended gross profit margin improved by 0.5ppt due to an improved product mix, as revenue contribution of colorants and additives now exceeds revenue contribution of engineered polymers.

 A ramp up in sales towards the second half of the year compensated for the negative volume growth in the first half. In 2H17 alone, volume sold grew by 11%. The specialty plastics group finished the year with a 4% volume growth.


 Aerosols segment remains the fastest growing segment of the company, posting 20% y-o-y earnings growth in full year 2017. Blended margins expanded by 2.2ppts which resulted from a shift to higher value and more R&D-intensive products. The aerosols group now contributes 6% to D&L’s overall consolidated income, compared with 3% five years ago.

 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 disposable income in the country.