Management perspective and outlook
“2026 has remained a challenging year thus far, marked by geopolitical tensions, supply chain disruptions, elevated inflation, and higher interest rates. Despite these headwinds, the company was able to grow its earnings by 8% in the first half of the year,” remarked D&L President & CEO Alvin Lao.
“The diversified nature of our business, coupled with the essential nature of our products, has enabled us to navigate volatility with resilience. In many ways, periods of disruption—particularly those affecting global supply chains—have created opportunities for us to further strengthen our position as a reliable partner to our customers. These situations allow us to demonstrate the value we bring through our differentiated products, technical capabilities, and ability to ensure business continuity for our customers. Together, these strengths continue to deepen customer relationships and reinforce our competitive position in the marketplace,” Lao added.
“Meanwhile, the gradual normalization of coconut oil prices is a welcome development. Our Food Ingredients business delivered a significant turnaround in 2Q26, which we believe signals that earnings have likely bottomed and reached an inflection point. As raw material costs stabilize and our portfolio optimization initiatives continue to gain traction, we are optimistic about the segment’s ability to deliver more stable and improved profitability moving forward,” Lao continued.
“Overall, we remain confident in the long-term prospects of the business. While prevailing macroeconomic uncertainties continue to weigh on market valuations and liquidity, they have also created opportunities to acquire high-quality businesses at attractive valuations. This confidence is reflected in the continued share purchases by Jadel Holdings, the Lao family’s holding company, which has increased its stake in D&L by approximately 4.4% since the pandemic. In 2025 and year-to-date 2026 alone, Jadel acquired approximately 106 million and 7 million shares, respectively. At current levels, the stock continues to offer an attractive dividend yield of approximately 6.7%, based on dividends declared this year,” Lao concluded.
HMSP margins improved by 2.1 ppts for the period; Sales mix shifted toward HMSP (51% of sales)
With coconut oil—one of our key raw materials—stabilizing at around USD 2,100/MT after a prolonged period of volatility, margins continued to recover in 1H26. The recovery was particularly evident in the High Margin Specialty Products (HMSP) segment, where gross profit margins (GPM) expanded by 2.1 percentage points during the period, reflecting easing input cost pressures alongside continued price pass-through.
Rapid increases in coconut oil prices followed by equally swift corrections
Meanwhile, the sales mix shifted modestly back toward High Margin Specialty Products (HMSP), which accounted for 51% of revenues in 1H26. Over the past few years, strong commodity sales—particularly from the higher biodiesel blending mandate—had tilted the sales mix in favor of commodity products. However, as the company continues to allocate a significant portion of its resources toward developing HMSP, management expects HMSP to account for an increasingly larger share of the sales mix over time.
Free Cash Flows (FCF) swings positive to P2.3bn for 1H26; net gearing and interest cover improved
Free cash flow turned positive at P2.3 billion for the period, primarily driven by lower incremental working capital requirements as coconut oil prices continued to normalize, coupled with muted capital expenditures. Barring any significant commodity price shocks or substantial working capital requirements, the company expects free cash flow to remain positive. Following the completion of the Batangas plant, no major capital expenditures are anticipated in the near term. With free cash flow expected to remain positive and capex staying at normalized levels, the company is well positioned to continue deleveraging its balance sheet.
Meanwhile, the company’s balance sheet remained solid despite the significant capital investments and unprecedented rise in commodity prices over the past few years. Interest cover improved to 3.9x in 2Q26 from 3.2x in FY25, reflecting stronger earnings and cash flow generation. Net gearing continued to trend lower, declining to 91% as of 1H26 from 96% at end-December 2025, while the average cost of debt edged down to 5.90% from 6.01% over the same period. With improving profitability and continued deleveraging, Debt-to-EBITDA likewise improved to 3.7x in 1H26 from 4.3x in FY25.
Return ratios continue to improve
Amid a challenging operating environment, the company delivered continued growth, driving further improvement in return ratios. ROE rose to 13.2% (+1.9 ppts vs end-2025), while ROIC increased to 10.7% (+1.4 ppts vs end-2025). As the Batangas plant ramps up and contributes more meaningfully to earnings, return ratios are expected to continue improving.
Segment Results
Food Ingredients
Following a challenging period marked by unprecedented volatility in coconut oil prices—which saw prices nearly triple from their 2023 lows to their peak in 2025—the Food Ingredients segment delivered significant earnings recovery in 2Q26, signaling that earnings have likely bottomed and reached an inflection point. While 1H26 earnings remained 12% lower YoY, the strong 2Q26 performance substantially narrowed the decline from the 69% YoY drop recorded in 1Q26. On a standalone basis, 2Q26 marked a complete turnaround from a loss in the same period last year, while earnings improved 75% sequentially.
The sharp earnings recovery was primarily driven by the rebound in margins of the HMSP food ingredients business. Gross margins expanded by 3.5 ppts YoY in 1H26, supported by the normalization of coconut oil prices and the company’s ongoing portfolio optimization initiatives, which focus on higher-margin, more earnings-accretive SKUs. As these initiatives continue to gain traction and raw material costs stabilize further, the food ingredients segment is well positioned to deliver more stable and improved profitability in the periods ahead.
Chemrez
Following an exceptionally strong performance in 2025, when earnings nearly doubled, Chemrez’s earnings moderated in 1H26, declining 17% YoY against a high base. The softer performance was primarily attributable to lower biodiesel sales as demand normalized following last year’s exceptional growth. Sales were likewise affected by scheduled plant maintenance during the period, softer fuel demand amid elevated pump prices, and heightened geopolitical tensions, which weighed on market conditions.
Despite these near-term headwinds, the company’s long-term growth drivers remain firmly intact. With the Batangas plant now fully operational, the Chemrez group is well positioned to serve a broader global customer base and support the continued expansion of its higher value-added, sustainable product portfolio. Backed by its expanded production capacity and diversified product offering, the company remains optimistic about its medium-term growth prospects and profitability.
Specialty Plastics
The Specialty Plastics segment continued to deliver a solid performance in 1H26, with earnings increasing 24% YoY, driven by 27% volume growth and a 0.3 ppt expansion in gross margins. Despite supply chain disruptions arising from the conflict in the Middle East, which affected the availability of petroleum-derived raw materials used in the plastics industry, the company successfully secured critical inputs and maintained uninterrupted supply to customers. This reinforced its position as a reliable and trusted partner in an increasingly challenging operating environment.
The segment’s highly technical and customized product portfolio, coupled with its ability to ensure consistent inventory availability during periods of market disruption, continues to differentiate the business and strengthen customer relationships. Over the longer term, sustained investments in research and development and a strong pipeline of new product innovations are expected to support further margin expansion and deepen customer engagement.
Consumer Products ODM
Consumer Products ODM continued to deliver strong growth, with earnings increasing 27% YoY, driven by 7% volume growth as the Batangas plant continued to ramp up. The segment remains well positioned for sustained expansion, supported by additional capacity from the new facility and ongoing efforts to grow its export business. Export sales now account for 19% of total segment revenues, up from virtually zero five years ago, highlighting the company’s successful execution in expanding its presence in international markets. With ample production capacity and a growing global customer base, the segment is well positioned to sustain its growth trajectory in the years ahead.
-end-
D&L Industries is a Filipino company engaged in product customization and specialization for the food, chemicals, plastics and consumer products ODM 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 most of the industries it serves, as well as long-standing customer relationships with the Philippines’ leading consumer and manufacturing companies. It was listed on the Philippine Stock Exchange in December 2012. For more information, please visit https://www.dnl.com.ph/investors/.
This press release may contain some “forward-looking statements” which are subject to a number of risks and uncertainties that could affect D&L’s business and results of operations. Although D&L believes that expectations reflected in any forward-looking statements are reasonable, D&L does not guarantee future performance, action or events.
INVESTOR RELATIONS CONTACT
Crissa Marie U. Bondad
Investor Relations Manager – D&L Industries Inc.
+632 8635 0680
crissabondad@dnl.com.ph / ir@dnl.com.ph