Losses at food and beverage company Del Monte Pacific narrowed in the first quarter of its 2017 financial year, due to lower operating expenses as a result of a restructuring effort that began last year.
The group, dual-listed in Singapore and the Philippines, yesterday posted a net loss of US$8.7 million (S$11.8 million) for the three months ended July 31 - an 18.3 per cent improvement over the US$10.7 million net loss in the same period the year before.
The net loss included US$2.8 million in one-off expenses from the severance and closure of its North Carolina plant. Without the one-off expenses, net loss for the period would be lower at US$5.9 million.
Revenue dipped 2.8 per cent to US$465.5 million, owing to lower non-branded sales in the US, although this was partially offset by the strong performance of the Del Monte brand in the Philippines and the S&W brand in the rest of Asia.
Gross margin shrank slightly to 20.1 per cent from 21.4 per cent previously, partly affected by the incremental cost of the closure of the North Carolina plant. Trade spending last year was also lower than usual, given the short supply of products, said Del Monte Pacific.
AT A GLANCE
NET LOSS: US$8.7 million (+18.3%)
REVENUE: US$465.5 million (-2.8%)
Losses per share for the quarter narrowed to 0.45 US cent from 0.55 US cent previously, while net asset value per share stood at 18.21 US cents as of July 31, up on the 15.66 US cents from a year earlier.
Del Monte Pacific said the first quarter is seasonally the weakest quarter for its United States subsidiary, Del Monte Foods Inc, accounting for only 19 per cent to 21 per cent of full-year sales. Sales would peak in the second and third quarters, around Thanksgiving and Christmas. "Our ongoing restructuring and streamlining efforts will deliver significant savings this year and next," said Mr Joselito D. Campos Jr, managing director and group chief executive of Del Monte Pacific. "With the first quarter being seasonally the weakest quarter in the US, we expect improved profitability in the coming quarters."
As part of the group's deleveraging plan, Del Monte Pacific plans to issue US dollar-denominated perpetual preference shares on the Philippine Stock Exchange this year, subject to regulatory approvals and market conditions. The proposed issue will be up to US$360 million, which will result in a further improvement in the group's leverage ratios, it said. It added it expects to be profitable for the rest of the year.
DBS Group Research said in a note that while the firm's results came in within expectations, its performance in subsequent quarters would be more reflective of its earnings traction for the year. It maintained a "hold" call on the stock with a target price of 37 cents.
Del Monte Pacific shares closed two cents or 5.4 per cent lower at 35 cents yesterday, after the results were announced.