In This Article:
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Net Income Growth: 6% increase year-on-year for the first half of 2024; 13% increase quarter-on-quarter.
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Revenue Growth: 17% increase compared to the first half of last year.
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High Margin Specialty Products Volume: 33% increase year-on-year.
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Export Sales Contribution: 33% of total sales, matching a previous record high.
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Free Cash Flow: PHP2.4 billion for the first half of the year, more than double the previous year's total.
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Gross Margin - High Margin Segment: Recovered to 24.4% from a low during COVID.
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Commodity Segment Margin: 7.3%, close to the midpoint of typical swings.
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Food Commodities Volume Growth: 66% increase.
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Specialty Plastics Net Income Growth: 51% increase.
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Debt Reduction: PHP800 million decrease, improving debt-to-equity ratio.
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Interest Coverage: Comfortable at five times.
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Net Gearing: 60%, considered a comfortable level.
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Average Cost of Debt: 5.73%.
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Cash Conversion Cycle: 144 days, stable from last year.
Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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D&L Industries Inc (DLNDY) reported a 6% increase in net income for the first half of 2024 compared to the previous year, with a 13% increase quarter-on-quarter.
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High margin specialty products volume increased by 33% year-on-year, marking the fourth consecutive quarter of growth in this segment.
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Export sales contributed 33% to total sales, matching a previous record high, indicating strong international demand.
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The company achieved a free cash flow of PHP2.4 billion for the first half of the year, more than doubling the free cash flow from the entire previous year.
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The new plant in Batangas has become profitable, contributing positively to the company's financial performance.
Negative Points
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The sales mix is still not optimal, with a higher-than-desired proportion of low-margin commodity sales compared to high-margin products.
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The consumer products ODM segment experienced a decline, attributed to higher inflation and increased product costs.
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There is a lag in passing on increased coconut oil prices to customers, affecting margins in the high-margin specialty products segment.
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Utilization of the new Batangas plant is still below 50%, indicating underutilization of capacity.
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The company faces challenges in ramping up high-margin exports due to the time required for certification and client qualification processes.
Q & A Highlights
Q: Given the exports revenue contribution to total revenue has increased considerably, why have we only seen a slight increase in HMSP revenue while commodity revenue is growing significantly? A: Alvin Lao, CEO, explained that the volatility in commodity prices, particularly a 50% increase in coconut oil prices, has led to a significant jump in commodity revenue. The company is exporting a lot of coconut oil, which has contributed to the profitability of the Batangas plant. While there is more export growth from commodities than initially anticipated, the company is focusing on quick wins with commodity exports while high-margin exports ramp up over time.