CANNED-FOOD brand Del Monte Pacific : D03 0% on Wednesday (Sep 6) posted a net loss of US$13.1 million for the first fiscal quarter ended July, narrowing from its net loss of US$30.5 million in the corresponding year-ago period.

The latest figure was due primarily to higher inflation levels and interest rates, which had hit the group’s margins adversely, the company said. 

Loss per share stood at US$0.0067, down from US$0.0165 in Q1 FY2023.

Despite the net loss, the group said it expects to achieve a net profit in the remainder of FY2024; it reiterated its full-year guidance for a higher year-on-year net profit for the fiscal year.

The group’s Q1 turnover rose 13.2 per cent to US$516.7 million from US$456.6 million. This was driven primarily by higher sales in the US, and higher exports of fresh pineapple. Gross margin fell to 21 per cent from 28.9 per cent; operating margin came in at 5.1 per cent, down from 11 per cent. 

Del Monte’s US subsidiary, Del Monte Foods Inc (DMFI), booked a 17.8 per cent increase in turnover to US$356.4 million, accounting for 69 per cent of the group’s turnover. This came from pricing actions and the development of the company’s branded-product portfolio in both traditional and emerging channels, Del Monte said. 

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DMFI posted a gross profit of US$64.7 million, down 17.4 per cent from US$78.4 million, due to inflationary factors from sales of high-cost FY2023 pack inventory. DMFI implemented a 4 per cent price increase on Jul 31, and launched a number of cost-saving moves to restore margins in the subsequent quarters.

Excluding DMFI, Del Monte booked sales of US$166.9 million, 3.9 per cent lower than the US$173.7 million in the year-ago period.

The higher export sales of S&W fresh pineapples, favourable pricing across almost all segments, and higher volume from the Philippine market were offset by lower sales from exports processed business. Its gross margins were, however, affected by higher product costs arising from lower plantation yields and inflationary factors. 

Del Monte’s net debt against its adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) rose to 7.2 times from five times last year; gearing was up to six times from 4.2 times. 

These came from higher loans from the redemption of Del Monte’s US$100 million Series A-2 preference shares in December 2022, the acquisition of Kitchen Basics, as well as higher working capital, mainly from DMFI’s inventory.

Del Monte said although its debt levels have risen, the refinancing of the US$300 million preference shares with bank loans at an average interest rate of 6.8 per cent – versus the preference share coupon of 10 per cent on a step-up basis if not redeemed – saves the company about US$10.5 million annually. 

The group also announced a “strong debt-reduction programme”. It will optimally use internally generated cash for debt repayment, and is also considering the issuance of appropriate equity instruments to increase its capital. 

Looking ahead, Del Monte said the global environment remains unstable, with consumers being more cautious with their spending, even as inflation has not abated to normal levels. It is all the more imperative to offer superior brand and product value to consumers, it said. 

“We will remain vigilant in managing our operating expenses throughout the supply chain from production to distribution, with better operational and energy efficiency, optimised packaging and reduced wastage in order to improve our margins,” the company added. 

Shares of Del Monte closed flat at S$0.156 on Wednesday, before the results were announced.