UMVA has learned that a significant shift in the market dynamics of specialty food ingredients and oleochemicals is underway, driven by a decline in crude and coconut oil prices, which is improving the outlook for D&L Industries, Inc.
The company’s president and CEO, Alvin D. Lao, expressed optimism about the current market conditions, stating that the worst may be over, especially with the lower price of crude oil. This sentiment comes as coconut oil prices have dropped substantially to about $2,100 per metric ton from roughly $3,000 per ton in August.
Coconut oil is a critical component for D&L, accounting for about 39% of the company’s raw material costs. The decline in prices is seen as a positive development, making costs more manageable. Additionally, Lao cited slower inflation in May as a sign of easing pressure on demand and costs.
The company’s nonfood operations have been a strong performer, offsetting a sharp decline in the food segment. Food-related net income fell 69% last quarter, while nonfood earnings rose significantly, driven by industrial customers in plastics, packaging, construction materials, and paints.
Manufacturing clients have been building inventories amid concerns over potential supply disruptions tied to geopolitical tensions, supporting demand for D&L’s industrial products. Many of these customers operate on relatively high margins, allowing them to absorb input cost swings without major volume cuts.
The nonfood segment is a key growth driver for D&L, accounting for 46% of total revenues. This comes as food demand remains weak. Despite mixed segment performance, D&L reported a 5.22% rise in first-quarter net income to P716.69 million from a year earlier, supported by margin gains and stronger domestic demand.
The company’s various business units showed mixed results. Food ingredients earnings declined 69% due to lower volumes and portfolio adjustments. However, Unit Chemrez Technologies posted a 34% increase in earnings on higher exports of coconut-based products.
Specialty plastics rose 22% on stronger volumes and improved margins, while the consumer product original design manufacturer segment grew 65% as output from its Batangas facility increased. These developments indicate a recovery in certain segments of the business.
During its annual stockholders’ meeting, D&L appointed Cesar G. Romero and Richard Raymond B. Tantoco as independent directors. Both bring extensive experience from leading respected organizations, which is expected to further strengthen the board.
The company also declared a total cash dividend of P0.236 per share, representing 65% of prior-year net income. This marks the sixth consecutive year of special dividend declarations since 2020, demonstrating a commitment to delivering value to shareholders.
D&L shares rose 3.06% to P3.70 each following these announcements, reflecting positive market sentiment towards the company’s strategic direction and financial performance.
