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Tuesday, May 13, 2014

Higher-margin additives prop up DNL's earnings

D&L Industries' earnings climbed by a fifth in the first three months of the year as the food additive company sold more of its higher-margin specialty products.

In a briefing, D&L chief financial officer Alvin Lao said the firm’s earnings increased to P377 million in the January to March period from P314 million last year.

D&L had set a target of growing profit in the mid- to high-teens for the entire 2014. Earnings for the three-month period account for 29 percent of last year’s income.

Consolidated revenues went up by 34 percent to P3.10 billion this year from P2.32 billion in 2013 due to the recovery in commodity prices and sustained double-digit volume gains.

D&L has enjoyed sequential topline growth of five percent in the past four consecutive quarters on the back of increasing volume, shifting product mix and rising commodity prices.

High-margin specialty products continued to drive revenues, accounting for 64 percent of overall sales, while the share of the low-margin commodity business was at 36 percent.

D&L saw margin compression during the period as increases in commodity prices outpaced growth in volumes. As a result, overall gross profit margin dropped to 18.4 percent from last year's 19.2 percent and overall net income margin eased to 12.2 percent from 13.6 percent.

"We do hope and expect [gross profit] margins for rest of the year will start to go up as we sell less of commodity products," Lao said, adding that D&L targets to end the year at 20 percent, consistent with its plan to improve margins by one percent every year until 2018.

D&L Industries is engaged in product customization and specialization for the food, plastics, and aerosol 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.

- Interksyon

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