Del Monte Products (Photo : Getty Images)
Del Monte Pacific Ltd. (DMPL) is increasing its China sales in an effort to expand the business.
According to Luis Alejandro, chief operating officer of DMPL group, China market would grow from less than 10 percent of the company’s business to 33 percent of non-U.S. sales.
Del Monte, presently expanding its market, is aiming to increase its sales outside the United States.
Currently, 80 percent of DMPL’s earnings are accounted from U.S. The remaining 20 percent comes from Asia and other areas.
Alejandro said that the company plans to decrease U.S. sales to 60 percent and increase the sales in other areas to 40 percent within five years.
According to Parag Sachdeva, the company’s chief financial officer, DMPL expects to profit from the America First policy of U.S. President Donald Trump. The policy could cut the imports that threaten the U.S. unit of the company.
A recovery of DMPL’s U.S. business is expected in 2019 to 2020.
The company also plans to bring in more healthy products in an effort to support the U.S. market. The healthier line would ease the stress brought about by the saturation of the canned market and would boost the brand’s presence in supermarkets and groceries.
The company is looking forward to a higher recurring profit in the fiscal year 2017 which will end in April.
Del Monte Foods Inc. (DMFI), Del Monte’s U.S. subsidiary, had a $450.6 million sales, equivalent to 74.6 percent of the group sales, in the third quarter ended Jan. 31.
According to DMPL, a 3.4 percent decrease in sales was caused by the persistent weakening of the canned fruit industry, decrease in regional brand sales in the packaged vegetable category across retail and foodservice, and decrease in private label sales. The closure of the North Carolina plant has raised supply-related issues, affecting the sales of regional brands.
For the third quarter, DMPL had $604 million total sales, a little higher than the sales in prior year period. The increase is attributed to the strong performance in the Philippines under the Del Monte brand, and rest of Asia under the S&W brand, counterbalancing the decrease in U.S. sales.
The $8.5 million net income for the quarter has completely turned around the $4.8 million net loss for the previous year period.
A $70 million capital expenditure is allotted by the company for the fiscal year 2017 ending April and about the same level for the fiscal year 2018, higher than the $50 million of the previous year. The Capex will be spent equally on Asian and U.S. business.
Last week, DMPL launched its plan to issue dollar-denominated securities in the local stock market, the first issuer of the newly approved product.
An initial tranche of 25 million preferred shares will be issued by the company. It will be comprised of 15 million shares for the base offer and an oversubscription option of 10 million at $10 per share, which the company expects to produce at least $250 million.
The company’s debt program of up to $360 million includes the initial tranche. The program is registered under the Securities and Exchange Commission’s shelf registration facility.
BDO Capital and Investment Corp. Has been tapped by DMPL as its sole issue manager, with Chinabank, PNB Capital and RCBC Capital Corp. as the company’s joint lead underwriters and book runners.
According to the offer supplement filed with the PSE, April 7 will be the target issue and listing date. The company plans to utilize the proceeds to refinance the $350 million bridge loan facility extended by BDO Unibank which was used to partially fund the DMFI Consumer Food Business acquisition.
Del Monte hopes to make its business bigger by increasing its China sales.
