Del Monte books $22-M loss in May-July

MANILA, Philippines - Food processing giant Del Monte Pacific Ltd. (DMPL) booked a net loss of $22 million in the first quarter of its new fiscal year due to related expenses from its recent acquisition of the consumer food business of US-based Del Monte Foods Inc. (DMFI).

Such acquisition-related costs that led to the loss include higher interest expenses from a long-term loan to acquire DMFI and short-term bridge financing of DMPL, the firm said in a disclosure to the Philippine Stock Exchange.

DMPL said it plans to conduct a public offering of its common shares worth $2 million upon the approval of the Securities and Exchange Commission to refinance its short-term bridge financing.

Likewise, DMPL intends to conduct a perpetual preference share offering amounting to $360 million and a rights offer worth $180 million.

“Group borrowings will then be reduced by approximately $520 million, which will significantly deleverage DMPL’s balance sheet as it pays down its short term bridge financing,” the Singapore and Philippine-listed DMPL said.

Sales during the May to July period (first quarter of its 2015 financial year) was flat at S$445.6 million, more than half or $340 million of which came from DMFI.

“While first quarter sales decreased by one percent versus the prior year period, this was a marked improvement from the 17-percent decline during the transition period of February to April 2014, where sales were affected by inherited higher product pricing and changes to product labels,” said Nils Lommerin, DMFI chief executive officer.

In February this year, DMPL completed the acquisition of DMFI for nearly $1.7 billion, jumpstarting the transformation of the former into a global branded food and beverage firm.

DMPL owns the Del Monte brand in the Philippines where it is the market leader across major food and beverage categories while DMFI owns the Del Monte brand rights for processed food products in the US and South America.

DMPL’s 23,000-hectare plantation in Mindanao is considered as the world’s largest fully integrated pineapple operation with a 750,000-metric ton processing capacity.

 “We have taken corrective measures by adjusting the price of our products to competitive levels, reintroducing the well recognized classic label and undertaking aggressive promotional campaigns in an effort to regain market share. In the packaged vegetable and tomato segments, we have stabilized market shares while in packaged fruit, we have improved it,” Lommerin said.

As part of its cost-saving measures to improve the group’s gross margin starting in its fiscal year 2016 and beyond, DMPL said DMFI’s back office functions would be outsourced to the Philippines by February next year.