Del Monte Pacific Initiates Restructuring Amid Improved Q1 Earnings

Del Monte Pacific Ltd. (DMPL) has embarked on restructuring discussions with its principal creditors and stakeholders to address pressing liquidity and debt-maturity challenges. This move comes as the company reported a substantial increase in its earnings for the first quarter of fiscal year 2027.

In a regulatory filing, DMPL indicated that it is collaborating with external financial advisers to devise a comprehensive restructuring framework. This may encompass debt restructuring, operational initiatives, asset sales, and shareholder support. The company acknowledged that its core Philippine business, Del Monte Philippines, Inc. (DMPI), alone would not suffice to alleviate its liabilities and negative equity, which stood at $578.5 million as of July 31, an improvement from $589.9 million in April.

“In light of the existing negative equity, DMPL does not expect to declare and pay dividends to its shareholders while the capital deficit remains outstanding.”DMPL Statement

DMPL's current liabilities exceeded its current assets by $609.7 million, primarily due to revolving loans from local partner banks. The company has also indicated that it does not anticipate declaring dividends while its capital deficit persists. As of July 31, DMPL reported net debt of $969.7 million, a slight decrease from $977 million in April, attributed to debt settlements. However, cash and cash equivalents fell to $4 million from $8.1 million, reflecting timing issues in payments.

Despite these financial pressures, DMPL's earnings showed marked improvement. Attributable net profit surged to $16.1 million, nearly tripling from $5.5 million during the same period last year. Revenue increased by 9% to $222.1 million, with gross profit rising 13% to $74.7 million. Earnings before interest, taxes, depreciation, and amortization (EBITDA) grew by 25.7% to $49.3 million, while operating profit rose 14.1% to $41 million. The gross margin improved to 33.7% from 32.5%, reflecting stronger sales and reduced financing costs.

“The improvement in net profit reflected stronger sales, gross-margin expansion, improved operating income, and lower financing costs.”DMPL Statement

International sales were particularly robust, increasing by 21.4% to $118 million, driven by higher volumes of fresh pineapple, packaged products, and not-from-concentrate juice. Sales in the Asia-Pacific region rose 5.8% to $195.1 million, supported by increased exports to China and South Korea. However, Philippine sales saw a 2.2% increase in peso terms but a 6.9% decline in U.S. dollar terms, amounting to $82.6 million, largely due to peso depreciation and softer volumes in core segments.

Looking ahead, DMPL anticipates remaining profitable in fiscal year 2027, although it cautioned that the operating environment is fraught with challenges. Factors such as volatility in fuel, fertilizer, and tinplate costs, along with uncertainties related to El Niño, may impact performance. On the local stock market, DMPL shares experienced a decline of 5.41%, closing at P3.50 per share.