Del Monte acquisition expense weighs

Del Monte acquisition expense weighs

Del Monte Pacific revealed that net profit plunged in the second quarter as acquisition-related expenses weighed on the bottom line.

The company said net profit fell to US$200,000 in the three months, down from $8.9m in the prior year period.

Acquisition costs related to the group's takeover of US company Del Monte Foods totalled $20.5m, the company said. These included interest expenses from long-term debt and short-term bridge financing, Del Monte Pacific revealed. The group plans to refinance these with equity, the company added.

"We are committed to significantly deleveraging Del Monte's balance sheet by reducing debt in the next quarter through an international perpetual preference share offering followed by a rights issue which is expected to raise $515m," CEO Joselito D Campos Jr said.

However, operating profit in the quarter to 31 October was up, rising to $25.4m from $16.1m.

Revenue rose from $136.3m to $548m, the company said.

Show the press release

2Q FY2015 Highlights · Achieved sales of US$548m with US$435m contributed by Del Monte Foods, Inc (DMFI) · Sales of Del Monte in the Philippines rose 4% · Group EBITDA and net income of US$59m and US$21m, respectively, before acquisition and non-recurring expenses of US$20.5m net of tax · Group net income of US$0.2m included acquisition-related expenses

Singapore/Manila, 15 December 2014 – Singapore Mainboard and Philippine Stock Exchange dual listed Del Monte Pacific Limited (“DMPL” or the “Group”; Bloomberg: DELM SP, DMPL PM) reported today its results for the FY2015 second quarter ending October 2014.

The Group achieved sales of US$548.0 million for the second quarter, of which DMFI generated US$435.1 million of sales, and posted a net income of US$0.2 million, compared to a net loss of US$21.9 million in the first quarter. The net income was impacted by earlier announced acquisition-related expenses and was attributed mainly to purchase accounting primarily due to inventory step-up, and other non-recurring expenses. The bottom-line also reflected interest expense from a long-term loan to acquire DMFI and short-term bridge financing of DMPL, which will be refinanced with equity.

The ordinary share public offering in the Philippines was completed on 30 October 2014. An international perpetual preference share offering, to be listed on the Singapore Exchange subject to regulatory approval, is being planned. The Company has mandated DBS Bank Ltd as sole global coordinator for the Offering. Thereafter, a rights issue will be offered.

“We are committed to significantly deleverage DMPL’s balance sheet by reducing debt in the next quarter through an international perpetual preference share offering followed by a rights issue which are expected to raise US$515 million,” said Joselito D Campos, Jr, Chief Executive Officer and Managing Director of DMPL.

In the second quarter, the Group achieved EBITDA and net income of US$59.4 million and US$20.7 million, respectively, before acquisition-related and other non-recurring expenses of US$22.1 million at EBITDA level and US$20.5 million at the net income level. The EBITDA of US$59.4 million was more than double that of the first quarter given the seasonality of the business.

“In our main US market, the initiatives taken post-acquisition, which include reverting back to competitive pricing levels, reintroducing the well recognised classic Del Monte label and reinstating trade support levels, have led to increased market share across our key categories of packaged vegetable, fruit and tomato” said Nils Lommerin, Chief Executive Officer of Del Monte Foods, Inc. “Our main drawback was the impact of currency deterioration in Venezuela that contributed to the overall decline of 6% in our sales versus the prior year period,” he added.

DMPL’s branded business in Asia (comprising of Del Monte in the Philippines and the Indian subcontinent, as well as S&W in Asia and the Middle East), and export sales globally, generated sales of US$128.5 million and net profit (before acquisition-related interest expenses and non-recurring expenses) of US$10.7 million compared to sales of US$120.6 million and a net profit of US$6.4 million in the first quarter.

For the first half, the Group generated sales of US$993.6 million, with DMFI achieving sales of US$774.6 million. The Group achieved EBITDA and net income of US$80.8 million and US$18.5 million, respectively, before acquisition-related and other non-recurring expenses of US$42.4 million at EBITDA level and US$40.0 million at the net income level. The Group incurred a net loss of US$21.7 million in the first half primarily due to acquisition-related expenses in the first quarter.

“We are encouraged by the consumers’ response to our initiatives in the US and we expect to continue to gain market share in the coming quarters,” said Mr Campos. “Our branded business in Asia continued to broaden and deepen its market penetration and there too we are encouraged with customer reaction,” he concluded.

DMFI’s Enterprise Resource Planning (“ERP”) migration to the SAP system will begin in February 2015 and its back office functions will be outsourced to the Philippines also in February 2015. These cost saving measures are expected to improve the Group’s gross margin in FY2016 and beyond.

Earlier this month, the Group announced a joint venture with Nice Fruit SL and Ferville Limited, to utilise Nice Fruit’s patented technology that allows fruits and vegetables to be picked at their optimal ripeness and frozen for up to three years while preserving its nutrients, structure, original properties and organoleptic characteristics. The introduction of this technology will open up new markets globally for S&W and improve DMPL’s operating margins

Original source: Del Monte Pacific