August 18, 2015

DNL reports 1H15 net income of P1.03b +10% YoY

In its quarterly filing to the Exchange, D and L Industries (DNL) reported 1H15 net income of P1.03b +10% YoY. This however, included a one-time expense in 2Q15 related to the increase in its authorized capital stock amounting to P47m. Excluding this item, net recurring income would have grown 23% and 15%YoY in 2Q15 and 1H15 to P607m and to P1.07b, respectively. DNL’s gross profit margins (GPM) grew across all business segments as the company benefitted from the drop in commodity prices. As a result, blended GPM grew 200bps to 18%, the highest ever recorded in the company’s history.

DNL recorded double-digit growth in most of its business segments except for its specialty plastics division which declined 9% YoY amid the negative impact of the port congestion issue. Management however indicated that the plastics division should recover in the second half of the year as the effects of the port congestion subside. For 1H15, its food ingredients division grew net income by 28%YoY to P400m; Chemrez, up 29%YoY to P268m; and aerosols rising 59%YoY to P55m. The specialty plastics division posted a 9%decline in net income to P298m.

Our take: DNL’s results slightly trail our estimates and accounts for 42.7% of our full-year forecasts. Despite the slight shortfall in its first half performance, we are still optimistic that the company will hit our full-year estimates on the back of a rebound in its plastics division in 2H15 and the continued strong performance of its other business units. – WealthSec