Del Monte Pacific Limited ($D03)

Good evening to you all. Thank you for joining Del Monte Pacific's results briefing for the third quarter and 9 months ending January for fiscal year 2026. Representing Del Monte in this call are Luis Alejandro, COO of Del Monte Pacific and President and COO of Del Monte Philippines; Parag Sachdeva, CFO; and I am Iggy Sison, Chief Corporate Officer of DMPL. Parag will go through 3 slides on the 3 months and 9 months results, and then Cito Alejandro will wrap up with the strategic priorities and outlook, and then we'll proceed to Q&A, which will be moderated by our colleague, Jennifer Luy, okay? So we'll go through the highlights now with Parag Sachdeva. Thank you.

Thanks a lot, Iggy, and good evening to all who are on the call. Pleased to share with you the third quarter and year-to-date month 9 results for Del Monte Pacific. We did sustain a very strong growth trajectory in the third quarter. Our sales at $243.8 million were up 20% on higher sales in the international markets and also Philippines did grow by 5% in U.S. dollar terms. Our net profit at $10 million continued to be in the same trajectory as we had seen in the first half, and it improved from $2.5 million, driven by improved sales and margins. If you consider and recognize write-down of investments and other assets under discontinued operations that resulted in negative equity at the end of fiscal '25, the company's net debt-to-equity ratio is a negative 1.7x. We do continue making significant progress on capital raising initiatives amidst the volatile market environment to reduce our capital deficit of $590 million as of 31st January 2026. I would like to also note that our debt-to-EBITDA has improved, and I'll elaborate on that in the coming slides. Thank you, Iggy. So in terms of third quarter results, 20% growth with our international business growing at 34% and would like to highlight that of the 33%, 34% growth that we saw in international business, volume contributed around 27.5%, and we got good robust momentum on pricing as well with pricing contributing around another 6.4%. When it comes to Philippines, volume grew at 3.3% and pricing contributed another 2.8% in line with -- 2.6% in line with inflation. Our gross margin performance as you can see, at 32.7% is a reflection of a very strong momentum on our overall international business, both fresh and processed had good margins. Our costs have also improved, particularly in the light of productivity improvement that we were -- that we had planned for, particularly for our processed pineapple variety, which had significantly gone down in fiscal '24, so that's on track or, in fact, ahead of track. Our productivity is planned to improve by more than 15% versus last year. So that's also helping our cost. Overall, from a commodity perspective, so far, in the first 9 months, we saw favorable momentum, particularly with tomato paste, sugar. While in the fourth quarter, we are starting to see now more volatility, both in urea and obviously, fuel, which must be top of mind for everybody. EBITDA, driven by our gross profit improvement also was higher. Net profit at $10 million was much higher than the third quarter, and our debt also marginally reduced from $1.03 billion to $990 million. Our net debt to EBITDA, as I mentioned, due to improvement in profitability and also some paydown has gone down from 7.5x to 5.9x. Our cash flow from operations at $53.5 million was slightly lower than last year, but that's because of slightly higher inventory because our pineapple volume is up, plus also because our receivables for international business from the significant growth were on the higher side as compared to the third quarter last year. Next slide, please. Overall, our revenue, as you can see, at $682.4 million was up 14.2%. And if we have to look at the growth from international business, it was double digit at 15.2% and our Philippines business grew at 8.4%. So both our pillars have been having a very strong momentum on a year-to-date month 9 basis. Gross margin at 33.2%, driven by sustainable pricing, improved sales mix, particularly on our international business with higher sales of Deluxe and also favorable commodity trends and improvement in our pineapple costs, particularly for C74 processed variety led to this gross margin improvement. Our EBITDA driven by higher sales and gross margin improvement was at $133.5 million, which is a 22.8% increase. Net profit driven by gross profit EBITDA at $32.3 million is a significant improvement over last year. Net debt, as we talked, is down. Net debt to EBITDA is pretty much covered in the previous slide. And cash flow from operations is quite strong at $221 million, though lower than last year and as I mentioned, mainly because of some inventory increase as compared to last year. Prior year was benefiting from a very low inventory base, which was also, to some extent, starting to impact our sales. So with increased pineapple supply, we are now able to get to the right levels. And also our receivables, as I explained, was higher as compared to last year at the end of January because the mix between international and local receivables was quite different with higher sales coming from international business in fiscal year '26. So with that, let me hand it over to Cito or should I just continue with it, Cito?

Okay. Thank you, Parag, and good evening, everybody. So let me take you through a summary of our strategic priorities and the outlook for the year. So overall, we remain focused in growing our Asian operations to drive long-term growth and profitability. And of course, this is led by our subsidiary, Del Monte Philippines, which continues to perform well with resilient consumer demand and very, very strong and stable supply chain. Our key priorities include, first, in the Philippines to further drive market leadership in our core beverage, culinary and packaged food. We will also be launching in new segments and in adjacencies to broaden our consumer base. And equally important to us is diversifying growth across the retail channel to cover convenience stores away from home, which used to be called our foodservice business, drug stores and schools. In international, the priority is to further expand leadership of fresh MD2 pineapples across North Asia. specifically strengthening our leadership share in China. And of course, equally important to us is to regain our leadership in Korea, which we lost for a bit last year, and we believe that we will be back on track by the middle of the year with a better supply situation. Operations is all about the productivity of our C74 pineapple. In cost management, cost control proactively, reducing waste and reducing inventory write-offs and also stabilizing our inventory levels to make sure that we optimize our working capital. Prioritizing our raising of equity to reduce leverage and capital deficit resulting from impairment of our investment in the U.S. operations. So the first 9 months of the year results, we've demonstrated strong growth momentum in the Philippines as well as our international business, driven by both the packaged goods as well as fresh and barring unforeseen circumstances, we expect the company to sustain its profitability in 2026. And however, the path to overall corporate financial health needs to be supported by successful execution of our equity raise program. So that's it, Iggy, and we will welcome everybody to our Q&A.

Thank you, Cito. thank you, Parag. Jenny will moderate the Q&A, and there are some questions already in the Q&A box.

Okay. First question is, can you elaborate equity raising options being taken?

We are in the process of talking to a few investors. And in -- it's a consortium that we are in discussions with and they have expressed interest and also submitted us a nonbinding term sheet. So that has been the progress on it. We are looking at raising anywhere up to $400 million from this particular initiative.

Okay. Thank you, Parag. How much proceeds were raised from the sale of the Indian investment? And how were the proceeds used?

Thank you, Jen. So far, we have divested 6.4% of the 14.4% stake that we hold in the Indian business called Sundrop Brands. That 6.4% got us around net $18 million as proceeds, and these proceeds were ultimately used for the operating needs of Del Monte Philippines, Inc., which is our main operating and core business in Philippines.

Thank you, Parag. How much debt reduction is expected by the end of FY '26?

Without equity raise, we are not expecting any major debt reduction by the end of fiscal '26. The debt reduction that we have achieved in the first 9 months has already been outlined. We will get an opportunity to further look at debt reduction by May or June once we further sell another 5% of our stake in the India business for which we do have a binding offer.

Thanks, Parag. So now we don't have any more questions. [Operator Instructions] We have two new questions. How are you managing short-term obligations? Are you mostly refinancing?

The banks continue to cooperate. We had already extended the maturities in August and September last year. Plus as we look at equity raise, we continue to collaborate with the banks and look at various options to refinance and extend the loans so that we can match it with our cash flow and also with the use of proceeds that we would have from the equity raise initiative as well. So both are in play, and we continue to get good support from the banks in addressing the issue around maturities and extensions.

Thank you, Parag. Given the current share price, will it be very dilutive to do an equity raise? I think he's thinking is from DMPL.

We are looking at equity raise more at the DMPL level. We think that's the most important asset, and it will actually unlock the valuation of the business.

Thank you. Next is how close are you to concluding your talks with the consortium for equity raising?

I think considering several regulatory considerations in play, I won't -- I would hesitate to give you a timeframe whether we can complete this in the next couple of months, but we absolutely are prioritizing the same and can assure you that we will have a more definitive update if we progress by the next investor call.

Okay. Thanks. Are there any other noncore businesses you are considering to sell after Sundrop branch?

We are looking at a few assets, but nothing very material that we expect to sell in the near future.

What is the current interest rate on your $1 billion loan?

Our interest rate on an average is slightly less than 7% on a weighted average basis.

We don't have any open questions. Okay, now we have one more. The profitability for the past 3 quarters has been encouraging. Is there a seasonality factor to the performance? What about fourth quarter?

I would just say it's sustainable. If you are trying to understand if we have some one-offs in that, not really. We do have good momentum on the process business, which, as you know, can be cyclical. The processed export business can be somewhat cyclical. And every 3, 4 years, depending on how competitive markets have -- are positioned from a supply perspective, that can play a role in the overall margins of the business. So to that extent, we are having tailwinds in this year, which we do expect to continue in the fourth quarter. But the only caveat on the fourth quarter is the significant headwinds that we could face with the volatility created by the war situation.