The Pineapple King

Alfred Romann

Del Monte Pacific, the fruit and processed food company based in the Philippines and listed in Singapore, could see its revenues improve significantly at the end of its financial year in April. The acquisition of Del Monte Foods in the US in early 2014 helped expand its business across the Americas and pave the way for future growth.

To date, however, the company’s shares have not seen much of a boost, even though a rights issue at the end of 2014 was oversubscribed. Still, the few analysts that cover the stock appear positive on the outlook for the company and the sector.

Investors in Singapore (DELM:SP) started warming to the company in March 2015 after years of staying away. Between mid-March and mid-April the stock rose more than 30 percent to around Singapore $0.44. Even at that price, it was down 22 percent for the year. The company’s shares in the Philippines Stock Exchange were also at multi-year lows of less than 13 Philippine Pesos. (US$0.29)

The recovery could be long but positive results could help.

“We are on track to deliver future growth, having stabilized the business with the initiatives taken post-acquisition, which include reverting back to competitive levels, reintroducing the well recognized classic Del Monte label and reinstating trade support levels,” said Nils Lommering, CEO of Del Monte Foods during a third quarter results announcement. “We will continue to explore acquisition opportunities that will complement our strategy and enhance our market leadership across our product range.”

The third quarter of this latest financial year was a good one for the company in the US. Sales rose 21 percent when compared to the same period a year earlier, a marked improvement from the declines recorded in the first half of the year.

In Asia, Del Monte Pacific also did well. Export sales rose 10 percent to US$136 million for the quarter with profits before acquisition expenses rising 36 percent to US$12.2 million.

“We look forward to sustaining our growth in the coming quarter as we execute against proven strategies and new growth driven initiatives,” said Joselito Campos, CEO and Managing Director of Del Monte Pacific.
And the next year could be better. The company is looking to eliminate an overhand of stepped up inventory in the year 2015 and face little impact in FY2016 that starts in May. Del Monte Foods, in the US, also acquired Sager Creek Vegetable Company’s vegetable business for US$75 million in March

Del Monte Pacific produces and supplies a range of vegetables, fruits, tomatoes and sardines as well as processed food products ranging from canned tropical fruits to ketchup to customers in Asia and Oceania. The company does business across North and South America since the acquisition in February 2014 of Del Monte Foods for US$1.7 billion. The deal gave the Philippine company a leading canned fruit, vegetable and broth business.

The US-based Del Monte Foods was a separate company held by a consortium. Through various subsidiaries and brands, the company does business in a range of markets. It controls S&W, a premium packaged fruit and vegetable brand, everywhere except Australia and New Zealand.

Del Monte Pacific also owns half of India’s FieldFresh Foods, which markets Del Monte products in India as well as its own-brand fresh produce. Bharti Enterprises, a large Indian conglomerate, owns the other half.
Del Monte Pacific controls a 23,000-hectare pineapple plantation in the Philippines, has 700,000 tons of processing capacity and a cannery. Del Monte Philippines, a subsidiary, operates the largest fully-integrated pineapple operation in the world.

Ultimately, the Campos family in the Philippines controls Del Monte Pacific thanks to its controlling stake in NutriAsia Pacific, a NutriAsia Group company with a 67 percent stake in Del Monte Pacific. NutriAsia Group produces liquid condiments in the Philippines.

A rumored takeover bid by Japan’s Suntory did not come to pass at the end of 2013, despite sending the company’s shares higher at the time.