Shares of the SGX-listed Del Monte Pacific Limited (SG:D03) fell sharply today following the company’s announcement of lower sales and profits in the second quarter of FY24. The Del Monte share price is down by 10.5% at the time of writing today, with a year-to-date loss of over 50%.
Growing cost pressures, higher interest expenses, and cautious consumer spending have impacted the company’s performance in the current fiscal year. Nonetheless, Del Monte maintained its industry dominance with sustained market share in its key products.
Del Monte Pacific is a food manufacturing company that provides branded and packaged food items for daily consumption.
Navigating Challenges Amidst Rising Costs
In the second quarter of FY24, Del Monte’s total sales declined by 5% to $667 million compared to last year. Among its regions, sales from the international markets were down by 30%, mainly due to supply issues in fresh products, especially pineapple. In the first half of the fiscal year, the total sales increased by 2%.
The company’s gross profit fell by 34% to $135.5 million, with the gross margin declining from 29% to 20%. This decline was caused by higher inflation and operating costs related to higher inventory levels. Lower gross profits and higher interest expenses led to a net loss of $8.5 million, as compared to the net profit of $49.5 million a year ago.
Meanwhile, the company implemented initiatives to reverse the inflationary pressures on its margins. It hiked the prices of its products in July and cut down the products with low margins.
Moving forward, Del Monte expects the ongoing constraints on consumer spending to continue. It intends to navigate these conditions by prioritizing efficient inventory management over the next 12 months. The group expects higher growth in branded revenue in the fiscal year 2024.
