Professional Documents
Culture Documents
SPECIALTY
PRODUCTS
D&L INDUSTRIES
INVESTOR PRESENTATION
May 2018
A-
Table of contents
Company Overview Financial and Operating Results
• Business segment overview 4 • 1Q18 highlights 23
• Key business strategies 5 • Net Income 1Q18 Breakdown 24
• 50+ year history 6 • Condensed Income Statement 25
• Key customers 7 • Product mix 26
• Board of Directors 8 • HMSP volume growth 27
• Senior Management 9 • Segment Volume Growth and GPM 28
• Ownership structure 10 • Commodity Margins QoQ 29
• Mission / R&D in perspective 11 • Commodity Segment Overview 30
• Integrated supply chain 12 • HMSP Segment Overview 31
• Asset light model 13 • Exports 32
• Dividend policy 14 • Pass-through pricing mechanism 33
• Historical Returns 15 • Financial and Operating Highlight 34
• Public float and liquidity 16 • 1Q18 Group Results Summary 35
• IR conferences 17 • Food Ingredients Group Results 36
• Net foreign flows 18 • Oleochemicals Group Results 37
• Corporate awards 19 • Specialty Plastics Group Results 38
• CSR initiatives 20/21 • Aerosols Group Results 39
• Balance Sheet 40
A- 2
Table of contents
Financial and Operating Results
• Cash Flows 41
• Capital Structure 42
• Cost Structure & R&D Spend 43
• Working Capital Cycle 44
Appendix
• Food ingredients overview 46
• Oleochemicals overview 47
• Specialty plastics overview 48
• Aerosols overview 49
• News and developments 2017 50
• News and developments 2016 51
• Bunge soft oil products 52
• News and developments 2015 53
• News and developments 2014 54
• Comparing ROE, PEG Ratio, and Div Yield 55
A- 3
D&L INDUSTRIES is a Filipino company that makes customized, specialty
ingredients for food and chemicals
% FOOD INGREDIENTS
50%
Revenue OLEOCHEMICALS & OTHER
34%
Revenue
33% 32%
Of Proforma 1Q18 Fats, oils and other specialty SPECIALTY CHEMICALS
food ingredients Coco-biodiesel, oleochemicals,
Revenue Net Income resins and powder coatings Net Income
%
Of Proforma 1Q18 Net
Income
13% 3%
Revenue Revenue
SPECIALTY PLASTICS AEROSOLS
Pigment blends, color and
additive masterbatches and 27% Aerosol & non-aerosol products
for homecare, personal care 6%
engineered polymers Net Income and maintenance chemicals Net Income
A- 5
Our history of serving customers spans across 50+ years
A- 6
As the leading B2B2C company in the Philippines, we have longstanding customer
relationships with mostly consumer companies
Shortening
Flavored Toppings
Length of Customer Relationships Flavored Glazes
Icings
(in Years)
34 Frying Oils
Gravy Mixes
27
>70%
Breading
Dipping Sauces
of sales are to 23 Body Fragrance
consumer companies Sprays
19 Insect Control Sprays
Spray Paints
15
Brake Cleaners
Flavored Coatings
11
Syrups & Fudges
Whipped Cream
Soft Ice Cream
9 Mix
Pancake Mix
6 Butter Compounds
Margarines
Maple Flavored
Syrups
A- 7
Majority of the Board are independent directors while 3 out of 7 board
members are female – highlights the importance we place on good
corporate governance and gender diversity.
BOARD OF DIRECTORS*
Alvin D. Lao,
Yin Yong L. Lao, John L. Lao, 46 years old
65 years old 63 years old CEO & President
Chairman & Director Vice Chairman Director of Axis REIT; Former
Trustee - Association of Chairman/President – President of EO Philippine
Petrochemical Manufacturers Aero-Pack Chapter, member since 2000
of the Philippines B.S. in IT (Honours) and
B.S. in Business Statistics from the University of
B.A. in General Studies Administration Western Australia
Ateneo de Manila University University of the East MBA from the MIT Sloan School
Years of D&L experience : 43 Years of D&L experience: 42 of Management.
Years of D&L experience: 19
INDEPENDENT DIRECTORS
Mercedita Nolledo, 77 years old
Filemon Berba, 79 years old
Lawyer and CPA
Member of Institute of Corporate Directors
Former Senior Managing Director & Corporate
Former President of Globe and Manila Water
Secretary of Ayala Corp.
B.S. Electrical Engineering from the University
Chairman, BPI Investment Management;
of the Philippines
Director of Xurpas, Inc. ; Trustee, - Ayala
MBA from the Wharton School of the University
Foundation and BPI Foundation
of Pennsylvania
B.S. Business Administration & Bachelor of
Laws from the University of the Philippines
*Mr. Dean L. Lao and Mr. Leon L. Lao, D&L’s founders, together with Mr. Alex L. Lao stepped down as directors of
D&L. Nonetheless, all three continue to attend Board meetings as part of the newly created Advisory Board. Mr. Dean A- 8
L. Lao remains as Chairman Emeritus.
Professional managers and second generation family members with
more than 20 years of experience in sales, marketing & business
development compose our Senior Management team.
SENIOR MANAGEMENT
A- 9
Our wholly owned subsidiaries are focused on core activities such as R&D,
sales, supply chain, and manufacturing, with shared services* handled by the
D&L group
Lao Family
58.5% Jadel Holdings Co., Inc.
(Lao Family holding company)
100%
Foreign Ownership as %
69.4%
of Outstanding Shares 100%
OLEOCHEMICALS, RESINS,
& SPECIALTY CHEMICALS
Public
SPECIALTY PLASTICS
100%
AEROSOLS
*(legal, MIS, accounting and finance, HR)
A- 10
We are shaped and driven by R&D and disciplined innovation
OUR MISSION
• We are dedicated to growth. We are not complacent, timid, or
satisfied with status quo
• We are committed to increase productivity and profitability, but
•
not at the expense of ethics
We will continuously enhance our reputation for quality and
14% 1.4%
value. Our products and services must always represent good Tech staff
value for money and be competitive in the market place as % of Tech spend as
• We will maintain our market leadership through creativity, total
manpower
% of revenues
innovation and excellence in performance tempered with
experience
• We are proud of our employees. We consider them as our most
valuable asset. We will maintain an atmosphere where our
people can develop their abilities and potential while working
12% 61%
Tech spend as of revenues is
together enthusiastically to achieve our goal
% of non-raw driven by R&D
• We will contribute to the well-being of the communities in which material cost
we operate, and accept our responsibilities as citizens of the
Philippines
A- 11
We have an integrated supply chain that maximizes efficiency of working capital
management
> >
INTERCONNECTED
FLEET OF BARGES STORAGE CAPABILITY GROUND TRANSPORT
Direct access to fleet of 6 Ability to store 33,000 metric SYSTEM
barges with an aggregate tons of oil; refining facility of Superior ground logistics of 42
capacity of 10,000 metric 300,000 metric tons per road tankers with total
tons to transport crude oils annum is strategically capacity of over 1,064 metric
and raw materials to its located near port, optimizing tons; ensures just-in-time
refineries and storage tanks transportation efficiency delivery to customer, thereby
near the port increasing supply chain
efficiency
Key Benefits • Know-how of entire supply chain process ensures that the company can
anticipate and allocate the optimal resources for transportation of its
of Supply products
Chain
Process • Not dependent upon third-parties to provide logistics
A- 12
ASSET-LIGHT MODEL
A- 13
Our dividend policy increased from a 25% to 50% payout ratio* (effective 2016)
Dividend
Payout Ratio*
64%
Per 2013 2014 2015 2016 2017
Share 63% 1,679
1,429
Total P0.15 P0.20 P0.15 P0.20 P0.235 51%
714
Regular P0.10 P0.10 P0.15 P0.16 P0.185 40% 26%
Special P0.05 P0.10
100%
P0.04 P0.05 536 536
stock
Dividends Cash
Ex-Date July 24, 2017
FY2017
Net P1.04 P939 P674 P173 P2.91
Income billion million Million Million billion
3Y CAGR +14% +17% +7% +22% +13%
28%
25%
D&L parent is 0.2% of revenues through Management Service Fees / 3% of Consolidated Net Income
A-15
Assumes 100% ownership of all subsidiaries
INVESTOR RELATIONS
#45
P77 bn* w US$1.0mn
Rank 45 among
Philippines’
largest companies
by market cap
DLNDY:US
Unsponsored ADR
PCOMP
(BNY Mellon & Citi)
+32% 1ADR = 25 Ordinary
September 24-28, 2018 JP Morgan Rising Dragon Conference Kuala Lumpur, Singapore, Hong Kong
A- 17
NET FOREIGN FLOWS
FY15 FY16 FY17 Jan ‘18 Feb ‘18 Mar ‘18 Apr ‘18 4M18
1,167 1,449 2,212 759 2,201
391 78 113 307
FY2015 FY2016 FY2017 Jan '18 Feb '18 Mar '18 Apr '18 4M18
(275)
(8,870)
(12,729) (13,679)
(19,314)
(39,662)
(57,612)
A- 18
We have been awarded and recognized both locally and internationally
A- 19
CORPORATE SOCIAL RESPONSIBILITY
of D&L’s annual net
1% income is commited to
corporate social
responsibility programs
through the foundation
AREAS OF FOCUS
2017
P30mn 96
donation to the teachers’ salary
Education foundation sponsored
366 677
Educational Indigent students
Assistance scholars sponsored for
Values formation Livelihood Christmas gift-giving
A- 20
Our CSR projects focus on education and values formation
PROGRAM BENEFICIARIES
Partner Based Educational Program College, TechVoc, High School, Elementary
and Hearing Impaired students nationwide
A- 21
1Q18 Results
A- 22
1Q18 Highlights
13%
A- 24
Condensed Income Statement
REVENUES
% share to total group revenues
**
Significant improvement vs
4% growth in FY17
A- 29
Commodity segment overview
A- 30
HMSP segment overview
Oleochemicals
EXPORT
/ SALES 18% 18% 18% 25% 24% 22%
+68%
y-o-y
In P bn
A- 32
Pass-through pricing mechanism as natural hedge against
volatility in forex and commodity prices
GP Margin
EBIT Margin We’ve seen margins improve since
NI Margin 2010 due to our investment in R&D.
Average PhP:US$
1Q18: P51.48
1Q17: P50.00
A- 34
1Q18 Group Results
% of
Revenues 50% 34% 13% 3% 100%
% of Net
Income* 33% 32% 27% 6% 100%
Sales P3.2 bn -11% P2.2 bn +18% P839 mn +23% P215 mn +15% P6.4 bn +2%
GPM 14.8% +1.7 ppts 16.3% 0.7 ppt 28.4% -2.6 ppts 28% -2.6 ppts 17.9% +1.2 ppts
Net
P245 mn - P240 mn +30% P202 mn +15% P43 mn +5% P744 mn +12.3%
Income
REFINED FOOD
SPECIALTY FATS SPECIALTY
VEGETABLE SAFETY
AND OILS INGREDIENTS
OILS PRODUCTS
43% Volume +11% 52% Volume -25% 4% Volume +32% 1% Volume +54%
54% Revenue +8% 39% Revenue -30% 6% Revenue +8% 1% Revenue +89%
20.9% GPM -2.4 ppts 2.8% GPM +1.0ppt 32.8% GPM +0.4 ppt 35.5% GPM -0.1 ppt
A- 36
OLEOCHEMICALS & OTHER
SPECIALTY CHEMICALS
1Q18 Overall
• Volume +10% GPM
• Sales +18% to P2.2 bn +0.7 ppt
• Net Income +30% at P240 mn to 16.3%
A- 37
SPECIALTY PLASTICS POLYMER & COLOURS, INC.
1Q18 Overall
• Volume +9% GPM
• Sales +23% to P839 mn -2.6ppts
• Net Income +15% to P202 mn to 28.4%
A- 38
AEROSOLS
1Q18 Overall
• Volume +11% GPM
• Sales +15% to P215 mn -2.6ppts
• Net Income +5% to P43 mn to 28.0%
23% GPM -5.8ppts 36.5% GPM +2.9ppts 30.2% GPM -1.2 ppts
A- 39
Balance Sheet remains robust
As of end As of end As of end As of end
In Pmn In Pmn
Mar-18 Dec-17 Mar-18 Dec-17
Cash 2,160 2,855 Book Value 15,955 15,186
Debt-to-
equity
Total Assets 22,683 23,224 0.31x 0.43x
(Borrowings/
Equity)
Return on
Borrowings 4,970 6,600 18.7% 19.1%
Equity
Return on
Total Liabilities 6,727 8,036 Invested 20.2% 19.2%
Capital2
In Pmn
Interest Received 3 10
A- 41
CAPITAL STRUCTURE
interest
21x cover
P2.8 net
Billion debt
~4.06% average
p.a. cost of debt*
50% OF RAW
MATERIALS ARE
IMPORTED
Mostly denominated in USD
Working Capital Cycle in prior periods were recalculated to exclude impact of VAT A- 44
Due to rounding, numbers may not add up precisely
APPENDIX
A- 45
FOOD INGREDIENTS
Leading manufacturer of industrial fats and oils, specialty fats
and oils and food ingredients in the Philippines
REVENUE BREAKDOWN
REFINED VEGETABLE OILS By product
Refined, bleached and deodorized
palm oil, palm olein, palm stearin,
palm kernel oil and coconut oil.
A- 46
OLEOCHEMICALS & OTHER SPECIALTY CHEMICALS
Extensive line of oleochemicals (Philippines’ first continuous-process biodiesel plant +
integrated oleochemical plant for specialties), resins, and powder coating for domestic
and export markets
REVENUE BREAKDOWN
OLEOCHEMICALS - BIODIESEL By Product
Philippines’ largest Coconut Methyl Ester
(CME) or biodiesel producer in terms of
installed capacity e.g. BioActiv (mainly
used as diesel fuel additive); marketable Other
by-products include crude and refined Specialty
glycerin Chemicals,
27%
OLEOCHEMICALS - OTHER
Glycerin and other CME derivatives used
mainly as surfactants or foaming agents
Oleochemicals,
for soaps, lotions and detergents, and 73%
sold principally in the export markets
Amides, Methylesters,
Oleo-chemicals 6 110,000 44%
POWDER COATING Glycerides
A- 47
SPECIALTY PLASTICS
Go-to supplier in the Philippines for custom designed and formulated pigment
blends, color and additive masterbatches and engineered polymers for a wide
range of plastics applications
REVENUE BREAKDOWN
COLORANTS
By Product
Color compounding for various resins
and soft and rigid PVC compounds
Colormate – a proprietary line of color
concentrate. Applications include film
and tapes, moldings, wires and cables
and high-end fibers
Colorants, Engineered
Additives & Polymers, 50% Automotive,
ADDITIVES Others, 50%
50%
Additive materials dispersed into a
plastic base to produce a material with a
variety of desired qualities, such as a
particular texture
e.g BIOmate, Polymate, POLYMIX,
POLYBLEND, FRESHMATE
PRODUCTION CAPABILITIES
ENGINEERED POLYMERS
Premix of a wide range of resins and
compounds, additives, fillers and
colorants PVC compounds for
automotive wiring, building wires, bottle
cap liners, semi-conductor packaging,
rigid bottles and building applications
A- 48
AEROSOLS
First and only company in the Philippines to design and develop
customized aerosol products focusing on home care, personal care and
the maintenance chemicals
REVENUE BREAKDOWN
HOME CARE
Insect control spray; furniture
polish; air fresheners &
disinfectants; fabric
fresheners; ironing aide;
upholstery and carpet
cleaners; and pan sprays.
MAINTENANCE
PRODUCTION CAPABILITIES
CHEMICALS
No. of Filling Aggregate Annual Capacity
Location
Spray paints; brake cleaners; Production Lines Production Capacity Utilization
degreasers; penetrating oil;
mould release sprays; chain Quezon City,
3 18,000,000 pieces 72%
lubricants; chain grease; Metro Manila
aircon-cleaners; automotive
interior dressing
A- 49
NEWS AND DEVELOPMENTS
2017
APPOINTMENT OF NEW INDEPENDENT DIRECTORS
A- 50
NEWS AND DEVELOPMENTS
2016
OLEO-FATS premium soft oils,
Distribution agreement with
including coconut • Exports within Asia Pacific
(FOOD Bunge Limited
oil (under Bunge’s • Food service and retail
INGREDIENTS) (NYSE:BG)
Farm Origin brand)
A- 51
BUNGE SOFT OIL PRODUCTS
2015
INCREASE IN CAPITAL STOCK
Dividends taken
from retained
earnings as of
March 31, 2015
No changes in
equity
Capital Stock Pre - Inc in ACS Post - Inc in ACS
Non-recurring
gain of P83
SALE OF CHEMREZ PROPERTY million from sale
of land booked in
66 INDUSTRIA – 6,000 sqm
4Q2015
A- 53
NEWS AND DEVELOPMENTS
2014
• buying 65.3% of Chemrez for • Taking Chemrez private for
P6/share competitive reasons
Strategic
Transaction • Chemrez now wholly-owned • New product innovations
subsidiary Rationale with large potential for
Details
• funded with 2/3s short-term margin improvement
debt, 1/3 cash
ACQUISITION
OF CHEMREZ • Transaction completed on
• Valued Chemrez at 13x 2015
October 10
PER
• D&L now owns 99.7% of
Financial • Offer price at 24% premium
Status Chemrez Technologies
Rationale over Chemrez’s 60-day moving
• Full consolidation started
average before the
October 7
announcement (Aug 29)
A- 54
COMPARING ROE, PEG RATIO, & DIVIDEND YIELD
22.0 Dividend
Company PEG ROE Yield
20.0
DNL 2.2 19.5 2.1
18.0
ROE (%)
A- 55