3 March 2022 — The start of commercial operations (SCO) for D&L Industries’ Natura Aeropack Corporation (NAC) plant in Batangas will be moved to January 2023, following an extension granted by the Board of the Philippine Economic Zone Authority.
NAC, a wholly-owned subsidiary of D&L Industries that will manufacture coconut oleochemicals for various consumer care products, was slated for commercial operations by May 2022. However, in consideration of the recent turn of events such as the Omicron-related surge in Covid-19 cases early this year, global port congestion and supply chain disruptions, as well as longer-than-expected processing of registration and licenses, PEZA has granted a SCO extension to January 2023.
As such, NAC and D&L Premium Foods Corp., which is another wholly-owned subsidiary of D&L Industries located at its Batangas site, will now start commercial operations concurrently. DLPF will manufacture food ingredients to cater to the company’s growing export business.
“While the pandemic has posed challenges to the completion of our Batangas plant, this expansion is coming at an opportune time given the strong demand for high value coconut-based products in the export market. This is evidenced by the resilient and robust growth in our export sales which grew 55 percent YoY in the first nine months of 2021. As the world moves beyond this pandemic, this plant will help us cater to emerging, relevant industries where we see opportunities for new growth. Our existing capacity is still sufficient to serve requirements in the near term, as such the extension in the SCO should have no material impact on current operations,” remarked D&L president and CEO Alvin Lao.
D&L’s Batangas expansion sits on a 26-ha property in First Industrial Township – Special Economic Zone in Batangas. The ongoing expansion, also referred to as Phase 1, will occupy roughly half of the property. The company has so far spent about P6.2 billion for the project. Remaining capex to be spent this year stands at about P1.8 billion. In September 2021, the company executed its maiden bond offering, successfully raising P5 billion to help fund the remaining capex for this expansion. The bonds carry a coupon rate of 2.7885 percent p.a. and 3.5962 percent p.a. for the 3-year and 5-year bond, respectively, which are among the lowest rates in Philippine corporate bond history.
Once completed, the new plant will be instrumental to the company’s future growth, in line with plans to develop more high value-added coconut-based products and penetrate new international markets. It will mainly cater to D&L’s growing export business in the food and oleochemicals segment. It will add the capability to manufacture downstream packaging, thus allowing the company to capture a bigger part of the production chain. For instance, while the company primarily sells raw materials to customers in bulk, the new plants will allow it to “pack at source”. This means that D&L will have the ability to process the raw materials and package them closer to finished consumer-facing products. This will enable D&L to move a step closer to its customers by providing customized solutions and simplifying their supply chain, which is of high importance given ongoing global logistical challenges.
As of the third quarter last year, D&L’s earnings are already back to pre-pandemic levels with 3Q21 net income surging 25 percent vs. 3Q19 and 9M21 net income growing by 7 percent vs. 9M19. Year-on-year, 3Q21 net income grew by +34 percent to P768 million. With near-term catalysts such as the continued economic reopening and the boost from election spending, the company sees room for further earnings growth.
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