Del Monte Pacific

[opmi]

a good LBO dont deleverage through rights issue....a failed one probably needs

[white collar]

only if the rights issue is a surprise to everyone

[GreedandFear]

Whilst the numbers are encouraging, I think it is a bit early to break out the champagne. For the fourth quarter, the US (which accounts for more than 70% of sales) is experiencing negative sales growth year on year. The increase in EBITDA is very impressive BUT bear these numbers in mind :

Full year EBITDA : USD 235MM
CAPEX : USD 60MM
Full year interest : USD 97MM so interest cover is 2.4x without taking into account CAPEX; including CAPEX, interest cover drops to 1.8x
Net Debt : USD 1796MM (an increase of USD 110MM year on year - shouldn't they be focusing on reducing debt ?????)
Net Debt / EBITDA : 7.64x
The issue of perpetual bonds still has not happened....it has now been planned for 18 months ? 24 months ?

Operationally, the company is improving (and significantly so in terms of their profit margins) but with this debt load, there is still very little room for error and very little cash flow left to actually reduce debt. Just using EBITDA minus Capex minus interest as a proxy for debt repayment capacity gives a mere USD 68MM vs USD 1,796MM of debt....the free cash flow available for debt needs to get to at least USD 180MM (10% of debt) for it to start making a meaningful dent.

I like the company and continue to monitor it but, in my view, the financial position is still to precarious.

[specuvestor]

Looks like biz slowly turning around and EBITDA cashflow in 4Q of about US$63m with cash interest expense of US$23.4m and capex of $23m, while working capital continue to tighten. They still looking to issue the $360m perpetual pref shares but lowering expectations to US$250m first and within 3 years another US$110m

Agree very little room to reduce debt hence the debt to pref share swap

Del Monte is an interesting LBO case study for me which I didn't buy any tickets for the show.

Capex has been about halved and cashflow is hand to mouth with inventories shrunk in 3Q (end Jan as per new fiscal year). Pending the US$360m preferred perpetual to be issued in Phil which is taking longer than I expected. The LBO US biz surprisingly dipped.

They should really reward their CFO

If EBITDA stays, the ratio of debt/EBITDA is meaningless. I am taking the debt/EBITDA as an indicator, on the growth needed to clear the debt... The integration is still going-on, and synergy is the hope...

(not vested)

EBITDA can only cover interest expense means debt is not going to be repaid. Hence debt over EBITDA is just a ratio and meaningless. Unless they can swap debt for equity and cut capex it will be brinkmanship for some time, until biz improves

This is an LBO. Group EBITDA of US$21.5m can't even cover interest expense of US$23.9m is indeed worrisome with cash of just US$28.5m. Cash call have to come sooner rather than later.

[cyclone]

Financial Results for 3Q FY2017. Third quarter is 1 November 2016 to 31 January 2017

Highlights:
1. Del Monte Pacific’s third quarter recurring net income increased more than fivefold to US$11.6m
2. Net income without one-off items improved significantly to US$11.6m from US$2.1m
3. Revenue was slightly higher at US$604m as higher Asia sales offset lower USA sales
4. The Group’s US subsidiary, Del Monte Foods, Inc (DMFI), contributed US$450.6 million or 75% of Group sales
5. Gross margin increased to 20.8% from 19.8% on improved operational efficiency and lower commodity costs
6. Del Monte Philippines and S&W in Asia and Middle East continued to deliver strong performance
7. Gearing was 567.5% as at 31 January 2017
8. Deleveraging planned with Preference Shares offering in the Philippines
9. The Group is expected to generate a higher profit in FY2017 than prior year on a recurring basis (without one-off items).

More details in :
1. http://infopub.sgx.com/FileOpen/DMPL_3QF...eID=442834
2. http://infopub.sgx.com/FileOpen/DMPL_3QF...eID=442833
3. http://infopub.sgx.com/FileOpen/DMPL_3QF...eID=442835

[GreedandFear]

I have kept following this company in the hope that it would, at some point, be able to turn the corner. On the face of it, the food sector should be stable, recession proof with possible margin expansion if they further exploit their brands or generate more cost synergies now that it is a bigger company....However, with USD 2 Billion of debt and annualised EBITDA of only $200MM, that is 10x leverage. It gets even worse if you use EBITDA minus CAPEX as a proxy for free cash flow. For the nine months so far, capex was USD 50MM, annualised, call it $65MM, so annualised EBITDA minus CAPEX is around $135MM. Even if they issue $350MM of preferred shares, that is only a small dent in the debt and it will come with high dividends. I still think this company either needs raise more equity or sell a minority stake in its business to deleverage

[ZZF]

DMPL planning to IPO their money-making unit (DM Philippines) to cover debt in loss making US biz and booking one time gain on this.

The Board of Directors of Del Monte Pacific Limited (the “Board” and the “Company”, respectively) wishes to announce that the Company’s wholly-owned Philippine subsidiary, Del Monte Philippines, Inc. (“DMPI”), has filed application documents for a proposed initial public offering of common shares comprising the sale of 20% of its issued capital in DMPI by DMPL, by way of a secondary offer, (the “Offering” and such shares, the “Offer Shares”).
DMPI intends to list the Offer Shares on the Main Board of The Philippine Stock Exchange, Inc. (“PSE”). In connection thereto, DMPI has on 5 February 2018: (i) filed for the registration of the Offer Shares with the Securities and Exchange Commission of the Philippines; and (ii) applied for the listing of all the issued and outstanding common shares of DMPI, including the Offer Shares, with the PSE. The Offering will be subject to receipt of the requisite regulatory approvals and market conditions.

[ZZF]

Dear VBs, I hope someone can help clarify something here.

In the notes to the proposed IPO of their Philippines unit, it says: NAV of assets disposed is S$92.878m, shares offered are 559.464m. Hence max possible amount raised is 559.464m x S$0.763 = S$426.87m . As shown in the notes, after banker fees etc, max gain booked is approx S$402m.

But if the NAV is S$92.878m, shouldn't the gain be S$333m before banker fees? or maybe S$300m++ after fees. How did they derive S$402m?

Am I missing something?

Thank you in advance!



(1) The net asset value of the assets to be disposed of is approximately S$92,878,180, which is based on the assumption that the percentage dilution of the DMPL Group’s interest in DMPI arising from the Proposed Public Offering is 20%. The percentage dilution is based on the sale of 559,464,000 existing DMPI shares which represents 20% of DMPI’s total existing number of ordinary shares; please see paragraph 1.4 of this announcement for more details.

1.3 The estimated maximum offering price of the shares of DMPI (the “Offering Price”) is PhP29.88 (approximately S$0.763) per DMPI share.

1.4 Pursuant to the Proposed Public Offering, it is expected that the number of DMPI Sale Shares to be offered is 559,464,000, which will represent 20% of DMPI’s total existing number of ordinary shares.


3.3 The Proposed Public Offering will give rise to a one-time gain. For illustrative purposes, assuming the Company raises net maximum proceeds of US$314 million (approximately S$415 million(1)) from the Proposed Public Offering, the gain on disposal based on the Group’s audited accounts for full year ended 30 April 2017 would be approximately US$304 million (approximately S$402 million(1)).
Note:

[cyclone]

Financial Results for the Financial Year Ended 30 April 2018 ("FY2018")

Highlights :
1. For the full year of FY2018, the Group generated sales of US$2.2 billion, 2.5% lower versus the prior year as higher sales in Asia were offset by lower sales in the US
2. Del Monte Pacific Limited (DMPL or Group) posted a net loss of US$28m due to one-off expenses amounting to US$74m for two plant closures in the USA as part of a planned programme to achieve operational efficiency and reduce cost in its US subsidiary, Del Monte Foods Inc (DMFI), plus the write-off of deferred tax assets due to a change in US tax rates
3. Excluding one-off items, the Group would have generated a net income of US$12m in FY2018
4. The Group continued to implement its commitment to reduce debt, lessen interest expenses and improve cash flow
5. US$300m was raised from the sale of Preference Shares to repay loans, and interest savings and one-off gain of US$34m were achieved from the purchase of US$125m of DMFI loans at a discount
6. The Group doubled its operating cash flow to US$358m in FY2018, primarily on lower inventory in its US operations
7. Gearing was reduced to 2.3x equity as of 30 April 2018, from 2.9x in 2017
8. Barring unforeseen circumstances, the DMPL Group is expected to be profitable in FY2019.

More details in :
1. http://infopub.sgx.com/FileOpen/DMPL_4Q_...eID=512415
2. http://infopub.sgx.com/FileOpen/DMPL_4QF...eID=512414
3. http://infopub.sgx.com/FileOpen/DMPL_4QF...eID=512416
4. http://infopub.sgx.com/FileOpen/DMFI_pre...eID=512417

DMPL traded at S$0.179 (-0.001) at June 29, 2018, 15:08 SGT.

[cyclone]

Financial Results for the Year Ended 30 April 2019 ("FY2019")

Highlights :
1. The Group generated sales of US$2.0 billion, down 11% versus the same period last year mainly due to the divestiture of Sager Creek and lower sales in the USA
2. The Group reported an EBITDA of US$143.7 million, higher by 40% versus last year
3. The Group’s gearing improved to 2.4x equity as of 30 April 2019, from 2.5x in 31 January 2019, due to a reduction in inventory in DMFI
4. Generated higher net income of US$6.3m for the fourth quarter, and US$20.3m for the full year, a significant turnaround from prior year loss
5. Innovation gaining momentum - introduced four innovative products in the growing categories of refrigerated produce and frozen, catering to health and wellness, snacking and convenience
6. The Board approved a final dividend of US$0.0052 per share representing 50% of FY2019 net profit
7. Barring unforeseen circumstances, the DMPL Group is expected to be profitable in FY2020 on a recurring basis.

More details in :
1. https://links.sgx.com/FileOpen/DMPL_4Q_F...eID=564152
2. https://links.sgx.com/FileOpen/DMPL_4QF1...eID=564151
3. https://links.sgx.com/FileOpen/DMPL_4QFY...eID=564153