D&L Batangas Plant Commercial Operations Moved To Mid-2023
D&L Industries will move the start of commercial operations (SCO) of its Batangas plant, after getting approval from the Philippine Economic Zone Authority (PEZA).
Photo Insert: 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.
This was in consideration of the delays in processing permits and certifications as well as the late arrival of shipments from various overseas suppliers as affected by the global supply chain disruptions.
While PEZA has granted an extension until the end of 2023, providing allowances in case of a force majeure, D&L’s management is committed to start commercial operations by mid-2023.
“As mentioned during our third quarter briefing, while the plant is substantially complete, some steps in the final stages are currently taking longer than expected. Nonetheless, the bulk of the work has been done and we are past the hardest part which was continuing with the construction during the COVID-19 lockdown,” remarked President & CEO Alvin Lao.
“We are convinced that this plant comes at an opportune time given the strong demand for high-value coconut-based products in the export market. With the limited manufacturing assets built over the past few years, as hampered by the pandemic, our Batangas plant puts us in a good position. In addition, as the construction contract was already signed and major equipment were already procured prior to the pandemic, we were able to avoid the rapid increase in overall prices as well as the steep peso depreciation. This puts us ahead of those who are yet to build capacity,” Lao added.
“We do not expect the SCO extension to have any material impact on current operations as our existing capacity is still sufficient to serve requirements in the near term,” Lao concluded.
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 about 16ha. As of end-October, the company has so far spent about P8.6 billion for the project. The remaining CapEx to be spent this year and early next year stands at about P1.6 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% p.a. and 3.5962% 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 first nine months of the year, D&L’s earnings are already higher vs pre-pandemic level and are on track to exceed its record income booked in 2018. 9M22 earnings stood at P2.5 billion, higher by 17% YoY, while 3Q22 earnings stood at P910 million, higher by 18% YoY.
The better-than-expected earnings were mainly driven by a wider economic reopening and exports seeing resilient growth. The robust earnings also demonstrate D&L’s ability to weather various macroeconomic conditions given its diversified businesses, the essential nature of the products it manufactures, and its ability to adjust its selling prices regularly.