MANILA, Philippines — Food and plastic input manufacturer D&L Industries grew its nine-month net profit by 24 percent year-on-year to P1.29 billion as its commodities business gained market share as a result of the Bureau of Customs’ crackdown on smuggling.

Due to stronger than expected results for the first nine months of the year, D&L has upgraded its full-year 2014 net profit growth outlook to 22-26 percent from the previous guidance of 18-22 percent, D&L chief finance officer Alvin Lao said in a press briefing on Thursday.

For the third quarter alone, D&L’s net profit went up by 28 percent year-on-year to P494 million.

Revenues for the nine-month period jumped by 38 percent year-on-year to P10.62 billion. In the last four consecutive quarters, a double-digit volume growth in food ingredients has boosted top-line growth.

High-margin specialty products continued to drive revenues for the company, representing 59 percent of sales. This segment grew revenues by 20 percent year-on-year, led by the 24 percent growth in customized specialty food ingredients.

But the low-margin commodities segment – particularly vegetable oil–grew revenues in the first nine months at a faster pace of 79 percent. This thereby dragged gross profit margin to 16.6 percent from last year’s 18.6 percent while net income margin eased to 12.2 percent from 13.6 percent.

“We don’t mind because we’re selling more,” Lao said, noting that volume of vegetable oil – palm and coconut – had expanded. He added that the decline in margins might only be temporary.

Lao said Customs Commissioner John Sevilla had been doing a good job at curbing smuggling of goods into the country, allowing D&L to gain market share in the vegetable oil business. He said the commodities business could still grow its contribution to total business from 41 percent in the first nine months but noted that the share might not exceed 45 percent.

Meanwhile, the upgraded net profit guidance of 22-26 percent for the full year had not even priced in the impact of consolidation of Chemrez Technologies into D&L’s books. D&L now owns 99.7 percent of Chemrez, allowing D&L to maximize its participation and profit in Chemrez’ “high-performing” businesses.

In the first nine months, Chemrez grew its net income by 65 percent. D&L will start to partially consolidate the financial results of Chemrez on October 7 while full year consolidation will begin in 2015. Bulk of about P5.1 billion cost of the acquisition will be funded by short-term debt.

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