HIGHER PRICES of raw materials and “inventory obsolescence” resulted in losses for Campos-led Del Monte Pacific Ltd. in the second quarter, despite bigger sales.

But better performance as a result of higher sales, better pricing, and cost reduction, is expected in the second half, an official said.

Del Monte Pacific recorded a “net loss of $1.3 million for the second quarter of 2010 compared [with] a net profit of $5.1 million in the same period last year,” the company said in a disclosure.

“In spite of an 8% improvement in sales [to $85.1 million], the loss was due primarily to higher raw material costs and inventory obsolescence,” the company said.

The latest figures resulted in a $2.2-million net loss for the agro-industrial firm in the first half, a reversal of the $9.1-million net income the previous year, “mainly due to higher raw material costs and business-building initiatives.”

For the first half, sales rose by 8.5% to $151 million, but operating income fell by 78.9% to $3.3 million.

In the second quarter, Del Monte Pacific booked a loss of $2.2 million for joint venture FieldFresh India, up from $1 million the previous year, due to expenses to build up the branded processed food business.

“We expect improvement in the second half performance, particularly in the fourth quarter, from better volume, pricing and sales mix, and containment of costs,” Joselito D. Campos, Jr., chief executive and managing director of Del Monte Pacific, said in a statement. Asia Pacific accounted for three-fourths of Del Monte Pacific’s sales, with the rest coming from Europe and North America.

“The programs we are implementing to improve overall productivity are beginning to gain traction,” Mr. Campos said.

In March, the company put up a plantation oversight committee to facilitate the streamlining of current procedures, and update methods and agricultural practices.

Del Monte Pacific produces, markets and distributes food, beverages and related products in the Asia-Pacific region and the Indian subcontinent, and has supply deals with Del Monte trademark owners and licensees around the world.

The NutriAsia Group of Mr. Campos — one of two firms short-listed in the failed bidding for the 49% stake in San Miguel Pure Foods Co. — owns 78.7% of Del Monte Pacific.

NutriAsia leads the Philippine market for condiments, specialty sauces and cooking oil. Its flagship brand UFC has an 85% market share in the ketchup and hot chili sauce categories.

Del Monte Pacific’s 20,000-hectare plantation in Mindanao is the world’s largest fully integrated pineapple operation, with a 700,000-metric-ton processing capacity.

from BusinessWorld

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