FRUIT canner Del Monte Pacific Ltd. said it will spend $70 million (around P3.5 billion) in capital expenditure (capex) when it starts its 2018 fiscal year in May, mainly to expand its business in the United States and markets in Asia.
Parag Sachdeva, Del Monte CFO, said the capex is similar to last year’s spending, but the company is now focusing on also growing its other markets outside the US.
“Our capex will be focusing on our projects, which will be equally between Asian operations and the US. So we are looking at $30 million [P1.5 billion] to $40 million [P2 billion] in the Asian side, and a similar amount on the US. This will be mainly to drive supply-chain optimization and accelerate our margin to the US and for new products,” Sachdeva said.
Luis Alejandro, Del Monte Pacific COO, said the goal of the company is to grow its presence outside the US, where 80 percent of its revenues come from.
“We have a long way to go in penetrating China,” Alejandro said during the investors’ briefing on its $360-million dollar-denominated security (DDS) preferred-share offering.
“In our America [operation], we are not yet in South America. It’s an entirely differently market. We have the brand, but we are not yet there right now. The other market we have not yet penetrated is the ethnic market—Filipinos, Mexicans, Indians. The company has been an American product, but has not yet tapped that market and that provides an avenue for expanding the market,” he said.
Alejandro expressed confidence that over the long term, the expansion into China would reduce the current share of the US operation to the whole Del Monte pie.
Del Monte reported it generated sales of $1.7 billion for its first nine months, down 2.4 percent from the previous year’s $1.75 billion, about 80 percent of which are sales from the US through unit Del Monte Foods Inc.
Del Monte has priced its preferred-share sale under the maiden offering of the Philippine Stock Exchange’s (PSE) DDS, at a dividend rate of 6.625 percent, payable annually. The dividends of the preferred shares will be paid first before the common shares.
A total of 36 million preferred, cumulative, nonvoting, nonparticipatory and nonconvertible shares had been registered with the Securities and Exchange Commission to be sold at an offer price of $10 apiece.
The company is initially selling $250 million, divided into an initial 15 million shares and another 10 million as its oversubscription option. The proceeds will be used to repay Del Monte’s bridge loan to acquire Del Monte Foods.
The shares are offered at $1,000 per share to target retail investors, such as overseas Filipino workers. The offer will run between March 22 and March 28, and listed at the PSE under the trading symbol DMPA1 on April 7.