Chemical manufacturer D&L Industries Inc. on Thursday said its export revenues have already outpaced its import cost in dollar terms, which will allow the company to have a natural hedge against the depreciation of the peso.
From being a net importer since its inception, the company is now a net exporter of goods and is positioned to benefit from a stronger US dollar.
The peso closed at P50.80 against the US dollar on Wednesday.
As of end-June, the company’s export sales accounted for 33 percent of its total revenues, while imported raw materials accounted for 47 percent of total raw material costs.
“Our strategic focus on growing our exports business has started to bear fruits. It is something that we take pride in. From a relatively small and unknown manufacturing and R&D [research and development] company in the Philippines, our export customers are starting to recognize us as a quality, reliable, and world-competitive supplier of various food and chemical raw materials,” Alvin Lao, the company’s president and CEO said.
“Looking ahead, especially with the much anticipated commercial operations of our facility in Batangas, we see various opportunities that we can now take advantage of given the new capacity and capabilities that we will have. We see exports accounting for at least 50 percent of our total revenues in the next few years,” Lao said.
The strong export performance and outlook were driven by products where the company has a competitive advantage in, such as coconut-based products under food and oleochemicals, which continue to gain traction in the global market due to coconut oil’s perceived natural antiviral, antibacterial and anti-fungal properties.
The shift towards more sustainable consumption trends is also benefiting these products, as coconut derivatives serve as non-toxic substitutes for petroleum-based raw materials used in many applications such as personal hygiene and home cleaning products, the company said.
“The essential nature of our businesses, our low fixed cost structure, and our ability to adjust our prices regularly places us in a very solid position to weather emerging risks to recovery,” said Lao.
“While ocean freight has been historically high, we’re able to grow our exports business given the specialty nature of the products that we export and the strong demand from our customers, making freight costs a secondary consideration. In addition, as a percentage of our total costs and expenses, both our shipping costs and power costs only account for about 1 percent.”
Lao said that while fresh risks have emerged, the company is optimistic that the Philippine economy has likely bottomed out.
“We see various catalysts on the horizon that can support recovery in the near to medium-term such as the continued reopening and the anticipated spending boost coming from the presidential elections and Christmas season. The country’s vaccination rate has also been picking up,” he said.
“Overall, we should still be on track to reach at least the same level of pre-pandemic income booked in 2019.”