Delfi Limited

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Unaudited Financial Statements and Dividend Announcement For the Quarter Ended 31 March 2018

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Income Statement

Profit and Loss

Consolidated Statement of Comprehensive Income

Comprehensive Income

Balance Sheets

Balance Sheet

Review of Performance

Key Figures for the Group (unaudited)

Review of the Group's 1Q 2018 Financial Performance

The Group started the year on a strong note achieving 1Q 2018 revenue of US$107.3 million and PATMI of US$7.6 million, representing Year-on-Year growth of 15.1% and 33.1% respectively in the Group’s US Dollar (“USD”) reporting currency. The strong revenue growth was driven mainly by sales of our Own Brands products in Indonesia, especially of our premium products, but also benefitted from sales deferred from December 2017 as well as the run-up to the Muslim Lebaran festivities.

For the Regional Markets, the revenue growth in 1Q 2018 was driven mainly by higher Own Brands sales overall and higher Agency Brands sales in Malaysia.

On the back of the increased sales, the Group generated EBITDA of US$14.4 million (higher Y-oY by 18.6%) and PATMI of US$7.6 million (higher Y-o-Y by 33.1%). In addition to higher sales, the other key drivers of the profitability were the higher margins achieved and the benefit of a lower effective tax rate. The Group’s 1Q 2018 Gross Profit Margin of 34.5% improved by 1.4% point Y-o-Y reflecting increased sales of our higher margin premium products, especially in Indonesia, and our on-going cost containment initiatives.

The Group’s financial position remains strong with cash balance of US$66.3 million at 31 March 2018 which is more than adequate to support the Group’s foreseeable near term business and investment needs.

Performance review of Own Brands and Agency Brands

Own Brands sales continued to be the major contributor to the Group’s business, forming more than 60% of the Group’s revenue. Over the years, our portfolio of Own Brands has progressively expanded and today extends into the categories of chocolate confectionery, biscuits and wafers, breakfast, baking and beverages.

For 1Q 2018, total Own Brands sales increased by 20.9% Y-o-Y in the Group’s USD reporting currency (or 22.4% in local currency terms) driven mainly by Own Brands sales in Indonesia, especially in the premium format category.

For the quarter, our Agency Brands 1Q 2018 revenue growth was higher by 7.0% versus the same period last year. Growth was achieved in Indonesia and Malaysia while the weak performance in the Philippines reflected the discontinuation of two Agency Brands.

Performance Review by Markets


In 1Q 2018, our business in Indonesia generated revenue of US$76.2 million which was higher Y-o-Y by 17.5%. The main driver of growth was Own Brands sales which achieved Y-o-Y growth of over 20% with strong performance from our Core Brands in the premium segment (that is, SilverQueen, Cha Cha, Ceres Meises, Ceres Spread and Delfi Premium products).

The sales growth of our portfolio of Own Brands products in 1Q 2018 reflected - (i) orders from late December 2017, affected by the Government imposed transportation disruption, carried forward to this year; (ii) deliveries to capture the consumer purchases in the run up to the Muslim Lebaran festivities; and (iii) benefits from our initiative of direct shipments to our retail customers. The overall growth achieved reflected the benefits of our re-organization and restructuring initiatives implemented over the last two years as well as the execution of more aggressive promotion programmes to drive sales of our Core Brands.

To position our business for long term success, we refocused our spending on building our core brands and focused on where the strongest growth opportunities are. Innovation for our Own Brands remains a key priority for us and our objective is to reach many more consumers by developing products that will address different consumer needs at different price points (e.g. our Ceres Spread, Zap, Buzza and Cha Cha novelty tubes). We have also refreshed our brand communication programs to strengthen our brands’ connection with our consumers.

In addition, we continued investing in our sales force and in our routes-to-market capabilities to develop a distribution network that can quickly respond to the constantly evolving retail landscape both in Indonesia and our Regional Markets to ensure that our Own Brands portfolio continues to maintain a significant shelf space presence.

For our Agency Brands business in Indonesia, the double digit growth for some of our core Agency Brands in confectionery and snacking, and breakfast categories offset the weakness in others.

The Regional Markets

For our Regional Markets, revenues for 1Q 2018 were higher by 9.6% Y-o-Y in the Group’s USD reporting currency (3.0% in local currency terms). The growth was mainly driven by higher sales in Malaysia while growth of Own Brands sales in the Philippines reflected our “Goya - A Taste of World Class, Everyday” marketing campaign. Agency Brands sales in the Regional Markets were, however, negatively impacted by the discontinuation of two major Agency Brands - one in the Philippines (effective June 2017) and one in Malaysia (end-2017). Excluding the discontinued Agency Brands and in local currency terms, Regional Markets’ 1Q 2018 sales would have been higher 13.3%.

Review of Profitability

On the back of the revenue of US$107.3 million in 1Q 2018, the Group generated EBITDA of US$14.4 million and PATMI of US$7.6 million in the Group’s USD reporting currency. The strong performance achieved can be attributed to: (i) higher revenue achieved; and (ii) improvement in margins. The Group’s 1Q 2018 Gross Profit Margin improved by 1.4% to 34.5% on the back of higher sales of our premium products and our on-going cost containment initiatives.

The Group’s EBITDA of US$14.4 million generated EBITDA margin of 13.4% (higher by 0.4% point Y-o-Y). The improvement in EBITDA margin was achieved despite selling and distribution costs remaining high as a percentage of the Group’s sales. In Indonesia, we continued to invest in our brand building initiatives and in our routes-to-market capabilities, which we believe is necessary as we continue to strengthen our distribution infrastructure to support long term growth.

Purchase of “Van Houten”

On April 13, 2018, we announced that we had entered into a Novation and Assignment agreement with Hershey Singapore Pte. Ltd., part of The Hershey Company, and Barry Callebaut AG where Delfi acquired for US$13.0 million the perpetual and exclusive license to the Van Houten brand name for consumer chocolate and cocoa products in certain key markets in Asia and Oceania (including Australia and New Zealand). With this acquisition, Delfi will control the rights to the Van Houten brand name in key markets in Asia. Hershey will retain the rights to Korea, India and the territory of the Middle East.

The acquisition of the exclusive and perpetual license to the Van Houten brand will be an opportunity to strengthen our portfolio and will open up opportunities for growth outside our Regional Markets. Our focus will be on innovations and revitalizing of Van Houten into a premium brand.

Update on Claims Associated with the Disposal of Delfi Cacau Brasil Ltda.

By way of background, on 24 February 2015, the Company had announced that Barry Callebaut had notified the Company of various claims from the Brazil tax authorities (“Notifications”) against the former Delfi Cacau Brazil Ltda (“DCBR”), which Barry Callebaut purchased as part of the sale of the Cocoa Ingredients business. In the Company’s announcement made on 28 August 2015, the Company also pointed out that although the Settlement Agreement fully settled the dispute over the closing price adjustments, Barry Callebaut remained entitled to bring any further claims that may arise under the continuing warranties.

As previously announced, the Company was notified of a total of 9 claims associated with the disposal of DCBR totaling BRL 87,002,187 as of 31 December 2016. In FY2016, the Group recognized an exceptional charge of US$2.0 million pertaining to the claims. In 2017, the Company has not been notified of any further claims. At 31 December 2017 the Company’s total exposure in respect of tax and labour claims in Brazil has reduced to BRL 83,496,240 (equivalent to US$25.3 million based on end-March 2018 exchange rate) primarily due to a refinement of the basis used for indexation.

The Company, while reserving its rights in relation to the Notifications, has requested Barry Callebaut to defend these claims and the cases are proceeding through the Administration and Judicial processes in Brazil. The Board and management believe there are grounds to resist these claims and the Company will keep the shareholders updated as to material developments in relation to the Brazilian claims.

In assessing the relevant liabilities, management has considered, among other factors, industry developments in the current financial year and the legal environment in Brazil, and assessed that the amounts recognized in respect of these claims are adequate as at 31 December 2017. As management considers the disclosure of further details of these claims can be expected to prejudice seriously the Group’s position in relation to the claims, further information has not been disclosed in the Group’s financial statements.

Review of Financial Position and Cash Flow

As of end March 2018, the Group continues to maintain a healthy cash balance of US$66.3 million. The cash balance will be sufficient to support its acquisition of the exclusive and perpetual license for the “Van Houten” consumer chocolate brand for US$13.0 million as announced in April 2018, and meet any contingent liabilities.

The Company’s shareholders’ equity was higher by US$4.8 million on the Net Profit of US$7.6 million generated during the quarter which was partially offset by a foreign exchange translation loss of US$2.8 million due to the weakening of Indonesia Rupiah during the quarter under review.

For 1Q 2018, the Group generated an operating cash flow of US$14.3 million which was used mainly to fund the Group’s higher working capital needs. The increase in working capital was in line with higher sales to modern trade customers which have longer trading terms and the need to carry more inventories in Indonesia and Malaysia for the run-up to the Muslim Lebaran festivities in early June 2018.


The strategic restructuring of our organization, product portfolio, and routes-to-market implemented over the last two years are starting to yield the desired results. We are fully committed to the broad strategy of consolidating our core strengths, containing operational costs and investing in core brands and key markets in order to grow our business sustainably over the long term.

In 2018, the Group’s focus will be to continuously work closely with our trade customers and partners to grow our business by ensuring that our brands are always available, properly displayed and at the right price points. We will refocus our brand building initiatives and trade promotions onto our core products while ensuring that our products continue to maintain significant shelf space presence. In addition to growing our sales, we will focus on driving cost efficiencies throughout our organization and our supply chain. Through this combination of top line focus and stepped up productivity efforts, we expect, barring unforeseen circumstances, the Group’s operations to provide longer term stability and profitability. We will further strengthen the Group’s cash flow generation through focused capital expenditure.

To drive the growth of our business, we will work to:

  1. Ensure that our organization is well aligned to our growth plans and successful in implementing our strategies in Indonesia and our Regional Markets;
  2. Grow our key brands in our markets. Innovation remains a key part of this strategy, whether it is through product innovation in order to provide us with a competitive edge or through continuous reinvention to stay relevant by creating excitement at the shelf space while focusing on the core brands and products that can deliver growth in sales and margins;
  3. Extend market reach by having better channel segmentation for both the Modern Trade and Traditional Trade formats in order to widen and strengthen our distribution coverage to capture the growth opportunities; and
  4. Prudently invest to build capacity and capabilities where there are clear expansion opportunities into new and attractive categories; and increase our productivity and efficiency targets in our production and distribution infrastructure.

Over the long term, the consumption environment in our markets will continue to be supported by robust economies and the fast growing middle income classes. To add further value over the longer term to our quality earnings, we will continue to explore opportunities to enter new markets and to extend to new categories if suitable acquisitions meet our investment criteria.