The Singapore-listed company, which sells processed fruits and vegetables, juices and fresh pineapples, said its operating profit was down 34.5 per cent to US$4.46 million. The cost of goods sold had increased to 78 per cent of its turnover, compared with 71.5 per cent for the same three months of 2005.
Sales were also disappointing, with a mere 1.2 per cent rise to US$54 million, after intense competition in fresh pineapples led to a 63 per cent drop in its sales of non-processed products.
The company also reported a 7 per cent drop in sales to Europe and North America, which accounts for around a third of total turnover.
It blamed the decline on 'weak pricing' of processed pineapple, especially in Europe, as well as the impact of Del Monte Europe's acquisition by Fresh Del Monte. Del Monte Pacific is 85 per cent owned by NutriAsia Pacific, a joint venture between Philippine-based NutriAsia group and San Miguel. It is not owned by US-based Del Monte Foods.
However across the core processed products and beverages segments, sales were up 2 per cent thanks to better demand in Asia Pacific, and the group highlighted a strong 6 per cent growth in the Philippines.
"Most of the categories in the Philippines posted growth, particularly the beverage and processed pineapple segments," said Del Monte Pacific in a statement.
New businesses - Great Lakes China and Del Monte Foods India - also contributed higher revenues at US$2.2 million thanks to higher volumes (mainly of juices) and prices.
Great Lakes, which makes premium juices and also sells juices under the Rougemont and Welch's brand in China, entered new export markets such as Taiwan, Australia and the Indian subcontinent and contributed US$6.2 million in sales for the first half, up 58 per cent compared to the same period last year.
The flagship brand, Great Lakes 100% Juice, was also re-formulated during the second quarter as Not From Concentrate, triggering new growth.
However the business is still not making a profit, compounding lower margins across the group. Gross margin fell from 29 per cent to 22 per cent in the second quarter, according to Del Monte, and although it claims to have launched plans to reduce operational costs and boost revenue, it will have to work hard to reach its profit target for the year, "at least equal to that of 2005".
This means it has to make US$12 million in the second half, significantly more than the first half's US$7 million.
The group plans to expand sales by leveraging San Miguel's distribution network and developing joint trade promotions and joint procurement. For example, it will work with its owners, San Miguel and NutriAsia, to get better terms for packaging materials and agri inputs, among others.
It also wants to reduce inventory and rationalize warehouses.
"These will kick in starting in the second half of the year," said the managers.
"We also expect shipments to Europe to show improvements in the second half. Moreover, the second half is seasonally the stronger semester for our business given the holidays."
The group has also implemented an early retirement programme which will result in cost savings of approximately US$2 million per year.
Joselito Campos, managing director, said the company was currently in a "transition phase" to become a leading fruit-based food and beverage company.
The group claims to be in the right sector with consumers becoming more conscious of wellness and nutrition.
