We dialled in Del Monte Pacific’s 3QFY15 results briefing on 11 March. Key Takeaways:

Minimal effect of stepped up inventory in FY16 – Management expects to sell most of the remaining stepped up inventory in 4QFY15. This is expected to weigh on Del Monte Pacific’s bottom line. However, it expects minimal stepped up inventory to be sold in FY16.

Acquisition of Sager Creek Vegetable Company’s vegetable business – Del Monte Pacific bought the business at USD75mn. Management guided that the price paid is three times EBITDA. The purchase was financed through Del Monte Pacific’s revolving credit facility. Management expects to pay down the loan by end-FY16.

USD10-11mn Capex for SAP in FY16 – Management expects an additional USD10-11mn capex for SAP in 4QFY15. This will bring the total capex on SAP to USD45mn for FY15. In FY16, it expects to spend another USD10-11mn on SAP. Management estimates the total capex for FY16 at USD50-51mn.

Investment Actions

No stock rating or price target provided, as we do not have coverage on Del Monte Pacific.

Source: Phillip Securities Research - 12 Mar 2015