Del Monte unit starts selling US facilities

BUSINESS
November 22, 2019

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DEL MONTE Pacific Ltd. said its US subsidiary is improving its capacity utilization, as it has sold or in the process of selling assets of four US-based production facilities.
    
The listed canned fruit manufacturer told the stock exchange yesterday US subsidiary Del Monte Foods, Inc. (DMFI) sold and transferred its Cambria, Wisconsin operations to Seneca Foods Corp. on Nov. 1.
    
It also disposed of equipment at its Crystal City, Texas facility and is looking at selling the remaining assets of the factory.
    
For its facilities in Sleepy Eye, Minnesota and Mendota, Illinois, DMFI already signed a sale agreement and is targeting to complete the deal by the fourth quarter of its fiscal year, or within February to April next year.
    
“Production at rationalized facilities is being transitioned to other DMFI production facilities in the United States as well as to strategic co-packers. These divestitures will enable DMFI to significantly improve capacity utilization at the remaining plants in its production network,” it said.
    
Del Monte Pacific announced in August it is divesting these facilities as a way to reduce costs.
    
Through the initiative, the company said it expects its EBITDA (earnings before interest, tax, depreciation and amortization) margins to increase by about 225-275 basis points (about $50–60 million) over the next two years.
    
DMFI said it is now on-track to exceed its EBITDA targets for the full-year ending April 2020.
    
Savings from its cost cutting efforts will be used to expand the company’s brands as it said it wants to ride on the current consumer appetite for “convenient, healthy and tasty plant-based foods.”
    
Aside from operational changes, Del Monte Pacific said it is currently exploring refinancing the approximately $1.4 billion loan of DMFI. This includes a $442.5-million asset-based loan facility, a $670-million first lien term loan and a $260-million second lien term loan, which are due to expire on Nov. 2020, Feb. 2021 and Aug. 2021, respectively.
    
“The group has continued to support the capital structure requirements and deleveraging efforts of DMFI, including the purchase, over the last 20 months, of approximately $231 million of DMFI’s second lien term loan,” it said.
    
Del Monte Pacific posted a net loss of $38.3 million in the first quarter ending July, a turnaround from the net income of $3 million last year, due to one-off expenses from the disposal of its assets in its Crystal City, Texas facility.

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