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Del Monte Pacific Limited

Annual Report Analysis

Chin Nieve S. Figura BSA III

Disclaimer This presentation may contain statements regarding the business of Del Monte Pacific Limited and its subsidiaries (the “Group”) that are of a forward-looking nature and are therefore based on management’s assumptions about future developments. Such forward-looking statements are typically identified by words such as ‘believe’, ‘estimate’, ‘intend’, ‘may’, ‘expect’, and ‘project’ and similar expressions as they relate to the Group. Forward-looking statements involve certain risks and uncertainties as they relate to future events. Actual results may vary materially from those targeted, expected or projected due to various factors. Representative examples of these factors include (without limitation) general economic and business conditions, change in business strategy or development plans, weather conditions, crop yields, service providers’ performance, production efficiencies, input costs and availability, competition, shifts in customer demands and preferences, market acceptance of new products, industry trends, and changes in government and environmental regulations. Such factors that may affect the Group’s future financial results are detailed in the Annual Report. The reader is cautioned to not unduly rely on these forward-looking statements. Neither the Group nor its advisers and representatives shall have any liability whatsoever for any loss arising, whether directly or indirectly, from any use or distribution of this presentation or its contents. This analysis is limited only on analyzing the Liabilities and Equity section of the ABSCBN Holdings Corporation. It does not include the asset section and it does not reflect the whole performance of the company nor constitute an invitation or offer to acquire, purchase or subscribe for shares in Del Monte Pacific.

Introduction

Company Description Del Monte Pacific Limited was incorporated on May 27, 1999 as an international business company under the laws of the British Virgin Islands. On August 2, 1999, the Company was admitted to the official list of the Singapore Exchange Securities Trading Limited, and subsequently debuted in the Philippine market on June 10, 2013. DMPL is an investment holding company with subsidiaries that are principally engaged in growing, processing, developing, manufacturing, distributing, marketing, and selling packaged fruits and vegetables, canned fished and fresh pineapple, pineapple concentrate, tropical mixed fruit, tomato-based products, broth and certain other food products mainly under the brand names of "Del Monte", "S&W", "Contadina", "College Inn" and other brands. The Company's subsidiaries include wholly-owned companies: Del Monte Pacific Resources Limited; DMPL India Pte Ltd; DMPL Management Services Pte Ltd; GTL Limited; and S&W Fine Foods International Limited. DMPL also has one 89.43%-owned company, DMPL Foods Limited.

Vision Del Monte Pacific Limited nourish families by providing delicious food and beverages that make eating healthfully effortless – anytime and anywhere. Also build brands with quality products that are perfectly wholesome and thoughtfully prepared.

Strategy

Core Values  Championing Together. To champion together is the choice of the Del Monte because they see their selves as one team. Each work recognized a unique strength and play a part in the group’s collective greatness. When they collaborate, they achieve more.  Healthy Families. Del Monte choose to grow healthy families. Strengthen family bonds of the consumers and enable employees to build better lives for their families. At the heart of who DMPL are is the wellbeing of the home.  Ownership with Integrity. Del Monte Pacific Limited choose to embody ownership with integrity. Del Monte is under their care – they hold themselves accountable. Also, the DMPL see how their work helps achieve Del Monte’s vision. A genuine Malasakit – this is what they share in Del Monte.  Innovation. Del Monte Pacific Limited choose to innovate. They constantly rethink, explore, and create to produce only the fresh, groundbreaking and pioneering ideas for

their products and processes. DMPL will push – creating breakthroughs, always challenging the management to be future-ready.  Commitment to Society and Environment. Del Monte Pacific Limited choose to make a commitment to society and the environment. Responsible for the big role we play in safeguarding the world’s future. Thus, ensure that Del Monte not only refrains from harming the environment, but also contributes to enriching it. DMPL are committed to uplifting lives through honest and ethical business practices. DMPL are a good corporate citizen.  Excellence in Everything We Do. Del Monte Pacific Limited choose to be excellent in everything they do. No matter how large or small a task is, DMPL understand the value of executing each one effectively and efficiently. DMPL believe in doing the right things the right way.

History

This analysis would seek to evaluate the financial performance of Del Monte Pacific Limited. This paper investigates on the computed financial trends based on the available data (audited financial statements) and assess how the company performed in handling corporate finance in the years covered by this study. Thus, the financial statements of the company are presented fairly, in all material respects and will likely continue to operate in the near foreseeable future.

Background of the Analyzes

For over 130 years, consumers around the world have recognized the Del Monte® brand as a trusted symbol of product quality, freshness and reliability. The brand combined with the steadfast commitment to quality, innovation and responsible business practices allow itself to consistently deliver outstanding financial results to the shareholders. Del Monte Pacific Limited (the “Company”) was incorporated as an international business company in the British Virgin Islands on 27 May 1999 under the International Business Companies Act (Cap. 291) of the British Virgin Islands. It was automatically re-registered as a company on 1 January 2007 when the International Business Companies Act was repealed and replaced by the Business Companies Act 2004 of the British Virgin Islands. The principal activity of the Company is that of investment holding. Its subsidiaries are principally engaged in growing, processing, and selling packaged fruits, vegetable and tomato, fresh pineapples, sauces, condiments, pasta, broth and juices, mainly under the brand names of “DelMonte”, “S&W”, “Today’s”, “Contadina”, “College Inn” and other brands. The Company’s subsidiaries also produce and distribute private label food products. The immediate holding company is NutriAsia Pacific Limited (“NAPL”) whose indirect shareholders are NutriAsia Inc. (“NAI”) and Well Grounded Limited (“WGL”), which at 30 April 2019, 2018 and 2017, held 57.8% and 42.2% interests in NAPL, respectively, through their intermediary company, NutriAsia Holdings Limited. NAPL, NAI and WGL were incorporated in the British Virgin Islands. As one of the largest distributors of food items in the United States, Del Monte Pacific Limited has an annual turnover of over US$ 1.9 million (DMPL Annual Report FY2019). The food items that the company produces and distributes a high quality of fresh and fresh-cut fruit and vegetables, as well as Del Monte juices, Contadina, fruit burst, and healthy snacks. Apart from the production and distribution of the aforementioned foods, the company also trades in private label foods. Some of the company’s foods items rank top three in terms of market share. The Group owns approximately 95% of a holding company that owns 50% of Field Fresh Foods Private Limited in India (www.fieldfreshfoods.in). Field Fresh markets Del Monte

branded packaged products in the domestic market and Field Fresh branded fresh produce. The Group’s partner in Field Fresh India is the well-respected Bharti Enterprises, which is one of the largest conglomerates in India. Moreover, DMPL received an award and recognition on 2014 Labor Medal from the Labor Ministry in Guatemala and Voted the Favorite Juice Brand in the UAE by the BBC Good Food Awards; 2015 Certified as Carbon Neutral by SCS Global Services at our banana operation in Costa Rica (BANDECO division); 2018 The Department of Environment and Natural Resources - Environmental Management Bureau in the Philippines awarded Ms. Limpio with the Outstanding Women in Water Award, Recognized as Kenya’s Exporter and Importer of the Year by East Africa Maritime Awards and, Our operations in Kenya scored an A grade (Outstanding) by the Business Social Compliance Initiative (BSCI). In addition, there are 13 awards for 9 consecutive years from the Singapore Corporate Awards including Best Managed Board, Best CFO, Best Investor Relations and Best Annual Report. Ranked #13 in the Singapore Governance Transparency Index out of 606 SGX-listed companies. Finalist for Asia’s Best First Time Sustainability Report at the 4th Asia Sustainability Reporting Awards, 1 of only 3 food brands in Campaign Asia Pacific Top 20 Brands in the Philippines. It also received an Account Management Award from 7-Eleven Philippines, Awards from the Philippine Association of National Advertisers for the launch of best-in-class campaigns and Packaging Awards in the Philippines and France for our pineapples in Clear Can . GLOBALGAP Award, a prestigious international agriculture award; we are 1 of only 4 companies worldwide that got this. Also recognized by LinkedIn as a company with the “Most Socially Engaged Followers”, and many more. Unfortunately, DMPL faced unruly issue in environment for instance waste management in consumer goods sector, air and water pollution regulations in Farm Products industry, climate change, etc. (Fern Fort University). The United Nations calls for immediate action to slow climate change. Thus, management extremely proud of how Fresh Del Monte Produce has stepped up to this challenge. In 2010, the company set a goal to reduce the energy consumption rate by 10 percent in ten years. In 2014 CSR report, the two main goals has been accomplished both ahead of schedule, it surpassed the original goal of 10 percent reduction in water and energy consumption rate per ton of product by the end of 2020 wherein it has 12 percent energy

decrease and 21 percent water decrease. At the end of 2018, the energy consumption had decreased by 12 percent per ton of product1. In 2015, banana operation in Costa Rica (BANDECO division) was certified as carbon neutral and the company plan to have other operations follow suit. In the statement of Mohammad Abu-Ghazaleh, Chairman and CEO (2019), “For us, A Better World Tomorrow is a world where our business, products, people, communities, and planet are sustainable through generations.” To embed this sustainability into how Del Monte do business, including how it grow, transport, package and deliver its products and in how it to interact to the communities. Furthermore, securing “A Better World Tomorrow” requires to continue to act today. Through this forward-looking strategy, DMPL focus on four critical pillars of sustainability: products, communities, environment, and people. The company face a risk in the area of financial wherein the working capital management has an impact on the ability to manage the payment of the vendor and the Group has a long-term acquisition financing resulting in a leveraged balance sheet that arising a risk (if there is a general economic or industry slowdown) in the Group performance which subsequently may affect the Group’s ability to service its interest and principal obligation. As an integrated producer of packaged and fresh fruit products for the world market, the Group’s earnings are inevitably subject to certain other risk factors, which include general economic, market and business conditions, change in business strategy or development plans, international business operations, production efficiencies, input costs and availability, disruption of logistics and transportation facilities, litigious counterparties, insurgent activities and changes in government regulations, including environmental regulations. Liabilities Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at amortized cost using the effective interest

method. Interest expense and foreign exchange gains and losses are recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss. Financial liabilities at amortized cost comprise bank loans, trade and other payables. A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognized as finance cost (i)

Environment remediation liabilities

In accordance with the Group’s environment policy and applicable legal requirements, a provision for environmental remediation obligations and the related expense is recognized when such losses are probable and the amounts of such losses can be estimated reliably. Accruals for estimated losses for environmental remediation obligations are recognized no later than the completion of the remedial feasibility study. These accruals are adjusted as further information develops or circumstances change. (ii)

Retained insurance liabilities

The Group accrues for retained insurance risks associated with the deductible portion of any potential liabilities that might arise out of claims of employees, customers or other third parties for personal injury or property damage occurring in the course of the Group’s operations. A third-party actuary is engaged to assist the Group in estimating the ultimate cost of certain retained insurance risks. Additionally, the Group’s estimate of retained insurance liabilities is subject to change as new events or circumstances develop which might materially impact the ultimate cost to settle these losses. Loans and borrowing. The secured bridging loans of US$53.5 million as at 30 April 2019 (2018: US$54 million) is the remaining balance for the bridging loan that was obtained by the Company to finance the acquisition of Sager Creek and its related costs. In 2017, the

Company signed a two-year extension of the US$350.0 million BDO loans from 10 February 2017 to 2019. In April 2017, the Company settled US$196.0 million of the US$350.0 million BDO loan using the proceeds from the issuance of Series A-1 preference shares. In December 2017, the Company settled an additional US$100.0 million using the proceeds from the issuance of Series A-2 Preference Shares (see Note 17). In 2019, the Company settled an additional US$0.5 million and extended the maturity date from February 2019 to August 2020. The loans are secured by the following: 1) Share Charge by DMPL on its share in DMPL Foods Limited; 2) Pledge by DMPRL of its shares in CARI; and 3) Pledge by CARI of its shares in DMPI. Group

Company

30 April

30 April

30 April

30 April

2019

2018

2019

2018

US$’000

US$’000

US$’000

US$’000

Current liabilities Unsecured bank loans

353,870

417,310

135,070

152,140

Secured bank loans

138,870

64,310

–

53,894

492,740

481,620

135,070

206,034

Noncurrent liabilities Unsecured bank loans

168,825

57,990

111,241

–

Secured bank loans

817,090

925,613

129,774

129,594

985,915

983,603

241,015

129,594

1,478,655

1,465,223

376,085

335,628

Terms and debt repayment schedule

Terms and conditions of outstanding loans and borrowings are as follows:

Currency

Nominal

Year of

interest rate

maturity

30 April 2019 Face Carryin value

g

30 April 2018 Face Carryin value

g

amount % p. a.

amount

US$’000

US$’000

US$’000

US$’000

Group Unsecured bank

PHP

3.00%-4.50%

2020

57,584

57,584

61,856

61,856

loans Unsecured bank

USD

2.00%-4.50% 2019-2021

465,111

465,111

413,444

413,444

loans Secured

USD

4.50%-5.29%

2020

53,500

53,500

54,000

53,894

loan Secured bridging

USD

4.50%

2020

76,500

76,274

130,000

129,594

loan Secured bank

USD

Tranche A 2019/2020

136,672

133,851

10,000

6,442

2021

674,500

668,697

681,600

671,247

2021

28,555

23,638

135,055

128,746

1,492,422

1,478,655

1,485,955

bridging

– 4.11% –

loan under

6.75%

ABL Credit Agreement

Tranche B – 4.61% – 7.25%

Secured First lien

USD

Higher of Libor or 1% +

term loan

3.25% or total of 5.90% Secured Second

USD

Higher of Libor or 1% +

lien term loan

7.25% or total of 10.15%

30 April 2019

Currency

Nominal

Year of

Face

interest rate

maturity

value

30 April 2018

Carryin

Face

g

value

amount % p. a.

Company Unsecured bank

USD

2.75%-4.50% 2019-2021

1,465,223

Carryin g amount

US$’000

US$’000

US$’000

US$’000

246,311

246,311

152,140

152,140

loans Secured bridging

USD

4.50%-5.29%

2020

130,000

129,774

184,000

376,311

376,085

336,140

183,488

loans 335,628

In 2015, the Company obtained loans from BDO amounting to US$130 million to refinance its existing bridge loans with the same bank and other bridge loans with other lenders and for general corporate requirements. The loans are secured by DMPI suretyship. In 2019, the Company settled US$53.5 million bringing the balance to US$76.5 million. The BDO bridging loans above require the Company to continuously maintain a debt to equity ratio of 3:1 applicable to fiscal years 2018 to 2020 and interest coverag...