"

"

"

Hi, everyone. Good morning.

Welcome to the third quarter results briefing of D&L Industries. To discuss the results, we have Mr.

Alvin Lao, President and CEO of D&L Industries. After his presentation, we will have a Q&A portion.

I'll now hand over the presentation to Alvin.

Good morning, everyone. Thank you for joining us today for the results presentation for the third quarter of 2025.

So, our highlights are that we were able to increase net income by 8% for the first 9 months of the year. And compared to the third quarter last year, net income was higher by 12% for this year's third quarter.

So, we saw volume growth coming in at a pretty good level at 11%, up despite the much higher coated oil prices we're experiencing this year compared to previous years. Our exports continue to do well with the growth in gross profits from exports.

It's up by 22% year-on-year. Our CapEx continues to be very manageable, so continuing to trend lower.

And so, giving us a lot of more cash in our cash flow. And the final point there is that this year definitely has been challenging, but we are -- we continue to be confident and we continue to perform despite the challenges.

So, the first slide, here, we see how we did in terms of net income in previous years as well as the first 9 months of the year comparing it this year's versus last year's first 9 months. And so, you can see there the 9-month net income coming in at PHP 1.95 billion, so slightly below PHP 2 billion.

And then here, you can see how Batangas plant is continuing to perform. So still profitable.

And so, you can say that for 4 consecutive quarters, the Batangas plant has been profitable. And we have mentioned before that this is actually ahead of our expectations.

We were not expecting the Batangas plant to be profitable for at least the first 2 years. So, this has come in earlier than we had expected.

In terms of the condensed income statement, so the big jump there, you can see in revenues. So, for the first 9 months of the year versus last year, revenues were higher by 40%.

However, admittedly, the bulk of this is due to price increases with a lot of raw materials, especially coated oil being significantly higher this year versus last year. So, you can see that cost of goods sold, the jump there has actually been quite high as well.

So, for us -- so one big trend or change that you can see. So, interest rates have been going higher, and we have had to borrow more because of the higher working capital requirements.

So, interest expense is up this year versus last year. Then another change that you'll see in terms of income tax, we are paying significantly less income tax this year, primarily because of the operations coming from the new plant, which is in Quezon where we are experiencing an income tax holiday.

But the end result, we do see our net income coming in at PHP 1.95 billion, higher by 8% compared to last year. So, if you were to compare that to last year's full year net income coming in at about PHP 2.3 billion.

So, we need a little under PHP 400 million in the last quarter of the year to at least match the performance from last year. So, fingers crossed.

Okay. The next slide, so we've got more details on our export sales.

So, in terms of export revenues, it's higher by 20%. However, -- so what we're seeing is that we had our biggest growth driver this year, which has made the biggest impact is really biodiesel.

So, the biodiesel blend went up from 2% to 3% starting October 1 of last year. And that means in terms of our product mix, the commodity side increased much faster than the domestic -- sorry, the high-margin side.

And so that's why you see the exports as a percent of sales figure there in the yellow box coming in at 27%. So, it's not that exports did grow.

It's really more that the domestic side grew much faster, primarily because of biodiesel. So, more details on the exports and how they're doing.

So gross profits there, you can see on the right, exports higher by 22% versus 8% growth from our domestic side. So, both sides growing, it's just that exports are growing faster.

And then, of course, on the bottom there, you can see in terms of blended gross profit margins, we're seeing export gross profits coming in significantly higher than for the domestic side. Now the next slide looks at volume growth.

So, we have our 4 main segments here, and then we have split it up between high margin and commodities. And so, we can see here that in terms of volume, we actually experienced higher growth in our high-margin business, whereas for commodities, it still experienced growth, but overall, it was higher by a smaller amount.

But if you look at the big numbers there, the biggest change came from the commodity side of Chemrez. So that's the second row for the oleochemical business with volume growing by 49%.

And then the next highest growth came from the high-margin food side with volume higher by 22%. So overall, high-margin volume up by 14%, commodities volume up by 10% and overall volume up by 11%.

So, the next slide shows you on a quarterly basis, how high-margin sales have moved. And so, we wanted to present this because the bulk of our profits do come from our high-margin side.

And so, as you can see, last quarter, the high-margin segment overall volume actually dropped slightly by 4%. However, this year, on a quarterly basis, volume is actually higher by 12%.

And in the next slide, you can see here how more focused on our high-margin segment. And the margins overall have come down.

And we'll see that -- we'll see more details later when we go into the segments, but this is primarily due to the lower margins on our food ingredients business, which is primarily a result of higher costs, which is predominantly coconut oil. For the next slide, so a closer look at our commodity segment.

So, revenue significantly higher, up by 75% overall for commodities. So earlier, we showed that volume was higher by 10% for commodities, but with revenue higher by 75%.

So, you can see that we are able to -- it's much easier to pass on price changes on the commodity side and the margins are lower than where they were last year. But I would say that's pretty much the midpoint of where we would normally achieve the margins for our commodity business at between 7% and 8%.

The next slide, so you can see the product mix between high margin. So that's the dark side at the bottom and the commodity side of our businesses, which is the lighter side at the top.

So, this is something that we started seeing actually earlier in the year. So, in our previous briefings, we had also shown that high-margin segment as a percent of overall revenue has gone below 50%.

But again, this is primarily due to the fast growth of biodiesel. So, with much higher growth in commodities, significantly higher than for the high-margin side, we can expect that product shift to change this way.

And I would say it's temporary. And later on, we can discuss about biodiesel in more details.

So, here's a look at our free cash flows. So, change in working capital.

So, a big chunk of cash, which is very close to where it was. Actually, it is a slight improvement from where we were in the first and second quarters.

But because of our continued profitability as well as much better management of working capital. Free cash flow, which was negative PHP 3-plus billion in the first quarter, it's still negative, but now below PHP 1 billion.

So, it's a big improvement. So quite a lot of things moving here.

We've got higher earnings. We've got slightly better change in working capital.

And of course, CapEx has been much more muted compared to previous periods. And speaking of CapEx, so here, we can see -- so we started commercial operations in our new plant in Batangas in July 2023.

So, CapEx actually peaked the year before in 2022 and has been trending lower. If you were to annualize this year's number, we're projected to come in below PHP 800 million for CapEx for the full year, which is significantly lower than before.

And I'm not sure if that will be the level that would be on a more recurring basis. There might still be some room there for further improvements in the next couple of years, but it's getting close.

So here, we can see how our 2 most used raw materials, which are coconut oil and palm oil how their prices have moved over the last 15 years, the brown line being coconut oil. So, we experienced that peak at roughly pretty much at around $3,000 a tonne that came in a couple of months ago.

Currently, we're at around $2,500 a tonne. That spread or gap between coconut oil and palm oil, it is still quite significant.

So, it's not as wide as it was when we saw the peak in coconut oil prices, but it is still fairly large. Then we have the other factors that affect our costs like the dollar-peso exchange rate.

And above, we have our margins. And so, what we have mentioned in the past is that our margins don't necessarily reflect just the high costs.

But if you were to go back to the previous slides with our product mix, you'll notice that the margins follow our product mix more closely rather than just the movement in our costs. So, here's a look at our group results.

So, our 4 major groups, food ingredients, oleochemicals, which are under Chemrez, specialty plastics and then fourth, our consumer products business. So, food ingredients is still the #1 largest business in terms of revenues.

Chemrez has been -- has become the biggest contributor of net income followed by specialty plastics. So, more details on food ingredients.

So, this business has seen very good top line growth, revenue up by 40% volume -- even volume is higher overall by 7%. And you can see in the details in the 4 boxes at the bottom, except for the commodity business, which is the second box.

All the other segments, which are all higher margin volume as well as revenue have seen significant improvements. And so this is -- I would say this is a very good sign.

It is a precursor to us setting up a very good foundation for growth in the food ingredients segment going forward. So net income lower by 66%.

Again, this is primarily due to the shift caused by much higher coconut oil prices. And we do believe that just like what has happened in the past, whenever prices hit peak and prices accelerated upwards, it was only a matter of time, a short period of time before prices would come back down.

We believe that is something that is likely going to happen as well. And so, when that happens, things will normalize.

And so, margins as well as profitability in this segment will improve. For Chemrez, so overall, very good numbers, volume up 30%, revenue up 90% net income up 88%.

So, volume higher across the board, doing quite well, slightly lower margins. Part of it is because of higher costs.

We do use coconut oil in our oleochemicals segment, especially, of course, for biodiesel. And speaking of biodiesel, so in terms of the blend, so we started at 1% blend in 2007, which became 2% in 2009.

So, the blend was increased to 3% last year and was -- the increase to 4%, which was supposed to happen this year has been postponed. We do not know yet when that 4% blend will be implemented.

We anticipate that it shouldn't take too long, but it is going to be a net positive for everyone in the industry when that happens. For specialty plastics, volume slightly lower, but this was a business that is coming off a high base because it's been growing -- it had been growing significantly well in previous periods.

But overall, we still see an improvement with net income higher by 2%. And then fourth, so our smallest segment doing very well, volume up by 6%, revenue up 32%, net income up by 50%.

And what we see here is that the biggest volume increase coming from personal care with the biggest increase in margins as well, reflecting that trend of people really being back to normal. So, after COVID, it took the Philippines quite a while to stabilize.

I would say things are very much back to normal now. The traffic is back to normal.

The malls are full, a lot of restaurants with a lot of long lines. So understandably, compared to what we saw during COVID, the personal care business is back.

So, in terms of what we classify as related party expenses. So, we can see in this chart, on the left, we have rentals that the company pays for a lot of its fixed assets.

So, these include land, buildings as well as barges. This comes in normally at between 1% and 2% of costs and expenses.

So, if you look at the balance sheet of D&L, you'll see that D&L doesn't own any land or buildings, and most of these are leased from affiliated companies. And on the right side, D&L charges a fee to manage a lot of what we call shared services, so everything from admin, finance, legal and so on, and that's related party income.

In terms of our cost structure, so no major surprises here, raw materials still being our #1 largest cost, followed by labor and then depreciation and rental. So if you were to look at what's classified as fixed costs, it's pretty much just depreciation and rental, maybe a little bit of utilities and then maybe half of others.

So that's coming in at less than 10% of our costs classified as fixed. And on the right side there, you can see around 31% of our raw materials are imported primarily in U.S.

dollars. So, a quick look at our balance sheet.

You can see that our debt is higher because we had to borrow more to support the higher working capital required. However, if you look at our ratios, specifically return on equity, return on invested capital, we saw the bottom in 2024.

So understandably, as we were constructing our plant and putting in more investments, we saw our ratios drop. But as things are getting better, as the CapEx number has started to stabilize, then we see ROE and ROIC improving.

In terms of the capital structure, so we're currently at 3x interest cover. And net debt is at PHP 22 billion.

Average cost of debt is 6.1%. This includes the effect of stock steps.

And on the next slide, you can see there just how -- so we've been tracking for the last 10 years, our net debt effective interest rate as well as interest cover. So, for our working capital, so what I referred to earlier, overall cash conversion is significant, has improved by a lot, currently at 117 days compared to 139 days last year.

So, we see big improvements in inventory and in receivables with inventory now down to 82 days and receivables further improving to 46 days. In terms of our listed shares, D&L is currently ranked #64 among the largest companies in the Philippines with a market cap of approximately PHP 32 billion.

And we just wanted to highlight here how the family -- since the IPO in 2012, so in the last 13 years, the family has bought back almost 600 million shares, which is roughly 8.3% of total outstanding shares, which leaves the float currently at 26%. And this year, we've actually bought much more than last year.

So last year, the family bought 20 million shares this year, as of date, we have bought 69 million shares. So as the price continues to be attractive, we're also buying shares in our company.

And foreign ownership in D&L currently at 10%. So, in terms of how the stock has done, so since the IPO, the composite index has been up slightly by 2%.

D&L is still higher by 12%, and based on the dividend this year, our dividend yield is at roughly 4.7% based on today's prices. So that doesn't include the increase -- the potential increase in the dividend that should come due to higher income this year, which is -- so that dividend is for next year.

And at the bottom there, you can see the various conferences that we are continuing to participate in. So that's the deck in a nutshell.

We're open for Q&A.

So, we have Brad on the line raising his hand. So, Brad, let me just allow you to talk and you may ask your questions.

Sorry, I must have clicked the wrong link. This is Parvin.

Congratulations on the results. It seems like coconut crude oil prices are finally turning around.

I had a big picture question. So, if I look at your gross profit margin, so the company has been through many cycles of high and low coconut oil prices.

For example, the last one in 2022, it almost hit, I think, 2,000, which if you account for inflation comparable to what is happening now. But gross profit margins, especially if we look at the last 3 months for Q3, I think they are the lowest in -- maybe since 2013 or '14.

I was wondering if there is something different about this cycle or this year specifically that the impact of higher coconut oil prices is taking longer to -- maybe it's taking for you longer to pass through it.

Well, so it's a good observation. In terms of the peak, if you were to use -- if you were to adjust for inflation, the peak is not that far.

However, the bottom, I would say, is in that sense would be quite far. So, what I mean by that, the difference in percent between the bottom and the top is much larger now compared to before, if that makes sense.

So that -- it just means that the magnitude of change being much bigger, it's a lot harder to manage and the effect on us has been greater. I would say that's a major factor.

The other factor here is that when going from a biodiesel blend of 2% to 3% or a 50% increase, even though from 0% to 1%, so that happened in 2007 and then 1% to 2%, which happened in 2009, when we saw the peak in 2011, that wasn't a factor at all. However, so I guess what I'm trying to say here is in terms of what happened with coconut oil price, it does look like that 1% increase in the blend did have an impact on coconut oil prices.

And that further aggravated how rapidly coconut oil prices have moved. And so, it's really more just the magnitude of the change.

It's much bigger compared to what it was before.

And a quick follow-up. So, it seems like there is much bigger divergence between palm oil and coconut oil.

And if we assume that for next, let's say, 2 years, coconut oil price will be coming down maybe 10%, 15% every year. What kind of an impact would it have on your financial statements?

We believe that currently, our margins are lower because of that delay or lag when we adjust prices going up. And we will see a similar lag when we adjust lower.

So, the margins should be much better on the way down.

How long does it usually take? For example, I think coconut oil prices stopped -- started coming down since July of this year.

So, it has been already 3, 4 months. For example, for October or November, do you already see that you were able to pass through all of the price increase and you're back to normalized margins?

Or basically, how long does it take?

So this is a little harder to -- so normally, it's 30 to 45 days. However, when it comes to coconut oil, we have a lot of storage and a lot of the product that we store were not just bought in the last 1 or 2 months.

Some of them were bought in much earlier periods. And so, with the price coming down now, but with all of this inventory purchased maybe 3, 4, even 5 months ago, they are bought at higher prices or even the same price.

So, it has affected us. But in general, it should be 30 to 45 days.

For Q4, do you think we will already see a normalized margin or it will be more like Q1 or even Q2 of 2026?

Maybe not fully normalized yet. It will depend on -- because the -- so we thought after the peak a couple of months ago, we thought the prices would come down quickly.

They haven't come down as quickly as we anticipated. So, a lot of it is hinging on how quickly prices come down.

But I think it's fair to say that we're past the trough or the lowest in terms of margins. They're not going to go any lower in the fourth quarter.

We're pretty sure of that. So, they should be higher in the fourth quarter.

In terms of how much higher, I can't say for sure at this point.

And last question, have you had any pushback because you have been increasing prices, not on commodity side, I guess, on more high-margin product side? Any pushback from clients?

We're always getting pushback for raising prices. I mean it's just part of the -- it's just how it is buyers paying higher prices.

But the upside here, I believe, is that the market has kind of been used to paying significantly higher prices in the last 12 months. So going forward, when costs go down, the market will still be in this high price mode history, recent history.

So it won't be as hard to charge prices that are higher, if you know what I mean, like because everyone is already paying higher prices for the last 12 months, even when coconut oil prices coming down, as you sell, since everyone still remembers and is used to paying higher prices, there's less resistance to pay higher prices now.

The next question comes from Brian Oy. Actually, Alvin has touched on some of it, but I'll read it anyway.

So, in case Alvin would like to add something else. So, given the recent pullback in coconut oil prices, do you see Q3 2025 as the bottom for gross margins?

Is the worst over for working capital pressure?

Yes. This is pretty much the lowest we've seen in terms of gross margins for a while.

It's hard to see it getting any lower. It doesn't make sense.

I mean, just looking at our history, looking at our -- what we're capable of, looking at the value that we give to our clients, it's really a factor more of how our costs have moved. And it's just the price lag when we pass on higher prices.

So, it's not going to last definitely.

Next question comes from Mike [indiscernible]. So, if we strip out the temporary tax holiday from Batangas, what would be the normalized effective tax rate and margins?

So, I have to turn to Crissa to answer this.

So, for the Batangas plant, so our income tax holiday started in 2023. So initially, it was 4 years, and we got a 2-year extension.

So, it will end. So, 2023 plus 4, 2027 plus 2, it will end in 2029.

For the corporate tax rate in the Philippines, as you -- as all of us are familiar with, so it's currently at 25%. But in our company, we have certain segments that enjoy income tax, preferred income tax rates, for example, for our biodiesel business, which is 10% of gross income.

We have a plant in Laguna for our specialty plastics plant, which is taxed at 5% of gross income. And for FIT or the plant in Batangas, so income tax holiday expires in 2029.

And after that, I believe we can still enjoy the 5% tax on gross income, I think, until 2034. So, on average, I'd say that after all the income tax holiday, it should be around 20%, definitely less than 25%, but that would be by the year around 2035.

So, from now until 2029, we'll probably average around 15% effective tax rate. By 2029, it should be a little higher than that, but still well below the 25% corporate income tax because of the 5% tax on gross income for Quezon located plant.

So, there you go. Next question comes from [indiscernible].

Congratulations for the remarkable performance in the first 9 months amidst a challenging business environment. My question is, given higher cash flow, lower CapEx spending and higher net income, is there any chance of increasing your cash dividend payout in 2026?

Good question. So, it's the Board who will decide that.

Off hand, so we've got -- so we issued the bond in 2021. The 3-year portion matured last year.

The 5-year portion is maturing September next year. So that's PHP 2 billion that we have to pay out.

And even though CapEx is trending lower and even if working capital is managed much better now and even if commodity prices or coconut oil prices come back down, the effect of all the borrowing we had from building our Batangas plant, that amount of debt, it's still going to be there. And so with that in mind, maybe not 2026.

2026 might be too early for us. That's my personal projection.

It might be -- we might need another couple of years to be comfortable with paying down the debt even more. Maybe see interest -- so now our interest cover is 3x, which is -- before it was over, I think, 20 in previous periods before we built the plant.

So, I would say we would need interest cover at a much higher level before we would discuss a higher payout.

Next question comes from Daryl Wong. Could you help share more color on why Batangas plant net profits were down quarter-on-quarter?

So, in terms of our food manufacturing, a lot of it is done out of the Batangas plant. And with food net income lower by 66% overall.

That is -- that has -- a big chunk of that is coming from our Batangas plant. And I guess the other factor is biodiesel.

We don't make any biodiesel in the Batangas plant. It's made here in our Quezon City plant.

And biodiesel has been a big driver of growth for us this year. So that's the 2 sides.

Next question comes from Dan Brian. Two questions.

Question number one, currently, do you see coconut oil and palm oil declining or holding steady? Do you see more reasons for it to go down or hold steady?

Second question, what segments will drive growth for the near-term?

Okay. So, coconut oil, just looking at it -- so if you were a technical analyst, you'd probably say that coconut oil prices went up too fast.

And from a historical perspective, it's always had that pattern in the past of whenever the increase is super rapid, the decline would be super rapid as well. So, my bet would be that coconut oil prices are still headed lower.

Palm oil, on the other hand, the supply is much bigger. So, the price movement there is not as -- it doesn't fluctuate as much.

So, it has a higher chance of being a lot steadier. Second question in terms of what will drive growth for the near-term.

So, Crissa, could you please show again the food ingredients slide. So, you can see here -- so in food ingredients, we have the high-margin side and the low margin side.

The low-margin side there is a second box at the bottom, what's called refined vegetable oils. So, you can see here the gross profit margin coming in at 5.6%, whereas all the other -- the first, third and fourth boxes, gross margins are significantly higher.

And for the refined oil side, volume actually fell by 2%, but it was coming off a high base, meaning it just grew a lot since COVID, whereas the high-margin side of our food business, it was the opposite. They were not really doing well.

They did really badly during COVID. But now you can see both on a volume as well as revenue basis, much higher growth.

So, your question in terms of what will drive growth near-term. I mean, I'm just looking at these numbers.

Once these margins normalize, you can just imagine the impact on the profitability. It's going to be quite big, the positive impact.

So that would be -- I would say in terms of what would make the biggest difference, this will likely be the one.

Next question comes from Brian Oy. So, what was the revenue and gross margin at the Batangas plant in the third quarter?

Okay. So, we don't break that down.

But what we do break down -- Crissa, could you go to the exports slide, the second slide? What we do break down is, in general, the amounts for exports in terms of revenue, gross profits and margins.

So, I would say this is a better representation because we don't just export from our Batangas plant. We also export from our other operations as well.

And I would say this is a better way to get a feel of how the exports are doing versus the domestic side. And it's also -- it gives a better picture really of how the different operations -- to summarize all the different operations.

Next question comes from Rainier Yu. So, 2 questions.

First question, can you give more color on the net income growth for oleochemicals despite margins dropping quite significantly? Second question, any seasonality seen in Batangas plants operations or profitability?

So, in terms of Chemrez, so net income grew because of that 49% increase in volume from biodiesel. So, when you go from a 2% blend to a 3% blend, that's 50% increase.

So more or less, the volume growth in biodiesel is in line with that increase in the blend. Margins, well, they're lower precisely because biodiesel is a lower-margin business compared to the other oleochemical businesses.

So, when you have a lower-margin business growing faster than the higher-margin businesses, then that change in product shift -- the change in product mix shifts your overall margins lower. And that's really what happened, I would say.

In terms of the second question, seasonality in the Batangas plant operations, I don't think so. We don't really -- there's -- we don't make any products where there would be significant difference in terms of time of the year or the temperature or season.

So not really much in terms of seasonality, I would say.

I don't see any more outstanding questions from my end. So maybe we can give our investors one more minute in case they have further questions.

Okay. Parvin is raising his hand.

So, Parvin, you may ask your question.

I had a quick follow-up on margins for food segment. Could you explain in a little bit more detail why the profitability there dropped more than in other segments?

In food ingredients?

Yes.

Okay. So, this was really a function of -- so partly -- so a big chunk of it is because of the higher coconut oil prices.

And then earlier, there was a question asked, I think you were the one who asked this, Parvin, in terms of resistance when it comes to raising prices. So, there's always resistance, but the problem comes when you reach a point where the price is so high that the customer doesn't -- it doesn't make sense for the customer to buy anymore, and they just stop buying.

We kind of -- I believe we kind of hit that point with some of our products. And so even if volume is up by 7%, I believe we did lose some business just because the customer -- our customer, which are food manufacturers, food retailers, they just couldn't buy it anymore because the price was just too high.

So high cost and very resistant price acceptance by the customer, it's just a perfect typhoon or perfect storm that will result in margins and net income dropping.

But then what the customers do, do they -- like, let's say, crispy cream, right. Do they switch to palm oil?

Do they change the recipe?

So, coconut oil -- so I believe the doughnut makers will be using, I think, soybean oil, not necessarily coconut oil. But anyway, I get your -- the users of coconut oil, some of them already switched a long time ago when prices -- from $1,000 a ton when it went up to $1,500, you can see a lot of them already switching when it went up to $2,000, even more switched all the way up to $3,000.

I mean, those that could switch already switched. So those that could not switch, a lot of them just had to absorb it.

So, one thing that helps is that when you look at most of our customers, cost breakdown. Usually, food cost is anywhere from maybe 18% to 30%, 35%.

And out of that 18% to 35%, less than 1% is from the food oils in general. So even if that product or even if that raw material cost went up so much, the overall impact on their cost is not as significant.

So yes, there's resistance. They just buy so much less.

They use up all the inventory. So, they don't keep any inventory anymore.

So not necessarily that they stop buying, but they just buy a lot less than before. So, when prices come down, that behavior will change.

They need inventory. So, they will buy more than what they normally buy because they need to stock up on inventory again.

They will be less resistant in terms of ordering larger volumes. So that change in behavior will result in demand -- a significant rise in demand.

So, volume up overall in a very difficult market, when the costs come down, as it comes down, we anticipate volume will go up even more. So, the margins will also go up and the profitability will definitely improve as well.

Our next question comes from Peter Wong. So, for each individual subsegment of food ingredients, what should be the normalized gross profit margin?

Okay. So not sure how to answer that because if you recall the chart for coconut oil, it's really volatile.

So, it's kind of hard to say there's a normal period. But in general, the lowest margin will be the refined vegetable oils.

That's usually low to mid-single digits. So anywhere in the past, so 5.6% is where it's at right now.

So that's the second box. on the screen.

That's pretty much close to the high of what we would normally see for a commodity product. It can go as low as 2% or even lower GPM.

So, you could say it's barely profitable. So, the profits from our food ingredients business really comes from the other 3 segments, which are usually double digit.

So, specialty fats and oils, current GPM is 9.6%. That's where we've seen the biggest drop.

If you can see there, it's negative 9%. So, it used to be at 18-plus percent last year.

So that in normal times would be above 20% GPM. Whereas specialty ingredients, food safety, higher margins than specialty fats and oils, so specialty ingredients, probably mid- to high 20s.

Food safety should be around mid-30s should be more normal.

A follow-up question from Peter. So, for food ingredients, you mentioned that those who can switch would have switched to alternative when coconut oil prices increased.

I guess we are losing volume with existing customers, but D&L is reporting a very healthy increase in volume. What are the new sources of demand such that we have such a good volume increase in the recent quarters despite very high coconut oil prices.

Yes. Okay.

This is very complicated because of the industry environment we're in. When you have prices this high, it's not just us that's selling to very reluctant customers.

Our competitors are also in the same boat. And a lot of our competitors are, I would say, in much worse position than us.

And what's happening is because our company is seen as the leader in our industry, where a lot of large customers have reliance on our competitors are not as -- they're just not as stable and reliable as we are because we've been around longer. We're a listed company.

We hold our reputation very, very seriously. So, we really treat our customers very well.

And so even in this very difficult environment, as you see from refined vegetable oils, the volume is down, but it's only down by 2%. It's really not a big drop.

I can tell you for our other competitors, their volumes are likely down by a lot more. So, what's happening is our -- for a lot of our customers, they're buying less.

So, if you just look at our regular customers, the drop in volume is much more than 2% for the refined vegetable oils. But what's happening is for some other food manufacturers, food retailers that are buying from -- sorry, that we're buying from our competitors, our competitors are not able to service them anymore.

So, they're turning to us. They're now buying from us.

So, every time there's difficulty in the industry, we're the company that a lot of customers turn to. So, what's happening is we're gaining market share.

And that is something that's happening this time again. It happens every time there's a difficult crisis happening in the industry.

So in terms of volume, yes, we've lost a lot of volume with our regular customers, but we kind of gained volume from our nonregular customers when their suppliers gave up or couldn't service their requirements anymore because when prices go up as much as it has from $1,000 a ton to $3,000 a ton, that requires much more cash in terms of inventory, receivables. And a lot of our competitors are not built to withstand these large financial shocks.

So, because we are run relatively conservatively, because -- well, it helps that we're listed and we have good lines with our banks. We were able to raise a bond a couple of years ago.

It helped that we do have the cash to sustain such a crisis. So, it's much more than just what we see happening just for us as a company.

It's really what's happening in the industry.

Next question comes from Clark. How much do you think your pricing can stick if ever coconut oil prices go down?

Since it would be difficult for customers to switch given the differentiated nature of the high-margin products, do you think we can maintain the high pricing?

Short answer is yes because this is not -- volatility of coconut oil is not new to us. I mean we've been doing this business for roughly 40 years, almost 40 years.

I mean, just food ingredients. And it's just part of the cycle.

So, we just have to write it out. I would say -- so earlier, I was talking about how we've seen a lot of customers who use coconut oil, they use up all their inventory.

They're just buying what they need. A lot of those who have switched have already switched.

I can bet you that a lot of them, when the price normalizes, they will gladly switch back to coconut oil. And you don't need to wait for $1,000 a ton for that to happen.

It will happen much earlier because there really is a significant difference in taste, in quality and in so many other aspects that makes coconut oil advantageous. So, the short answer is yes.

We will see that.

Just a follow-up on that stickiness. So, from Peter Wong.

How sticky these new customers will be if coconut prices decline significantly from here on and our competitors can go back to servicing these customers that weakened? My guess is stickiness will be low for refined vegetable oil.

What about for the other 3 segments? Basically, his question is, to what extent will you be able to keep the elevated volume to enjoy higher margins as and when coconut prices declined significantly?

So, I wish I could say that customers who turn to us in bad times will stay with us in good times. However, this is reality.

We will keep some definitely. We will lose some.

Because there are some companies who will prioritize different things, and we won't be the cheapest out there. So, it's just part of business.

We can't be the best at quality and reliability and be cheap as well. I mean something's got to give, right?

So, it's fine. And that's really -- it's really part of the game.

I mean we're not in this for the short-term. We really look at this as a long-term.

I guess one way to look at this, we have some new customers who didn't buy from us before who are now buying from us. And now they're experiencing the improvement in quality, the much higher reliability.

They will remember this, and they will include this as part of their criteria, the next time they buy, the next time when prices are lower. But some customers will not remember, and this is part of the game.

Next question comes from Rainier Yu. Has the company seen any demand impact from the U.S.

tariffs.

Very little because we don't sell that much to the U.S. I think overall, our U.S.

revenue is around maybe 2% to 3%, I think. But out of that, I would say a lot of those products, the customers don't necessarily prioritize price, which where the tariffs have an impact.

So short answer, the impact is not that significant.

No outstanding questions that I can see from my end. So, we can give our investors another 1 minute just in case they have further questions.

Okay. There's a follow-up question from Peter.

How is the industry landscape in biodiesel? Any new capacity being planned by your competitors?

My guess is demand would have stabilized and will be at the current level based on current blending.

We heard there were a couple of companies that had planned to build plants before like Petron, but they decided not to go ahead. There are maybe 1 or 2 companies who have built plants.

But in terms of positioning, we're definitely still the biggest. So, if the question is, has competition dramatically increased?

The answer is no. There's some out of like maybe, I think, 12 companies certified by the Department of Energy as biodiesel manufacturers.

There's a couple of new ones, I believe, but the overall impact on supply, I don't think has changed much. In terms of demand, demand is pretty steady because it's a law, it's a mandate.

So, the oil companies are required to comply with 3% blend. So, price does not come into play in this case.

Next question comes from Dan Brian. Have there been any exciting R&D updates recently?

So, we're constantly investing in R&D. We're constantly coming up with new products, new innovations, some of which we've talked about, which we're very excited about, some which we will disclose when the time is right.

No outstanding questions so far. Okay.

So, if no more questions, that concludes our third quarter briefing. Again, thank you so much, everyone, for joining this briefing.

And as usual, if you have any further questions, you may always reach out to us. Thanks again, and see you at our next briefing.

Thanks, everyone. Take care.