However, its Own Brands sales for Indonesia were higher, particularly for its premium products segment, which partially offset the decreased sales in Agency Brands. Higher Own Brand sales was driven by greater promotional investment.
The growth in Regional Markets was driven by robust Own Brands performance in the Philippines, and improved Agency Brands sales in both Malaysia and the Philippines.
See more: Delfi reports lower earnings of US$17 mil for 1QFY2025 due to weaker regional currencies
Following the results release, analysts are keeping a rather muted sentiment on the group, as they maintain their "hold" calls, as they wait for better days.
UOB Kay Hian has an unchanged target price of 82 cents on the counter.
Management expects elevated cocoa prices to remain as headwinds, putting pressure on costs and consumer demand. Cocoa futures have surged over 40% y-o-y, reaching over US$12,000/tonne in early-2025 – more than triple the prices y-o-y – driven by factors such as climate change, crop diseases and underinvestment in West African farms, which produce 80% of the world’s cocoa.
"While this is likely to weigh on profitability in the near term, management believes the group is well-positioned to navigate these challenges, backed by its strong brand portfolio, operational resilience and disciplined execution," say analysts Heidi Mo and John Cheong.
See also: DFI Retail Group is on track to drive profit lift
Delfi held a net cash position of US$51.7 million (+7% y-o-y), supported by robust operating cash flow of US$37 million (+7% y-o-y) during the quarter. Its healthy current ratio of 2.01x and low gearing also support its ability to sustain brand investments and navigate input cost pressures. "Notably, its inventory level is down 7% y-o-y to US$90.5 million, reflecting Delfi’s tighter inventory management and signals its focus on operational efficiency amid macro uncertainties," say the analysts.
The way the analysts see it, the outlook for Delfi may remain challenging, a normalisation in cocoa prices could support earnings recovery for Delfi.
Similarly, DBS Group Research has also kept its "hold" call and 80 cents target price on Delfi.
"The softer performance was largely anticipated, given the weak macroeconomic conditions in Indonesia and persistently high cocoa prices. However, the sharper-than-expected Ebitda margin contraction — from 15.5% to 11.3% in what is typically the company’s strongest quarter — likely reflects an increasingly competitive landscape," say the research house.
Its closest peer, Mayora, raised its advertising and promotion (A&P) spend by 17% to strengthen market presence, and DBS believes that Delfi similarly ramped up A&P investments meaningfully, which weighed on margins.
"With cocoa prices still elevated near USD11,000/ton, we expect earnings recovery to be pushed back to FY2026 or later," says DBS. That said, Delfi’s strong free cash flow generation should help sustain its absolute dividend at 3.24 US cents, implying an about 5.9% yield at the current share price of 71 cents, which will provide some downside support to share price.
On the other hand, CGS International has downgraded its call on Delfi to "hold" from "add" previously with a lower target price of 71 cents from 88 cents, as analysts Tay Wee Kuang and Tan Jie Hui trim revenue expectations due to macroeconomic uncertainties that could weigh on consumer sentiments and dented profitability given elevated cocoa prices, while accounting for a negative translation impact from the weaker USD against SGD.
Upside risks include improved profitability from better margins and maintaining its FY2024 DPS of 3.24 US cents in FY2025, which translates to a payout ratio of about 78% (FY2024: 58%) and yield of around 6.0%, based on CGS's estimates. Downside risks are economic downturn that could further arrest revenue momentum as well as a loss of market share.
As at 9.45am shares in Delfi are trading at 72 cents.
