Hike in coco biodiesel blend seen to affect D&L’s margins

LISTED D&L Industries, Inc. said the government’s plan to increase the country’s coco biodiesel blend to 3% from the current 2% is expected to have a substantial effect on the company’s margins.

“The increase [in biodiesel blend] would mean the demand would go up automatically by 50% from 2% to 3%. The effect on volume and margin, we expect that it will be substantial,” D&L Industries President and Chief Ex-ecutive Officer Alvin D. Lao said during a media briefing in Mandaluyong City on Nov. 29.

According to Mr. Lao, there is a low utilization rate as the local biodiesel industry is currently capable of supplying up to 5% biodiesel blend, which is far from the government’s mandated 2% blend.

“If you look at the biodiwesel industry, we’re actually ready to provide even up to the 5% blend. What that means is the capacity to supply is the 5% blend, but the actual demand is only at 2% [blend]. If you have roughly 40% utilization, low utilization means that the margin is low and everyone is underutilized and operating at very low capacity,” Mr. Lao said.

“We think that when that increase comes, it will likely be gradual. But the effect is going to be significant,” he added.

D&L Industries has a presence in the Philippine biodiesel industry via its subsidiary Chemrez Technologies, Inc., which operates a biodiesel plant.

Some of the claimed benefits of a higher biodiesel blend include lower pollution and better value-added for coconut oil products.

“The biodiesel blend increase, I’d say, is one big factor for us,” Mr. Lao said. “Most biodiesel manufacturers now barely make any money from that product due to oversupply and demand has not been growing that much. The increase would be quite impactful.”

On Thursday, shares of D&L Industries at the local bourse improved by 21 centavos or 3.48% to P6.24 apiece. — Revin Mikhael D. Ochave