D&L Industries, Inc.

Hi, everyone. Good morning. Welcome to the third quarter results briefing of D&L Industries. To discuss the results, we have Mr. Alvin Lau, 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 nine 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 coconut 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 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 nine months of the year, comparing it this year's versus last year's first nine months. And so you can see there the nine-month net income coming in at 1.5%. nine five billion pesos so slightly below two billion pesos and then here you can see how batangas plant is continuing to perform so uh still profitable and so uh you can say that for four consecutive quarters the batangas plant has been profitable um and we have mentioned before that this is actually ahead of our expectations we were not expecting the batangas plan to be profitable for at least the first two 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 nine 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 coconut 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 a PESA zone where we are experiencing an income tax holiday. But the end result, we do see our net income coming in at 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 2.3 billion PESAs. So we need a little under 400 million PESAs 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 commodity side increased significantly. much faster than 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 didn't 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 four 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 ChemRest. So that's the second row for the oleochemical business with volume growing by 49%. um and then the next highest growth came from the high margin food side with volume higher by 22 so um 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 you 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. the next slide so a closer look at our commodity segment so um revenue significantly higher uh up by 75 percent uh for overall for commodities so so earlier we showed that volume was higher by 10 percent for commodities but with revenue higher by 75 percent so you can see that 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 we can see the product mix between high margin. So that's the dark side at the bottom and the commodity side of our set 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 year. 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 um we we can expect um that product shift uh to uh to change this way and i would say it's temporary um so uh 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 three plus billion pesos in the first quarter, it's still negative, but now below one billion pesos. 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 analyze this year's number, we're projected to come in below 800 million pesos for CapEx for the full year, which is significantly lower than before. And Not sure if that would 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 two most used raw materials, which are coconut oil and palm oil, how their prices have moved uh over the last 15 years uh the brown line being coconut oil so we experienced that peak at roughly pretty much at around three thousand dollars uh a ton that came in a couple of months ago currently we're at uh around two thousand five hundred dollars a ton uh that spread or a 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 price 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 four major groups, food ingredients, oleochemicals, which are under ChemRes, specialty plastics, and then fourth, our consumer products business. So food ingredients is still the number one largest business in terms of revenues. ChemRes 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 four 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 a peak and prices accelerated upwards it was only a matter of time 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 ChemRes, 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 oleochemical 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 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 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 improvement volume increase coming from personal care was 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's 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 you 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 number one 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 US 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 return on investment 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 three times interest cover. um and uh net debt is at 22 billion pesos average cost of debt uh is 6.1 percent this includes the effect of top stamps uh and the next slide you can see there uh just how so we've been tracking for the last 10 years um 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 number 64 among the largest companies in the Philippines with a market cap of approximately 32 billion pesos. And we just wanted to highlight here how the family, since the IPO in 2012, so in the last 13 years, the family's 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. uh so as the price continues to be attractive uh we're also buying shares in our company and foreign foreign ownership in dnl currently at 10 so in terms of um how the stock has done so uh so Since the IPO, the composite index has been up slightly by 2%. D&L is still higher by 112%. 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 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 uh that we are continuing to participate in so that's um that's the deck in a nutshell we're open for q a

Okay, thank you, Alvin, for the presentation. 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. Okay, Brad, you may ask your questions now.

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

Oh, sorry. Okay, Parvin. Hello. Good morning.

Good morning. Thank you so much for your presentation and congratulations on the results. It seems like coconut crude oil prices are finally turning around. I had a big picture question. If I look at your gross profit margins, so the company has been through many cycles of high and low co-control prices. For example, the last one in 2022, it almost hit, I think, 2000, which if you account for inflation, comparable to what is happening now. But gross profit margins, especially if we look at the last three 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, like 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 adjust for inflation, the peak is not that far. However, the bottom, I would say, 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. Does that make sense? So it just means that the magnitude of change being much bigger, it's a lot harder to manage and 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 um aggravated how rapidly coconut oil prices have moved and it's so it's really more just the magnitude of the change it's much bigger compared to what it was before got it thank you and a quick follow-up uh the 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 two 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?

So we believe that currently our margins are lower because of that delay or delay 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 It started coming down since July of this year, so it has been already three, four months. For example, for October or November, do you already see that you are able to pass through all of the price increase and you're back to normalized margins or not? but 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 one or two 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 three, four, even five months ago, they're bought at higher prices or even the same price. So it is, it has affected us but in general it should be 30 to 45 days for u4 do you think we will already see a normalized margin or it will be more like q1 or even q2 of 2026 um maybe not fully normalized yet it will depend on because the so we thought um 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.

All right. Thank you. Sorry. 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, you know, it's just how it is. Buyers hate paying higher prices. But the upside here, I believe, is that the market has kind of been used to paying significantly higher prices the last 12 months so going forward when costs go down um uh the market will still uh 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 there's less resistance to pay higher prices now

That makes sense. Thank you so much. Sure. Welcome.

Okay. Thanks, Parvin, for your questions. Okay. The next question comes from Brian Oye. 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?

Yeah, 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 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.

Okay, thank you for that answer. Next question comes from Marky Karunungan. 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 Krista to answer this.

So for the Batangas plan, so our income tax holiday started in 2023. So initially it was four years and we got a two-year extension. So it will end. So 2023 plus four, 2027 plus two, it will end in 2029. For the corporate tax rate in the Philippines, as all of us are familiar with, so it's currently at 25%. But in our company, we have certain segments that enjoy 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 Batanga, so income tax holiday expires in 2029. And after that, I believe we can still enjoy the 5% tax on gross income tax. 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 PESA-located plants. So there you go. Okay. Okay. Next question comes from Jojo Abad. Okay, congratulations for the remarkable performance in the first nine 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. Offhand, So we issued the bond in 2021. The three-year portion matured last year. The five-year portion is maturing September next year. So that's two billion pesos 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. So 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 covers three times, which is, you know, before it was over, I think, 20 in previous periods before we built the platform. um so we i would say we would need interest cover at a much higher level before we would uh we would discuss a higher payout okay next question comes from daryl wong could he help share more color on why batangas plant net profits were down quarter on quarter Oh, so in terms of our food manufacturing, a lot of it is done out of the botanist plant. And with food net income lower by 66% overall, 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 two sides.

Okay. Next question comes from Dan Brian Goch. Okay, 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 the 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 is not as uh it doesn't fluctuate as much um so it has a higher chance of being a lot steadier um second question in terms of uh what will drive growth for the near term so uh krista 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 is the second box at the bottom, what's called refined vegetable oils. So you can see here the gross profit margin here. coming in at 5.6%, whereas all the other, the first, third, fourth boxes, gross margins are significantly higher. So, 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 okay next question comes from brian oi so what was the revenue and gross margin at the batangas plant in the third quarter uh okay so we don't um break that down uh But what we do break down, Krista, 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, you know, 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.

Okay, next question comes from Rainier Yu. So two questions. First question, can you give more color and the net income growth for oleochemicals despite margins dropping quite significantly? Second question, any seasonality gain seen in Batangas plants operations or profitability?

Okay, so in terms of ChemRes, so net income grew because of that 49% increase in volume from bi-diesel. So when you go from a 2% blend to a 3% blend, that's 50% increase. So more or less, the volume growth in bi-diesel 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 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 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.

Okay, 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 now ask your question.

right thank you i had a quick follow-up on margins for food segment um could you explain a little bit more detail why the profitability they are dropped more than in other segments in food ingredients yeah okay um 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 volumes up by 7%, I believe we did lose some business just because 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 Krispy Kreme, right? Do they switch to palm oil? Do they change the recipe? Okay.

So coconut oil. So I believe the donut makers would 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, you know, 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, went 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 product 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. So they need inventory. So they will buy more than what they normally buy because they need stock up on inventory again. They will be less resistant in terms of ordering larger volumes. So that change in behavior will result in 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 the volume will go up even more so the margins will also go up and the profitability will definitely improve as well okay thank you so much sure welcome okay

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

Okay. So uh not sure how to answer that because uh the if you if you recall the chart for coconut oil it really it's really volatile um so it's kind of hard to say there's a normal period um but 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 um 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 three 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.

Okay, 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?

Yeah. 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, you know, we're a listed company. We've got our, we, we hold our reputation very, very seriously. So we really treat our customers very well. And so even in this very difficult environment we, 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. Okay, so what's happening is 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 were 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 non-regular 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 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.

Okay, thank you. 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 ride it out. um i would say so earlier i was talking about how we've seen a lot of customers who use coconut oil you know they 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.

Okay, 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 we gained? My guess is stickiness will be low for refined vegetable oil. What about for the other three 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 decline 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, you know, something's got to give, right? uh so it's fine um and uh that's really part it's really part of the game i mean uh we we're not in this for the short term you know we really look at this as a long term um i guess one way to look at this uh 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.

Okay, next question comes from Rainer 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 is where the tariffs have an impact. So short answer, the impact is not that significant.

Okay, thank you. No outstanding questions that I can see from my end. So we can give our investors another one minute, just in case they have further questions. Okay, there's a follow-up question from Peter. How's the industry landscape in biodiesel? Any new capacity being planned by your competitors? My guess is demand would have stabilized and will be at a 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 one or two 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 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's pretty steady because it's a law, it's a mandate. So the oil companies are required to comply with 3% lend. So price does not come into play in this case.

Okay, thank you. Next question comes from Dan Bryan. 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. Okay.

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.