8 things I learned from Delfi Limited’s 2017 AGM

If you shop the confectionery aisle at your local supermarket, you may come across a familiar brand of chocolate lining the supermarket shelves called Delfi. If you have the impression that Delfi chocolate hails from Switzerland, you probably wouldn’t be the first to say that due to the brand’s Western sounding name and skier logo superimposed on a background of a mountain range.

However, Delfi is actually produced by a company called Petra Foods that was founded in Indonesia by the Chuang family in the 1950s. The company was incorporated in Singapore in 1984 before listing on the SGX in 2004. In 2016, Petra Foods Limited changed its name to Delfi Limited to better reflect its corporate identity as the Delfi brand is well-known among chocolate lovers everywhere.

Delfi Limited (SGX: P34) markets and distributes its own brand of chocolate products in the core markets of Indonesia, the Philippines, Singapore, and Malaysia. In addition, its products are sold in over 10 other countries including Thailand, Brunei, India, South Korea, and Vietnam. To supply all this chocolate, Delfi operates two manufacturing facilities in Indonesia and the Philippines.

Besides the Delfi brand of chocolates, the company has a portfolio of established chocolate brands names including SilverQueen, Ceres, and Selamat in Indonesia and Goya and Knick Knacks in the Philippines. Delfi also distributes brands for third parties (agency brands) across its distribution network in the region.

Delfi Limited has been on our watchlist for some time and, this year, I decided to attend its annual meeting to find out more about the company’s performance and future prospects.

Here are eight things I learned from Delfi Limited’s 2017 AGM.

  • Revenue essentially remained flat year-on-year from $405.9 million in 2015 to $402.1 million in 2016. The core market of Indonesia contributed 72.4% of the company’s total revenue. While revenue was flat, gross profit margin increased 500 basis points to 34.8% mainly due to Delfi raising prices of its products in 2016. After removing exceptional items, profit after tax and minority interests (PATMI) grew 83.5% year-on-year from $15.3 million in 2015 to $28.2 million in 2016.
  • Delfi’s regional markets segment (comprising Singapore, Malaysia, and the Philippines) made an EBITDA loss of $1 million. CFO Ben Ryan explained the loss is mainly due to the company’s continued investment in growing its market share in the Philippines. Delfi is spending heavily on advertising and promotions in the country and the CFO expects this to continue for the next two years, which will ease off once it has achieved a secure position in the market.
  • The CFO revealed that Delfi’s own brands contribute 60% of revenue and agency brands contribute the rest. The company’s preference is to build its own brands but it doesn’t have a targeted revenue split between its own brands and agency brands. CEO John Chuang explained that they distribute agency brands because it adds to the bottom-line and complements Delfi’s core business anyway – the products are stored in the same warehouse, delivered in the same truck, and reach the same markets. He reiterated that Delfi’s main business is in building its own brands but he is also happy to accept other business as long as it adds value to Delfi.
  • The CEO said Delfi has to continue innovating and expanding its product lines in order to grow and take advantage of new market opportunities. On the flip side, creating new products inevitably means some of them will be failures and it takes 2-4 years to know if a product will succeed or not. Delfi has to continually evaluate which products give the highest return on investment and have the best chance of success as markets, competitors, and consumer tastes evolve. Overall, Delfi’s strategy is to focus on its core market of Indonesia not just by increasing sales of its current product lines but also by introducing adjacent product lines to serve a market as large as Indonesia’s. At the same time, the company continues to explore and invest in new markets that are able to yield returns in a suitable time frame.
  • Delfi essentially serves two markets in Indonesia — one richer demographic that can afford to pay for premium chocolates and a lower-income group that can’t but Delfi nevertheless wants to serve. For example, the price of a Top chocolate bar is 500 rupiah which is equivalent to five Singapore cents!
  • Consumers buy chocolate based on the taste they’re familiar with. CEO John Chuang said that Delfi’s market leadership in Indonesia is because the taste of chocolate among Indonesians is synonymous with its SilverQueen brand. When Indonesians think of chocolate, they think of SilverQueen. On the other hand, the taste of Cadbury chocolate is what people in the UK, Australia, and Singapore are familiar with, while Americans like the taste of Hershey’s. Its unfamiliar taste was the reason why SilverQueen was unsuccessful when it was introduced in Singapore. The CEO joked that he would have to ‘brainwash’ Singaporeans for a hundred years before they like the taste of SilverQueen. (I tried a bar of SilverQueen and he was right – it tasted “funny”.) The reason why Indonesians love SilverQueen is because Delfi had a first mover advantage in Indonesia and decades to build mind share and familiarity of taste among the locals before they started facing any competition. While taste is a significant barrier for competitors to gain market share, it also means Delfi faces that same barrier when they enter new markets. The challenge for Delfi is to grow its business in new markets while keeping its number one spot in Indonesia where the young now have more choices available to them.
  • A shareholder questioned the increase in directors’ fees from $354,740 to $472,800. Chairman Pedro Bruckmann explained the rise was the result of the increase in the number of committees due to corporate governance requirements and the recent inclusion of an additional board member. Doreswamy Nandkishore recently joined the board as an independent director and has over a decade of experience in chocolate in the ASEAN market from his previous role as the global CEO of Nestlé Nutrition.
  • According to the chairman, Delfi has paid $183 million in dividends (including special dividends and capital distribution) over the last five years. This amount is 158% of total earnings over the same period. He clarified that Delfi doesn’t have a dividend policy but targets to pay at least 50% of profit as dividends. The actual dividend payout ratio will depend on the company’s profitability and capital needs.

Liked our analysis of this AGM? Click here to view a complete list of AGMs we’ve attended »

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Adam Wong

Adam Wong is the editor-in-chief of The Fifth Person and author of the national bestseller Lucky Bastard! which made the Sunday Times Top 10 Bestseller's List in 2009 and Value Investing Made Easy which made the Kinokuniya Business Bestseller's List in 2013. In 2010, he appeared on U.S. national television on the morning show The Balancing Act. An avid investor himself, Adam shares his personal thoughts and opinions as he journals his investing journey online.


  1. Hi Adam
    You mention earlier that the Company’s revenue was flat but gross profit increase 500 basis point, can you elaborate and share with me.
    Many thanks.

    1. Hi Ho Seng,

      Thanks for asking. Gross profit margin increased 500 basis points from 29.8% to 34.8%. So while revenue remained flat, Delfi earned 34.8 cents in gross profit from every dollar of sales.

      Hope this helps! 🙂

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