Delfi (formerly: Petra Foods)

[gzbkel]

Economist's article on the current cocoa shortage

https://www.economist.com/graphic-detail...-expensive

[weijian]

Hi gzbkel,

Thanks for the article but unfortunately, that is behind a paywall. I have asked Co-pilot (Microsoft's generative AI) and below is the response given:

Me: why are cocoa prices rising?

Co-pilot:
Cocoa prices have been surging recently due to a combination of factors. Let’s delve into the reasons behind this upward trend:

1. Adverse Weather Conditions:
The La Niña weather phenomenon has led to excessive rainfall in several cocoa-producing areas in West Africa. This wet and rainy weather has damaged cocoa plantations, particularly in Côte d’Ivoire (Ivory Coast), which is a major cocoa producer.
The uncertainty about the volume of available cocoa has arisen due to the excessive rainfall, affecting the country’s production. In the 2022/23 season, Côte d’Ivoire produced 2.14 million tons of cocoa, down 2.7% from the previous cycle.
Additionally, there are concerns about dry weather in the region as El Niño challenges crop prospects for the 2023/24 season.

2. Harmattan:
The Harmattan, a dry and dusty wind blowing from the Sahara towards the West African coast, has intensified. It has dried out young cocoa fruits in older plantations in Côte d’Ivoire.
As a result, there is an increased risk of lower production in the western part of the country compared to the previous year.

3. Pests and Diseases:
Heavy rains in West Africa have caused diseases in a significant number of cocoa seeds.
Producers are currently battling the “swollen porpoise virus”, which can lead to tree deaths within a few years.

4. Supply Difficulties:
Lower cocoa deliveries to ports in Ivory Coast have contributed to the rise in cocoa prices. Since the start of the 2023/24 cocoa harvest, deliveries have fallen.
The global scenario is characterized by low stocks, exacerbating supply constraints.

5. Growing Demand:
Despite supply challenges, cocoa demand continues to increase. This rising demand further impacts price fluctuations.

[gzbkel]

Sorry about that. Here is the archived version of that link: https://archive.ph/nTUkk

[tonylim]

So far , we have yet to see succession plan by the Chuang family , will Delfi a takeover target by the MNCs ?

[tonylim]

The controlling stake of 51.99% has changed the ownership . What does this mean ? A general offer is brewing ?

[weijian]

The controlling stake of 51.99% has changed the ownership . What does this mean ? A general offer is brewing ?

hi tonylim,

I have cut/paste the below information that is found in the 51.99% ownership change you described. The ownership change is for JOHNSONVILLE ASSETS LIMITED and in italics. I believe they should be self explanatory:

Butterfield Trust (Asia) Limited is a Singapore registered public trust company and its deemed interest arises from its 100% shareholding in Johnsonville Assets Limited and Johnsonville Holdings Limited, which together owned 100% of Aerodrome International Limited. Aerodrome has a direct and indirect shareholding interests of 51.99% in Delfi Limited. Both Johnsonville Assets Limited and Johnsonville Holdings Limited ceased to be the shareholder of Aerodrome International Limited on 3 December 2025. Consequently, on 3 December 2025 Butterfield Trust (Asia) Limited was appointed as the shareholder and trustee of Aerodrome International Limited.


Restructuring of investment holding by the beneficial owners of Aerodrome International Limited

JOHNSONVILLE ASSETS LIMITED change in interest announcement: https://links.sgx.com/FileOpen/_eFORM3V2...eID=868908

[tonylim]

The controlling stake of 51.99% has changed the ownership . What does this mean ? A general offer is brewing ?

hi tonylim,

I have cut/paste the below information that is found in the 51.99% ownership change you described. The ownership change is for JOHNSONVILLE ASSETS LIMITED and in italics. I believe they should be self explanatory:

Butterfield Trust (Asia) Limited is a Singapore registered public trust company and its deemed interest arises from its 100% shareholding in Johnsonville Assets Limited and Johnsonville Holdings Limited, which together owned 100% of Aerodrome International Limited. Aerodrome has a direct and indirect shareholding interests of 51.99% in Delfi Limited. Both Johnsonville Assets Limited and Johnsonville Holdings Limited ceased to be the shareholder of Aerodrome International Limited on 3 December 2025. Consequently, on 3 December 2025 Butterfield Trust (Asia) Limited was appointed as the shareholder and trustee of Aerodrome International Limited.


Restructuring of investment holding by the beneficial owners of Aerodrome International Limited

JOHNSONVILLE ASSETS LIMITED change in interest announcement: https://links.sgx.com/FileOpen/_eFORM3V2...eID=868908

Hi WeiJian , 

Thank you for your immediate reply...

[Yoyo]

Like many chocolate manufacturers, Delfi profitability suffered from the extreme cocoa price spike in 2024.  Delfi reported comparable profit in 2025 due to high cocoa locked in (hedging position).

Just how bad is this cocoa supply shock?  Pre-2024 average cocoa price is 2700-3000 USD/tonne (5-year),  2500-2800 (10-year) and 2200-2600 (20-year).  Cocoa price peaked at 12000 in 2024, about 3-5x historical average. 
Cocoa is about 25% of product cost.  Despite this extreme negative business settings, Delfi is still profitable albeit lower GM%.  Many chocolate manufacturers managed to pass on cost increase via price increase, shrinking product size and adjusting the product ingredients composition (reduce cocoa, increase sugar/milk).

Cocoa price has dropped to 3250 in early April 2026.  It is expected to climb in view of lower cocoa production due to a shortage in fertilizer (Middle east crisis).
 
Thesis – Steep drop in input cost of cocoa on the back of elevated chocolate price (relative price inelasticity), present a nice platform for supernormal profit.  It is highly probable that Delfi profit will jumped markedly in 2026. (though magnitude may be somewhat reduced if Delfi adopted hedging position longer than 12 months)  So, has it been fully priced-in Delfi share price of $0.95?  Or is there really an opportunity for capital gain in 12 months time?  Would like to hear from fellow VBs.

Vested with a small position.  Thinking of adding.

[weijian]

Hi Yoyo,

For a start, chocolate manufacturers like Delfi do not use cocoa beans as their raw materials. Instead they use cocoa powder/butter which are processed from cocoa beans by the ingredient manufacturers (ie. JB Foods listed on SGX). So the impact to Delfi's COGS is not as straightforward and immediate wrt to the prices of cocoa beans we see on the trading charts. But in general, lower (and more stable) cocoa prices will feed towards lower COGS and improve gross margins. But even with improved gross profit, it is anyone's guess what the company will do - Will they increase back the cocoa content? Will they "invest" it back via "strategic price adjustments" or do more promotions/marketing? Even if they don't, what if their bigger and the more well known brands do so? In 2023, revenue was higher due to higher sales but GPM reduced due to more promotions as a result of higher competition.

Besides manufacturing its own brands, about a quarter of its revenue is derived from distributing other products (chocolate and other FMCG products) in Indonesia/Philipines/Msia. This portion is generally unaffected by the cocoa bean price spike/volatility, and so ~25% of the revenue will not be sensitive to any sort of COGS bounce.

IMHO for any sort of "supernormal profit" (in your words) to happen, it has to come from the topline rather than the bottomline. Think of the recent memory price super squeezes that propelled memory chip makers to super profits. So if we look at Delfi's topline, the key is their own brands' sales in Indonesia. My thesis for Delfi is that it is simply a play on the Indonesian consumer. Immediate post covid due to Ukraine-Russisa war, coal/nickel were high and it led to much prosperity in Indonesia. Bring forward to 2026, it remains to be seen if these commodity prices will repeat its 2022 act. Indonesian animal spirits have been curtailed by the new Prabowo administration which had re-directed much Budget spending towards their free meal initiative.

[Yoyo]

Hi weijian

There is many variables in the determination of profit.  I merely apply a simple equation on the materials input cost, while holding other variables constant.  All chocolate manufacturers suffered in the commodity upcycle, it is a shame if they cannot recoup their earning losses in this unprecedented downcycle in input costs.  

Thanks for the reality check and words of caution.  Indeed, profit may not be the utmost priority in a FMCG setting, competition for retail shelf space and market share cannot be compromised.

No bad faith intended.  As usual, learning from others.