Good morning to our participants in Asia, and good evening to our participants in the U.S. Thank you for joining Del Monte Pacific's results briefing for the fourth quarter and fiscal year 2022. Representing Del Monte in this call are Cito Alejandro, Group Chief Operating Officer of Del Monte Pacific, DMPL, and President of Del Monte Philippines, Parag Sachdeva, Group CFO of DMPL, Greg Longstreet, President and CEO of Del Monte Foods in the U.S., and I am Iggy Sison, Chief Corporate Officer of DMPL. Parag Sachdeva will now present our results.
Thank you. Thank you very much, Iggy. I will start with slide five, covering the fourth quarter highlights and the full year highlights. For the fourth quarter, the sales for DMPL grew by 14.4% to $569.5 million, driven by strong performance in the U.S. and S&W fresh pineapple exports. Our U.S. subsidiary, Del Monte Foods, net profit quadrupled to $19 million. Group net profit of $20 million was higher by 37.8%. From a full year perspective, let me share with you a few KPIs that will really sum up the group performance and a very strong year for DMPL. Sales was up 8.3%.
When it came to gross margin, up 90 basis points. As you know, this was achieved during extremely volatile times. EBITDA up by 14% for the group. Net profit, we achieved a milestone with $100 million, which was higher by 58.1%. In terms of Del Monte Foods, net profit more than tripled to $54.3 million. At the same time, we completed the refinancing of DMPL pref shares and DMFI senior secured notes. Final dividend of $0.017 has been declared per share and approved by the Group board, which reflects 33% of fiscal year 2022 net profit. On slide six, let me take you through the outlook, which remains very consistent with our prior updates.
Our strategy is to strengthen the core business, expand the product portfolio in line with market trends for health and wellness, and continue to grow our branded business while reducing non-strategic business segments. We are focused on more product availability through better distribution and expanded sales channels, which includes e-commerce or dollar stores as well as convenience stores. DMPL continues to strive hard to offset the impact of higher costs. We are proactively addressing the inflationary impact from commodity headwinds and increased transportation costs through revenue and cost drivers, including efficiencies and productivity across the operation. Barring unforeseen circumstances, DMPL Group expects to generate a higher net profit before one-off refinancing expenses in fiscal year 2023. On slide seven, let me share with you the summary of group results. U.S. sales up 25.5%.
Philippines was lower by 12.8% in dollar terms and 7.3% in local currency. S&W brand continued to perform very well and grew by 7.6%, driven by exports of fresh pineapple. Our JV in India did have a one-off event with the discontinuation of fresh business, and that's what is reflected in the revenue. Del Monte package business sales was down 6% in dollar terms and 4% in rupee terms. When it comes to the group EBITDA, $78.2 million, up by 6.9% from higher sales, pricing, which was offsetting the cost headwinds and also lower G&A. Our operating profit of $57.2 million is up 16.4% from $49.2 million.
As I mentioned in the key highlights, net profit of $20 million is up 37.8% from $14.5 million. On slide eight, we'll provide you more color on our results. Fourth quarter sales, again, up 14.4%, from higher sales in the U.S. and exports of S&W branded fresh pineapple sales in Asia. Growth from volume mix out of the 14.4% was 8.2%, and the balance was from pricing and other factors, including foreign exchange. This will be explained more in the turnover analysis. When it comes to gross profit of $147.6 million, higher by 10.8% due to higher sales. Also, the pricing that has been taken across all markets to offset increased costs driven by commodity headwinds, including ocean freight and transportation.
Our gross margin at 25.9% is lower by 90 basis points for the quarter, mainly from commodity headwinds and increased transportation costs. This decline of 90 basis points is mainly coming from the base business. Margin for DMFI at 24.8% improved by 90 basis points, driven by strong branded retail sales, and we executed pricing to offset the headwinds from transportation and ocean freight. Also, we were offsetting through price and strong branded sales, higher 22-pack costs. The impact from pricing and trade optimization is approximately 5% for the quarter. Now, on the base business, margin decreased by 200 basis points during the same period, driven by commodity headwinds such as cost of fertilizers, increased cost of coal and fuel, which led to higher conversion costs. We also saw increase in packaging costs too.
We did take pricing action across all markets to mitigate the impact, but we will see the full impact of that in Q1 of fiscal year 2023. In terms of EBITDA, again, great story, growth by 7%, driven by higher gross profit and lower G&A. Net income of $20 million, higher by 38% from higher EBITDA and lower tax costs in the U.S. as a result of a tax benefit from the decrease of the reserve against our deferred tax assets. Net debt at $1.545 billion, higher by $289 million due to additional loans to refinance the redemption of Series A-1 pref shares and higher inventory build-up to normal levels in the U.S., to help improve our customer service levels. Inventory is at an increased cost.
Our gearing ratio at 3.1x reflects increased loans to refinance the redemption of preferred shares Series A-1 that was executed in April. Net debt to adjusted EBITDA is pretty strong at 4.4x , though higher by 0.3x as we increased loans. This was partly offset by increased retained earnings from higher net profit of $100 million in fiscal 2022. On slide nine, we'll share with you a bit more context on our turnover or revenue. Americas had a strong quarter, constituted 73% of total group sales and was higher by 25.5%, bringing it to $414.7 million. This was achieved through distribution gains on Club Wedge and also behind Easter promotions, which were very successful. Our velocity improvements on core fruit and PFC.
We had retail price increase effective March of 2022. Our branded retail sales rose 25.3%, while food service sales grew by 18%. Our 52- and 13-week volume share growth outpaced category growth across four of our major categories, and we increased market share. New products contributed 5.3% to DMFI's net sales in the fourth quarter. Asia PAC sales in the fourth quarter declined by 5% to $143 million from $150.5 million. Decline was mainly from sales of packaged fruit, which was down 32% due to lower pineapple supply as compared to prior year, particularly impacting exports. But that was partly offset by strong sales of S&W fresh pineapple due to higher volume in China and North Asia and also higher prices that we took to mitigate inflation.
In the Philippines, sales were lower by 7.3% in peso terms, mainly on lower sales of mixed fruit and spaghetti sauce with increased activity from competition. Our packaged fruit and spaghetti sauce category consumption was down due to shifting consumer priorities in the face of food inflation. All major retailers did continue to experience slowdown in the first quarter of calendar year 2022, with lower shopper traffic in January and February due to lockdowns implemented to avoid further spread of COVID-19. Innovation on a smaller base grew significantly, and food service sales rose by 14% as consumers dined out more, particularly in March and April. For the fourth quarter, when it comes to Europe, which is a small part of our business, sales did decrease by 30% to $11.9 million.
As I mentioned, that's mainly attributed to timing of supply and logistics challenges. Now let me provide you a bit more color on full year results. On slide 11, as I mentioned in the key highlights, very pleased to share our results for the full year with sales up 8.3%, our gross margin up by 90 basis points, our EBITDA up by 14% for the group, and net income with a milestone of $100 million up 58%. Our U.S. sales were higher by 11.4%. Philippines lower by 1.3% in local currency. To remind you, following a very high baseline in fiscal 2021. When it comes to S&W branded business in Asia, that grew by 13% driven by both fresh pineapple and packaged exports.
JV in India marginally declined, primarily due to discontinuation of fresh business. In the fourth quarter, overall, the packaged business, which is where we would focus on, when it comes to B2C segment, that grew by 6% in both dollar terms and rupee terms. Our EBITDA at $351.5 was up 14%, and that was due to higher sales, improved sales mix in the U.S. driven by branded retail sales, price increases that were taken to offset the inflation. Also we did a commendable job and effort in optimizing our fixed cost, particularly G&A.
Our operating profit at $267.3 million was up 26.3% versus last year, and net profit up 58%, as I mentioned to start with. On a reported basis. Next slide, please. Slide 12. Just wanted to share a few major inputs on the results. Our 2022 sales $2.3 billion, again, driven by very strong performance in the U.S. and international markets outperformed, including S&W in Asia. Gross profit at $622.7 million was higher by 12%.
That was driven by higher branded sales in the U.S., favorable impact of pricing both in the U.S. and base business, and continued benefit from execution of asset-light strategy in the U.S., partly offset by the impact of commodity headwinds and increased transportation costs, mostly in the second half. Our gross margin at 26.6%, up by 90 basis points, which was led by timely pricing to offset inflation and favorable sales mix in the U.S., and higher fresh sales also in North Asia contributed to the improvement in margin, partly offset by significant cost headwinds which impacted us in H2. Margin for DMFI at 23.9% is an improvement of 130 basis points.
Whereas for the base business, it also improved from a full year perspective by 10 basis points driven by improvement in international business, including fresh and pricing taken across all markets in line with inflation. To give you a little bit more context on pricing on a full year average basis for the base business, the pricing that we took between Philippines and international was between 4%-5%. On an average between trade spend and list price increase from a full year perspective, the pricing that we took was 2.2%. It was commendable to see that despite these inflationary headwinds, both the U.S. and the base business from a full year perspective had an improved margin versus last year. DMFI obviously benefited significantly from continued implementation of strategy of focusing on higher branded sales.
EBITDA, as we mentioned, because of higher gross profit and lower G&A, ended up being 14% higher at $352 million, and net profit at $100 million was $58 million higher, driven by EBITDA and lower tax costs in the U.S. Won't cover the debt related KPIs, they are the same as we had in Q4. Now on slide 13, when it comes to the revenue profile from a full year perspective, Americas constituted 71%, and grew by 11.4% to $1.7 billion, mainly from higher volume of branded products in retail, from distribution gains and also higher food service sales behind strong fruit sales in support of schools and restaurant re-openings. Branded retail sales grew by 13%, offsetting the reduced sales of non-core private label as we had planned.
Branded retail now accounts for 73%, while private label is just 5% of total sales. The rest is non-retail, including food service. New products contributed 5.3%-3% to DMFI's net sales. On Asia Pac, in 2022, from a full year perspective, the sales increased by 1.9% to $639.4 million from $627 million, and that was due to strong sales of S&W packaged pineapple, mixed fruit, and also S&W fresh pineapple in North Asia. Export of fresh to North Asia did regain momentum following impact of pandemic experienced in China in fiscal 2021, particularly the first half, and also from expanded distribution coverage in China. Cito will cover more about it in his update.
Coming from a higher base a year ago, the Philippine business was down by 1.3% in peso terms. As I mentioned again, the extended lockdown caused by COVID-19 did restrict the shopper traffic. As I mentioned again, we were up against a very high baseline coming from fiscal year 2021. If we compare our performance to two years ago, sales in the Philippines increased by 11.5%, while retail sales improved by 14.8%. This should provide you good context in terms of how we have performed in the last 24 months. New products that have been launched in the past three months contributed 6.45% to total Philippine market sales.
Food service channel has begun to recover, and expanded by 23.2%, but yet to fully recover to pre-pandemic levels, still down 10.3% versus two years ago. Europe sales decreased by 9%, at $35 million, and that was mainly driven by lower packaged food sales, limited by logistics issues. On slide 14, pleased to share with you that the board approved a final dividend of $0.017 per share to common shareholders, representing 33% of fiscal 2022 net profit before preference dividends or 41% of net profit after pref dividends. This dividend represents a 42% increase over last year's dividend. With that, let me hand over for a very comprehensive update by Greg on the U.S. business.
Thank you, Parag. I will now review the Del Monte Foods U.S. business. In the fourth quarter, we achieved $411 million in sales or 72% of the group sales. Sales were up significantly on our branded retail business of 25%, really led by our vegetable and fruit business, which is our core business. We had increased supply, and we also had a more aggressive merchandising support plan for the Easter holiday in the fourth quarter that proved very successful. Our Del Monte canned vegetable business, which has the highest contribution of all of our branded retail sales, saw a 4-point increase in market share due to our strong execution across the commercial teams, increased distribution of our core products, new product expansion, and all supported by very strong supply chain service.
Pleased to report that our food service channel also grew by 18% in the fourth quarter with another strong year of performance, matching last year's growth as a channel. New products contributed 5.3% of DMFI's total sales and were actually 6.5% of our branded sales. Gross margin increased to 24.8% from 23.9% on higher branded sales, price increases, and a lot of work to cut costs and fight inflation. Very proud of our margin performance in the face of some inflationary headwinds. Consequently, our EBITDA rose 40% to $57.8 million from $41.2 million. Net profit quadrupled to $19 million for the quarter. I'll next talk about the full year results for the U.S. business.
Full year sales were $1.7 billion or 70% of group sales. Sales were up 12%, driven by increases across all major segments, led by our core canned vegetable and fruit business, driven again by increased supply and some very aggressive distribution gains. Branded retail and food service sales were up 13% and 36% respectively, which more than offset our planned reduction in the low margin dilutive private label business. New products reached $90 million worth of sales for us for the year on a rolling three-year basis and contributed to 5.3% of our total turnover. Very proud of our gross margin performance for the full year.
Again, in the face of some significant inflationary headwinds, we were able to successfully grow gross margins to almost 24% from 22.6% last year due to better sales mix, cost reduction, the benefits of asset-light, as well as price increases. EBITDA rose 25% for the full year to $213.6 million from $170.5 million. Net profit tripled to $54.3 million from $15.1 million. Also pleased to report that Del Monte in the U.S., our DMFI business, achieved another round of credit rating upgrades. We were upgraded to B2 and B3 from B3 from Moody's, and received a positive outlook from S&P.
This reflects DMFI's strengthening operating performance following prior years' recapitalization and our major operational restructuring efforts that helped improve liquidity and lower our leverage. In May 2022, DMFI successfully raised $600 million through a new seven-year term loan at adjusted SOFR with a floor of 0.5% plus 4.25% interest. This was intended to primarily redeem the $500 million in senior secured notes that were at a 11.875% interest rate. These much lower interest rates will result in approximately $20 million-$30 million interest savings annually. There will be a one-off refinancing cost this year of about $70 million. As we look at the state of the business, pleased to report that our U.S. business has not been interrupted by inflation. Our profit momentum has continued. Our top-line growth is intact.
Our product set and portfolio is on point with consumer behavior in the U.S., and we'll talk more about that here in the coming slides. We have lots of room for growth in our multi-channel white space approach. We are pursuing growth in many new channels and emerging channels, and are having success in e-commerce, the value channel, our convenience channel, the natural foods channel and food service channel, as well as the club store channel. We're really out leveraging the power of our brands, coming up with strategic new products and finding portfolio advantages across these channels that are driving new sales. Our pipeline of new products and new brands and our tiered portfolio has also proven to be a real strategic advantage for us. Strategic pricing for FY 2023, the fiscal year that we currently just entered, has already been executed.
We took another round of pricing actions on June first that are effective September first. Cost management is now in year four of ongoing efforts and improvements. Our asset-light strategy is continuing. We have more work to do in our warehousing and logistics areas. We're seeing a lot of savings and efficiency due to our direct labeling strategy. We're driving more efficient deployment and reducing our warehousing needs through those efforts. We're also consolidating DCs, distribution centers, this year and delivering $14 million in annual savings through those efforts. We have a detailed playbook of cost-cutting initiatives and projects to offset inflation. We've increased our automation, we've lowered our maintenance costs, we've increased plant level efficiency and very proud of the work we're doing to stem inflation overall as a company. Next slide. Our market share performance continues to be very strong.
This is now our second straight year of significant market share gains across our portfolio. This year, as you look at our business, our market share on our core business, our canned vegetable business, is up 4.6 points to 22%. Our canned fruit business is up 2.3 points to 21.5%. Our fruit cup snack business saw some very nice gains, up 1.3 points, 26.5%. Canned tomato, our new strategy and our dual brand approach to that business is going quite well, up nearly half a point. Our broth share business held flat at 6.5%. The brand, Del Monte is well established in our traditional categories, and we're really seeing this continued trend of consumers reaching for trusted brands.
We're seeing continued stock-up behavior and continued in-home meal preparation, and more usage of our products in new ways across our portfolio. Very encouraged that we're really meeting consumers' need during this continued time of turmoil and recessionary fear in the U.S. market. Contadina and College Inn shares were flat after seeing tremendous growth the past couple of years due to COVID-19 pantry loading, but encouraged by the future with both businesses. We'll continue to drive long-term growth. Del Monte will continue to invest in our brands, continue to bring differentiated and highly innovative products to market, and are intently focused on expanding our distribution channels and building our brands. Next slide. Wanted to highlight our U.S. vegetable business. This is our largest business.
It's our flagship business in many ways our most important business. Really encouraged by how we've performed. If you look at this chart, what you'll see is EQ trends, which is essentially volume or case movement, and then dollar trends. If you look at the left-hand column, you'll see consumption change. What you'll notice is in the category, you'll see the latest month, 13-week fiscal year-to-date in 52-week data as you roll down those columns. You'll see that DMFI has consistently outperformed the category. On the most recent 13-week basis in the fourth quarter, Del Monte Foods business was up 18.2% while the category was up 5.4%. What that means is we're gaining share.
You'll see next to that, the green bars indicate the amount of share growth that we're enjoying. Just to the right of that, you'll see our nearest competitor, which would be Green Giant, their performance, as well as private label, which has continued to suffer some share loss. On an ongoing basis, in our U.S.-based vegetable categories. You see similar trends down below with dollars, with us outperforming the category, gaining share, and this path is continuing as we continue to find new ways to add distribution across our base of U.S. customers, through line extensions, innovation, and very strategic marketing efforts with our consumer base. Next slide. Some of the highlights for the quarter, excited about our growth in frozen.
We now have two very strong brand-new portfolio of products in the frozen category, one of which is our Veggieful riced veggies, which continues to get recognition. This past quarter, it was highlighted as a winner in Clean Eating magazine's poll. It's a very prestigious book and honor for the brand. We continue to get the word out about our healthier, more convenient, great-tasting, and accessibly priced frozen food offerings. This product, combined with our handheld sandwiches that are plant-based, that are frozen, called Pocket Pies, continue to gain traction, gain more national distribution and more market share in the important new frozen category for us. Next slide. As I mentioned earlier, and as Parag mentioned, we had a very successful Easter campaign.
We had enough stocks and supply this year to support our core business, including our vegetable business and fruit business, as well as our growing pineapple business. Very encouraged by the accelerated growth in our pineapple portfolio in the U.S. market. We have sort of a dual strategy with a base pineapple and a more premium Deluxe Gold pineapple that are working quite well for us. Had a nice Easter in terms of marketing and advertising across all forms of media in the U.S. marketplace, and that really played a role in driving all of our Q4 success. Next slide. As we talk about innovation, I mentioned earlier it now accounts for 6.5% of our retail branded business. In the year ahead, we'll reach nearly 9% of sales with the momentum and growth that we have.
Here you'll see kinda how we look at the business. We have closer to fresh products. We have plant-based goodness. We have culinary meal helpers. We have purposeful snacking and everyday value. Each of these are critical trends and growing trends in the U.S. marketplace, and they each have a place with U.S. consumers. You'll see across the rows products we launched in 2020 to meet these needs and products that we've launched in 2021 and that we're launching in 2022 to support these growing consumer needs. Very pleased that we're really touching the consumers in so many ways, leveraging the power of our brands and benefiting from some very significant top-line growth. I would add that this portfolio is generating margins that are accretive to our total portfolio. Next slide.
This is a look at our tiered portfolio strategy that I mentioned earlier. The way we've approached this across each of our business groups is to come out with a good, better, and best portfolio of products. This is designed to meet the divergent needs of U.S. consumers. We have a very large contingent of consumers that's growing that are very value-conscious, that are looking for at low price points, they're looking for brands they trust, in many cases, they're looking to stock up on those products. We have an offering across our vegetable, fruit, tomato, and broth and stock business for that consumer. We raise our product specs and grade slightly to our better portfolio, slightly higher priced. This has been very successful for us.
Then those consumers, and there's a large group out there, that they're eating more at home now. They're spending less of their food dollars out at restaurants, and due to inflation and recession, are trying to find better ways to create better home meals. There's a very good need out there for more premium, organic, more interesting, more premium offerings in our portfolios, and we're getting a lot of success, a lot of traction, and a lot of new distribution through that approach. We're really meeting the needs of a wide range of consumers in the U.S. marketplace across a wide range of consumer channels. This successful strategy is really behind a lot of our gains, and this will further our growth and development over the next three to five years in the U.S. marketplace.
With that, I will now transition to Mr. Cito Alejandro.
Thank you, Greg. Thank you for a very comprehensive review. I will now start the discussion on the Del Monte Philippines operations. Del Monte Philippines achieved sales of about PHP 730 million for the fiscal year just ended, up 3% in peso terms. Sales in the Philippines in the fourth quarter were impacted by reduced demand in the advent of inflation, and as well as competitive activities. On the whole, as Parag mentioned earlier, we're cycling off a very high fiscal year 2021 base. Packaged fruit and spaghetti sauce were the most hit. In fact, in fruit, we expanded our leadership share despite category consumption being lower than year ago.
In spaghetti sauce, while we are still the category leader, we lost some shares, but recovered in the latest April period, and I'll show that to you in a while. Sales of fruit juices were mixed. While 100% pineapple juice declined, consumers started shifting to the fruit drinks, which actually grew by a whopping 54% now. We have seen improvement in food service, and it has started to grow with restaurants opening up. Sales grew by 14%. Pleased to report that our new product portfolio, in the same way that we are driving innovation in the U.S. with dairy and snacking products accounted for 9% of fourth quarter sales and 6.5% of total year sales. We had a great international business last year.
Our S&W pineapple grew 14% behind success in North Asia, especially in our major market, China. Our full year EBITDA was up 1% and net income by 3%. Next chart, please. On this chart, you will see that we were able to maintain our leadership share across categories. However, in ready-to-drink juices, we lost share to competitive activities of Minute Maid, particularly in one region of the country. We're slowly getting that back on track. Other categories were slightly impacted by price brands. On spaghetti sauce, in particular, where we lost share for most of last year. As you will see, it's 37.4%. Our latest April share has now recovered to a high of 41.5%, so that's all encouraging news for the category. Next slide. This shows some of the marketing activities we implemented last year.
One common theme is we leveraged advertising to communicate value for money and the unique benefits of our portfolio, from fruit to culinary to healthy beverages. This is extremely relevant in an inflationary environment where consumers have to make harder choices on their purchases. Next slide. Pleased to report that our food service business has started to regain vitality. Full year sales grew 27% and is now at 88% of pre-pandemic sales level. Gross margin increased by 3 margin points and operating income grew by 30%. This year is a critical recovery period for us and the industry. Industry expectation is we could be back to pre-pandemic, if not better conditions, by the middle of next year. Next chart. Just wanted to highlight our progress on e-commerce.
We're still scratching the surface here, but it has been a rewarding past two years seeing the growth of this key emerging platform. Not only are we present in traditional marketplaces like Lazada and Shopee, we have actually evolved our 36-year-old Kitchenomics cooking education website into an e-commerce platform. To further reinforce our goal of becoming a major e-commerce food and beverage brand, we have partnered with Accenture e-commerce experts. This has been going well so far. I guess more to come on e-commerce in future investor meetings. Next chart. Here is a recap of the new products we launched in the past two years in the Philippine market. Most successful are the dairy products. In total, innovation now accounts for 6.5% of total sales.
Our vision for the long term, or specifically over the next three to five years, is for this category and for this innovation, our innovation products to contribute 10%-15% of total sales. Next chart. In international, we have pushed innovation on our high value, high quality MD2 pineapple variety, which we use in fresh and which we have now extended into frozen and juice formats. Most exciting are the Nice Fruit frozen pineapple spears, now sold in about eight countries. Another big hit is the Super Sweet Deluxe variant that's sold mostly in North Asia, as well as the Deluxe Gold package fruit. You will see here it's on the black package that is very popular right now in the U.S., and we're selling it through our affiliate, Del Monte Foods. Next chart. Moving now to S&W.
Pleased to report the strong growth of our fresh pineapple, where we now have, in China, a commanding volume share of 53% among all imported pineapples. We have also remained among the top three choices of consumers in Japan, South Korea, and the Middle East. Next chart. Full year sales of S&W-branded business grew 13% on higher sales of fresh pineapple and packaged pineapple and juices. Our China business benefited from expanded distribution, covering mostly tier two and three cities, and we have also penetrated unique food service customers like milk tea shops who use our pineapple in their drinks. As I mentioned earlier, our Super Sweet Deluxe variant is becoming iconic in North Asia. Separately, there have been sustained efforts to expand S&W packaged goods portfolio in ASEAN markets. That's all I have, and now I turn you over to Iggy.
Thank you, Cito. Improving sustainability is one of DMPL's five strategic pillars, supporting our vision, nourishing families and reaching lives every day. DMPL's five main sustainability goals are net zero emissions, better nutrition, responsible sourcing, waste reduction, and ESG ethos across our stakeholders. The group is committed to net zero emissions by 2050 to address climate change. You will have read about Del Monte Foods, Inc.'s announcement to this effect about two months ago as well. Del Monte Philippines, Inc. pineapple operations have been independently verified as carbon footprint negative based on ISO standards. This is based on scopes one, two, and three for air travel and fuel used for vehicles. We continue to embark on a range of initiatives to achieve fuel efficiency. On slide 35.
We will invest in renewable energy by installing additional 3-MW solar in our California facility, in addition to the current 4-MW capacity. In the Philippines, we're also installing solar capacity in both our cannery and plantation. We have set goals for converting plastic packaging to 100% recyclable, reusable or compostable plastic. We also have a range of water reduction system investments to conserve water across our production facilities, as well as diverting food waste from landfills through upcycling and food donations. Slide 36. To recap our outlook, our strategy is to strengthen our core business, expand the product portfolio in response to consumer preference for health and wellness, and we will continue to grow our branded business as we reduced our non-strategic business segments.
We continue to improve our product availability through a more efficient supply chain, better distribution, and expanded sales channels, as explained by Greg and Cito earlier. We continue to proactively address the inflationary impact of commodity headwinds and increased transportation costs through revenue and cost drivers, including driving efficiencies and productivity across our operations. The group has embarked on a number of cost optimization initiatives, including asset-light in the U.S., as well as the others that Parag has outlined earlier. The group expects to generate a higher net profit in FY 2023 before one-off refinancing expenses, estimated at $70 million, which will be booked in this new fiscal year. With that, we'd like to open the floor to questions.
You can post your questions in the Q&A box, not in the chat box, or click the Raise Hand icon at the bottom of your screen. Our colleague, Jennifer Luy, who's responsible for investor relations, will read the questions or call you. There's some questions now in the box, which, Jennifer will start to read.
Hi, good morning, everyone. Thank you for joining our call today. We'll start off with the Philippine business from [Wei Tan. Do we expect Philippine sales to turn around, and what are we doing about it?
If you wanna take that.
Yeah. You want me to take that?
Yeah.
I think the answer is definitely yes. Absolutely, yes. There are a couple of things that are important to the turnaround of the Philippine business. Number one is beverage. That is our most profitable and biggest segment, and we are repurposing our portfolio and pushing our full lineup of juice drinks. And that will involve not only distribution, but also new advertising that will increase the relevance of these products. These are the ones that are in place right now. The second part of our beverage improvement is Fit 'n Right. We launched this later in the year last year, and then we have still to fully maximize the relaunch.
We are also going to bring back the classic because we've heard a lot of desire for consumers to go back to the classic, the first one that we had earlier introduced, but we eventually took that out when we relaunched the new lineup. That's all in play. I think by August, we will be out, and that will lead into the holiday season, and we will be on track. No? The other thing that we're doing in the Philippine market is we have also increased the competency of our manpower. We have new people, more experienced people managing our general trade, modern trade, and also our trade marketing organization.
We believe that these new people will come together in order for us to increase our cadence and management of the Philippine operations. No? In a nutshell, those are the two things that are going to be very critical other than the usual marketing efforts that we do for the other culinary products and the fruit products that we have. No? In the innovation front, that is growing right now, and as you know, it has contributed a significant volume on the top line. We will continue to expand that this year, and we are really looking to that part of our business to grow and contribute 10%-15% of total top line.
Just to build on what Cito said, we will continue to make improvements from a channel perspective in general trade. That is expected to also drive the growth of core business. We are expecting convenience channel to be coming back as the economy opens up, so that will, that has been declining. We are hopeful that would turn around. Our food service business will continue to improve as the economy opens up, plus we are investing in e-commerce.
With the growth of e-commerce, convenience stores, in addition to the core business, we are also going to grow through new products, for which a platform has been clearly launched in fiscal year 2022. That would just supplement what Cito said on Philippine market growth.
Thank you, Parag.
Thank you, Cito. Thank you, Parag. Next is on the U.S. market. Do we expect the momentum to continue? This from Wei Tan. He said, "Great growth in the U.S. Congrats".
Yes. Thank you. We do expect this to continue. Beginning with our core base of business, we've had several recent successes at our largest customers from Walmart to Costco to Kroger to Target, and feel very good about the outlook on those top core retail customers. We are also very encouraged by this new kind of channel expansion strategy. We continue to see increases in distribution across the value channel or the dollar channel. We have a growing natural foods business, a growing e-commerce business, encouraged by the upside still in food service, and more to do in the club stores. Very excited about the road ahead, and working hard to make sure we have enough supply, quite honestly, to keep up with this.
We've expanded our sourcing, our growing areas, and with the help of Parag, we really have a nice plan in place to make sure that we have the right procurement and supply chain synergy to help fuel further growth.
Thanks, Greg. Let's move on to the gearing. Noted that the group's gearing has jumped significantly from 1.9x- 3.1x, due mainly to the redemption of the 200 million A1 pref shares through debt in April 2022. Are there plans to bring down the gearing levels to below 2x in the near term, bearing in mind that there is a 100 million A2 pref shares that can be redeemed in December 2022?
No, we are absolutely confident about renewing or redeeming the preferred share in December 2022. Initially it would be through refinancing through debt. In 12-24 months, we are gearing up for a capital structure transaction and are considering our options both here and in the U.S.
Thank you, Parag. How much of our debt are floating? With the increase in interest rate, how much interest expenses do we expect in FY 2023?
That's a great question. In terms of our total debt, which is around $1.6 billion, our debt is around $750 million in the U.S. and the balance in the Asia business. The balance of $850 million that we have in the Asia business, out of that, I would say 20%-40% of the same is at a fixed rate. And the balance is at a floating rate. What we would do is start working with our partner banks to adjust the credit spread to offset the impact of increase in the base rate that we would be seeing across globally.
When it comes to the U.S. business, of the $750 million, as far as the new $600 million term loan is concerned, that is on a floating basis, but we have interest rate hedge from April 2023 to April 2026 in place. That hedge provides a cap of three percent, which means up to 3% we take the risk, and beyond that, our risk is covered on the total amount of hedge that we have taken. Our ABL obviously is floating as well.
Again, as you might have picked up in the last 12 months, we have been able to bring down the credit spread through improved performance, and that's what we would endeavor to do in the coming year to make sure that from an overall cost perspective, we are able to mitigate the impact of increase in LIBOR and increase in our benchmark rates in Philippines as well.
Thanks, Parag. How much do we expect in interest expenses for this year?
In terms of our interest expense on an organic basis, we expect to get savings of around $20 million-$30 million as outlined by Greg. That would be coming from really refinancing the high yield bonds from high yield bonds to the term loan. In terms of increase in interest rates, we are expecting an increase of around 100-150 basis points on an average versus last year.
Thanks, Parag. Any update on the IPO of Del Monte Philippines?
As I mentioned, on the cards, we are working on it. Considering where the markets are with the volatility in the marketplace, we expect this to be more, in a timeframe of 12-24 months.
Thank you, Parag. Any update on the Indian JV?
Yes. Our Indian JV did go through tough times in the last two years as 50% of our revenue comes from B2B sector. Post-COVID and with our new management in place, we are absolutely focused on growing the B2C business. As I mentioned, the B2C business did grow at 6% last year and is further expected to grow double-digit in fiscal year 2023 through a focus on e-commerce through focus on our distribution expansion in top-tier cities and also modern trade and key accounts too. That is our plan, and we are optimistic about our growth opportunities in India in the coming years.
Just wanted to add to that, Parag, for everybody's benefit on India. Two critical changes that we believe are critical to turning this around and achieving more in that huge market. Number one is, whereas before we had the two pieces of business, the packaged goods and the fresh, we have divested the fresh operations right now, and the company is solely focused on packaged goods. That's a big help to us in terms of focusing the organization on what matters most. The second thing is we've hired a new CEO. We actually hired him as a COO about a year to 18 months ago. A couple of months ago, exactly six months ago, we have decided to put him as the new CEO.
This new CEO has a very strong B2C background. He came from Unilever India and worked also for Carlsberg. We just had a review with the board yesterday, and we are confident that we have a new and more achievable plan to bring India to a higher level of performance.
Thank you, Cito. Thank you, Parag. Okay. In light of the rising interest rate environment, given that the Fed already raised rate hikes and likely will increase more with the BSP following suit already with 25 basis points, how far is Del Monte effectively hedged in the future, like with raw materials and inventory as such? Lastly, about Del Monte's floating debt of 5% by May, is there a risk of it rising so much that it can pose a big risk to operations?
On the first question, let me start by sharing that as far as our exposure to commodities, in fiscal 2023 is concerned, we are largely covered in terms of our requirements, particularly in the U.S. That would include metal packaging. We are also taking out hedges on natural gas and fuel where volatility is quite high. In terms of ingredients and rest of the packaging material, I can confirm that we are covered to almost 75%-80% of our total requirements. Yes, on plastic-based packaging, there could be some volatility coming from a change in resin prices, which is obviously fuel-driven.
When it comes to the U.S., also on raw produce prices, ahead of our pack season, we are more or less clear on our total raw produce cost as well. We understand that, and we are taking appropriate pricing and operating measures to make sure that our margins are protected or in fact will improve versus fiscal year 2023. When it comes to the base business, yes, we are seeing some volatility every day, particularly with the exchange rate. I mean, as you would have seen, the exchange rate today is more than 54.50. Yes, that would impact oil prices dramatically, which would in turn impact our conversion costs.
Again, with the productivity improvements that we have in place, both around plantation and the cannery, we feel confident that we can mitigate it. We are also making opportunistic moves. For example, on fertilizers, we were able to lock in prices and build inventory for a good nine months with lower prices than what we have in our plan, which will help us. We are taking all measures in the base business to protect, but a couple of areas where we do have some vulnerability is around oil and FX, which does increase our input costs.
At the same time, because our export earnings are higher and our exports are higher than imports in our Philippine entity, we have a natural hedge, and overall, it allows us to protect our margin on the base business. Let me ask Greg and Cito to complement.
No, I think.
Yeah.
Yeah, no, I think, Parag, you covered that really well. I think if you think about all the pre-purchase work and negotiations that happened regarding all of our MRO and supplies and materials, et cetera, for the U.S. business, we're locked in. We have the hedges in place for natural gas and diesel.
You know, we have a solid commitment on can supply and can pricing throughout the year. We've already taken pricing action to account for, you know, any increased inflation that may occur over the next couple of quarters. We're largely in good shape in the U.S. business in terms of protecting our bottom line, and as I mentioned, see more and more upside to top line growth for the company. Go ahead, Cito. Sorry.
Yeah. I think for the base business, the planning on the materials, the material costs and all of those key cost items really started way ahead. As early as January, we were already planning it, and we were able to secure certain contracts with our suppliers. Where there is an opportunity to load up on inventory at lower prices, we took that opportunity. Yes, Forex is another risk, but, you know, I mean, very difficult to control that, no? As far as fuel is concerned, we are also taking steps in our operations in order to reduce our power cost, no?
We have solar energy coming up in our plans, and that will be a big help in trying to manage our power costs, which are indeed very high, no? In the pricing front, what's good is we took pricing as early as last year. The strategy was to take smaller chunks of pricing, but also more frequent in order for us to manage any impact it would have on our volume and with consumers, no? We've been successful with that, and that has also been the strategy that has been adopted for the U.S., no? In a way, where other competitors we have in the Philippines would be taking as much as 10%-15% price increase over the next six months, no?
This I have learned from my industry contacts. That is not the case with us. We have taken pricing last year, and we will continue to take smaller chunks, so that as we protect our cost, it is also important that we protect our volume and our market share.
Thank you. Thank you, Cito, Greg, and Parag. Parag, do you wanna address this again, the floating debt of DMFI by 4%? I know you mentioned that there was a cap, there's a cap of 3%. That's on the adjusted SOFR, so the cap will kick in next year. That's right?
From April 2023. Yes.
Okay. The adjusted SOFR will have a cap of 3% plus the 4%, right? All in will be about 7%.
Correct.
Okay. Okay, thank you. Next,
Just on one of the questions, total interest expense for the group next year, excluding any one-off refinancing costs, we are expecting it to be around $90 million-$95 million.
Thank you.
The increase is also attributed to the refinancing of preferred shares and increased loans. That has been considered in the amount that I gave you.
Okay. Thanks, Parag. Going to China, is China limited to fresh pineapples, or are there plans to grow the product portfolio there?
No, it includes packaged. Fresh is obviously the big part. We are inching towards a $100 million business in China. Both the growth is primarily focused on fresh, but we do have a reasonable packaged food business as well, mainly on food service.
Thanks, Parag. Any impact of the lockdown in China?
None so far. Initially, we thought that they could impact our fresh business, but we didn't see any significant impact, and they're back on track right now. We actually have more demand than supply in China today.
Thanks, Cito. Thanks, Parag. Okay. Going back to gearing. Gearing has gone up while U.S. seems to be going into a recession. Wouldn't it be prudent to conserve cash and perhaps discontinue dividends?
I think it's a fine balance. It is important to continue rewarding the shareholders, and we are sticking to our dividend policy, which is 33%. We are being prudent not to go beyond that and limit it to that just because of that reason. It's a fine balance, and we also want to make sure that shareholders are rewarded.
Okay, thanks. Continuing on with the dividend question. Given the $70 million one-time charge in 2023, will this impact cash dividend payout next year?
Great question. We don't think so. Our base plans are strong, both in the U.S. and in the base business. We would strive and do our best to continue to be profitable and come close to our profitability, as per last year, so that we can continue providing good and reasonable dividends to our shareholders.
Thanks, Parag. Next is the upfront cost for the refinancing facility seems way too high, potentially amounting to half of interest savings over the life of the loan. Can we have the reasons for such high upfront costs?
No, actually the upfront costs are very reasonable and nominal. Not sure where this came from. Our total upfront cost for refinancing the $600 million term loan are just about $10 million-$12 million, which is very modest. We actually have reduced the upfront cost versus high yield bonds significantly.
Thank you. Danny?
Parag, if you wanna highlight on the payback, you know, the it's a two to three year payback on the entire refinancing cost.
Absolutely. With the savings that we are expecting of $20 million-$30 million, the cash cost that we have incurred on redemption of $44.5 million plus the one-time costs on the term loan, we have a very good payback of 2-3 years.
Okay. Thanks, Parag. Moving on to the States, are we on track to $2 billion sales in FY 2023? Will we start exploring the listing of the DMFI?
Yeah. Our long-range plan called for us to reach $2 billion in sales in the U.S. in fiscal 2026. However, we are a year ahead of our long-range plan in terms of top line and bottom line performance. We are optimistic that we can meet and exceed that goal for $2 billion in sales. We are quite interested in the idea of listing and we'll be evaluating that in the next several months, given our improved credit ratings, our improved leverage, and our top line and bottom line performance and our overall profitability compared to our peer group. We now look very much like a good CPG company in the U.S.
Our EBITDA percentages, our gross margin percentages, our CAGRs actually are leading a lot of U.S. companies in terms of growth. We feel we'll be well-positioned. With the outlook ahead, in terms of 2024 and 2025 that Parag and I are working on right now, we're refreshing our long range plan. We feel we'll be in a position of strength to consider a listing here in the year ahead. Anything to add there, Parag?
No, I think you covered it very well, Greg. Thank you.
Parag, just a follow-up on that upfront cost from Hital. He's saying it's $70 million, which is considered huge. That's what he meant by the upfront cost. That's really the refinancing cost, Hital, that includes the penalty charges, right?
Yeah, the penalty charge is not.
Penalty for breaking, yeah.
That penalty charge is a non-cash cost, number one. That penalty charge relates to the upfront fee that we incurred when we issued the high yield bonds under very difficult circumstances. We had to give an upfront discount on the high yield bond, and it ended up being an exercise which required high upfront cash costs. It's a non-cash charge which we are writing off at the moment. The cost was already incurred in 2020.
He's asking for the breakdown of the $70 million, so the non-cash and the cash component.
$44.5 million is the cash component, that's the redemption fee. $26 milion is the non-cash component. We have a $1 million small amount of commitment fee.
Without the refinancing $70 million one-time fee, it's meant to break the old loan, right? Not the new loan. It's not upfront for the new loan.
Okay, let's move on.
Yeah.
Yeah.
How often is a credit rating review carried out in the DMPL? Will there be one initiated in light of the FY 2022 results?
Yes. It would be definitely looked at in fiscal year 2023 as well. As our performance continues to improve and as we continue to meet our projections or do better than that, we would look at an upgrade in fiscal year 2023 as well.
Thanks. What are the covenants in the April loans to refinance preference shares? What are the covenants in the June loan? June loan meaning, I think May loan.
As far as our covenants on refinancing of prep shares, very consistent. Debt to EBITDA, debt to equity of 4x . That's what we are working with the banks on. Our interest coverage is around, if I remember it correctly, around 1.5x or 1.7x , which is very comfortably achieved by us.
For the U.S.
That's on the base business.
Are there covenants in the $600 million loans in the States?
Nothing significant.
Okay, thank you. The global freight rates have been going down lately. Is that showing a better next quarter for Del Monte? Or focusing on rail is still the same plan? Are we still focusing on rail?
Yes, we are very focused on rail. That's for our domestic transportation and moving our product from the plants to the DCs. That continues to be a big focus, and we are actually achieving very good mix of almost 70%-80% by rail, if not more, in the last two or three months. We will continue to improve on that. Ocean freight continues to post challenges. It's still not that easy to get vessels, particularly for managing our imports into the U.S. We are seeing some softening, which is helping us on the spot rates and getting more vessels easily on the spot rates, which was not the case last year. Some softening is happening and we are seeing some benefits.
On an overall basis, it's not that big a difference.
Thank you, Parag. Are there plans or is it possible to deseasonalize the DMFI business, meaning to capture the sales throughout the year rather than in seasonal peaks in Q2 and Q3?
Yeah. We're doing that in a couple different ways. One example is I highlighted in Q4. We've put an added emphasis against the Easter holiday. We think that's a big window for us to drive further sales lift and top line growth across our portfolio. The second way is through innovation. Our frozen food business that we're building is much less seasonal in nature than the holiday-driven portfolio across the core business, and that's a growing business. Next is our beverage business, and I didn't talk about that much, but our new line of Joyba bubble tea products will reach $40 million in sales this year, and that very much skews towards the summer months and summer seasonality and is a year-round product.
Between innovation and opening up some new holiday windows, we can work and do plan to deseasonalize the business.
Thank you, Greg. For CapEx, for the group, it's at record levels of $200 million. What is the expectation next year, and what are you spending on? What is the other operating loss of $2.7 million in 4Q 2022 share compensation?
The first question. As you probably know, our $200 million of capital includes a major chunk on bearer plants in Philippines. Obviously our investment in bearer plants is going up because of two reasons. One, the business is expanding. We are investing behind fresh business. We are expanding our growing area, which is requiring us to invest more, and that's the upfront investment that you see. The second one is obviously we are now investing behind increased capacity, whether it's on the packaging side with multi-packs or with new products such as Joyba in beverages in the U.S., where we are seeing significant potential.
We are looking at continuing to invest in various packaging formats in the base business in Philippines as well. That has led to our investments being in the range of $60 million-$70 million from a group perspective, with $35 million-$40 million being invested in the U.S. business and almost $25 million-$30 million being invested in the base business of Philippines. Very clear focus on increased capacity, cost savings, automation, environmental safety and health is becoming a big focus. Obviously rest would be process improvements and routine investments that we have to make in our plants.
Thank you, Parag. We'll take these last two questions, which are related to pricing. I'll start off with Asia or Philippines. What are the price increases for 2022? And I think, I guess the outlook for this coming year for price increases for the base business.
Okay. In 2022, as I did outline when I was explaining the gross margin results, we have protected the margins of base business. Our base business made more than 30% in fiscal 2021, and it was 10 basis points better in fiscal year 2022 as well. That has been possible through timely and small price increases that we have been taking throughout the year. On average, across all our businesses, excluding the U.S., our price increase impact has been around 4%-4.5%. That's what we have taken on average, for the full year, which has allowed us to offset the headwinds that we have been seeing, particularly in the second half, though in the fourth quarter, as I mentioned, we did see our margins decline by 200 basis points.
Full year 4.6%, and that's what we are. That's what led to us being able to protect, in addition to an outstanding performance from an operational perspective, both in the plantation and cannery.
I think also to add to that, no, Parag, that as far as pricing is concerned, no, in international, we have already taken a significant bulk of our price increases already, no. Therefore, in a way, we're ahead, no, as opposed to a plan that takes a lot of price increases in the second half of the year. That, in a way, also helps us manage our revenue and our volume delivery.
Thank you, Cito. Thank you, Parag. We have that same question for the U.S. business. How much price increase have you taken at last year, and how much more can you take in FY 2023? If U.S. is raising price on June 1 and it's effective on September 1, will there be front loading of inventory? How much more can prices rise with higher raw materials as it is a moving target?
Yeah. No, good questions, and I'll kinda answer both, Jen. Similar to what Luis Alejandro has led successfully in the Philippines, we've taken a series of small, selective and strategic price increases. We took two last year in fiscal 2022, and we've taken one already in fiscal 2023. We monitor them closely. We do not allow any front loading from our customers, and we restrict that and measure that and monitor it. We closely manage the impact and study the impact in terms of elasticity to see what effects it's had on demand to ensure that we continue our momentum and do not lose share. That strategy worked this year, and we're gonna use the same elements of that strategy again in the year ahead. Will we raise prices again? We don't know.
Our pricing strategy is to offset a portion of inflation. The rest of the work we do ourselves through cost savings and efficiency efforts. As Parag and I both mentioned, we feel good about the outlook ahead. You know, we understand what's facing us in terms of inflationary headwinds, and we've accounted for that in our outlook and in our pricing strategies. If more arises, we'll deal with it. As I mentioned earlier, the market share gains, the top line growth in the face of higher pricing is just proving the power of our brands in the U.S. marketplace and, you know, consumers' desire to continue to produce more meals at home, which is really our sweet spot.
We like where we're positioned for the next 12-24 months of turmoil. We'll be a company that succeeds.
Greg and I are completely focused on improving the gross margin further to what we have delivered in fiscal year 2022.
Yeah.
Thanks, everyone. There's one last question from George. A long shot. NutriAsia owns majority of Del Monte. Is there a chance they will backdoor list their local business?
George, it's a long shot. We don't think so.
It's a very long shot, George, right? More than a three-point shot, right?
Okay. That brings us to the end of our Q&A. Thank you so much to our panelists for answering all of the questions so well, and congratulations to a very good FY 2022. Look forward to this coming year.
Thank you very much.
Thank you.
Thank you for joining us.
I'll see you in a bit, Greg. I'll see you in a bit. Okay.
Thank you.
All right. Thank you. Thank you.
Thank you.
Bye.
Greg.