Will FX impact on our domestic business growth numbers. We would have grown double digit, driven by a very strong performance of international markets. We also took adequate pricing to cover for the recent volatility in commodity costs, which has been caused mainly by the U.S.-Iran war since February and March of 2026. Our gross profit improved to $74.7 million behind increased sales, mainly international business, and also our improved margin profile driven by favorable pricing, better sales mix in fresh, also favorable Forex, which benefits our international business and offset by higher product costs. Gross margin of 33.7% is up 120 basis points just for the very reasons that I just outlined. EBITDA, driven by gross profit improvement, was at $49.3 million, an increase of 25.7%.
Behind our cash profit growth or EBITDA growth, net profit rose to $16.1 million versus $5.5 million last year, reflecting a 7.3% net margin as compared to 2.7%. Our net debt at $970 million is lower due to some loan repayments that we continue to strive and make. Net debt to EBITDA improved to 5.1 x from 6.9 x, reflecting improved profitability and debt reduction. Cash flow from operations at $57.6 million was again very robust despite the volatility that we are seeing in commodity costs, which leads to increased spending on growing pineapples that is not fully reflected in the P&L just yet, as we cycle the cost over a period of 18 months to 36 months. With that, let me hand over to Angie to take you through the strategic priorities and outlook.
Thank you, Parag. Let me now take you through our strategic priorities and outlook. At Del Monte Philippines, our focus remains on building the underlying strength of the business and driving sustainable growth and profitability across both our Philippine and international markets. As you have seen from Parag's presentation of our first quarter results, the international business continues to perform strongly, supported by resilient consumer demand and a stable supply. At the same time, we are operating in an environment that remains challenging and increasingly volatile. In particular, the U.S.-Iran conflict has created additional pressure on key input costs, including fuel, fertilizer and tinplate. We are therefore taking a very disciplined and deliberate approach to mitigating these pressures, as Parag had referenced to earlier.
We are implementing pricing actions where appropriate, accelerating productivity initiatives across the supply chain and the entire organization, in fact, diversifying sources for critical inputs and reducing waste and inventory write-offs. We are also maintaining very tight control over costs and discretionary spending. These actions are part of a broader effort to make the business more efficient and improve our earnings and cash generating capacity on a sustained basis. Based on our stress testing, we believe that the business can absorb moderate adverse movements in these cost variables within our planning horizon. However, we remain appropriately cautious. The ultimate impact of both the geopolitical environment and El Niño remains uncertain, and we continue to monitor these very closely. Next slide, please. Beyond managing the near term operating environment, we remain very focused on strengthening the business for longer term growth.
For the Philippine market, Del Monte continues to hold strong positions in our core beverage, culinary, and packaged fruit categories. Our priority is to reinforce these positions while at the same time expanding the arenas in which we compete. We are developing new products that will allow us to participate in new segments and broaden our consumer base. We are also increasing our presence in growth channels such as convenience stores, food service, drugstores, schools, where we see opportunities to reach consumers across more consumption occasions. In our international business, we intend to build on the strong momentum we have today. We will continue to defend and strengthen our leadership in fresh pineapples across North Asia while further expanding the S&W brand in important markets such as China and Japan. Operationally, one of our immediate priorities is managing the effects of El Niño on pineapple supply and quality.
Our teams in Mindanao are actively addressing this to protect both availability and the quality standards for which our products are known. While we recognize that FY 2027 continues to present a challenging operating environment, we remain confident in the underlying strength of the business. Our focus in the near term is to protect and strengthen our core businesses, pursue the areas where we see the greatest opportunities for profitable growth, improve operational efficiency, and strengthen the financial foundation of the company. Together with the restructuring initiatives that Parag will discuss next, we believe these actions will put Del Monte on a more sustainable path for long-term growth. Let me turn back to Parag to discuss our capital structure.
Thank you, Angie. As we have continued to maintain, we are in discussions with our principal creditors and other stakeholders, and we are working on a comprehensive framework which will establish a sustainable capital structure for the group. We recognize that the capital deficit at the holding company level, which has been caused by the impairment of our former U.S. subsidiary, does not fully reflect the financial strength and underlying operating capacities of DMPL's core Philippine business, which is DMPI. At the same time, we also recognize that the performance of DMPI by itself is not sufficient to address the group's total liabilities of $1.2 billion or the negative equity at the DMPL level of $579 million. No equity raise by itself is expected to turn DMPL's equity position to positive. Our restructuring initiative is not premised on a single capital raising or an isolated transaction.
We are looking at a combination of measures and continue working on it, including debt restructuring, operational initiatives, as Angie mentioned. Also considering asset monetization, shareholder support, which continues to be there, and other capital measures, which will be required to address the group's obligations and improve the position of its creditors and other stakeholders. As mentioned on slide one, unfortunately, in the light of existing negative equity, DMPL does not expect to declare and pay dividends to its shareholders while the capital deficit remains outstanding. Thank you.
We would now like to open the floor for questions. You can also post your question in the Q&A box.
We have some questions sent in advance, so I am going to start with them. The first one is, "There is a pending increase of minimum wage in the Philippines under TRO as of the moment. In case this pushes through, what is the impact to the salary or labor expense of DMPI amount in terms of Philippine peso annually?
Thank you for the question. I think what you are referring to is the pending TRO in Metro Manila, which increases the minimum wages in two tranches, one at the end of July and the second at the beginning of January. That reflects 8% to 12% increase. As you know, our main activity is more in Mindanao. To that extent, the increases were already taken in January 2026 and May 2026 and factored in our cost structure and plans. This increase in Metro Manila will mainly impact our logistics operations, and the impact of that with the 8% to 12% increase is expected to be around $200,000 to $300,000 on an annual basis. However, we do recognize that in this inflationary environment, more such increases and minimum wages can be expected.
Thank you, Parag. On the loan profile, out of the $974 million, how much is dollar and how much is peso denominated or other currencies?
Thank you for the question. What is peso denominated of the total obligation that you just mentioned, Jen? $242 million equivalent is in peso terms at DMPI. That is the total amount. We now continue working in converting on a priority basis our peso loans. Sorry. Our dollar-denominated loans in DMPI into peso. That is what we are aiming for, and we have converted $52 million of loans towards end of July and early August from dollars to peso in DMPI's books.
Thanks, Parag. For interest expense, we paid $16 million for the quarter out of the $973 million loan. So his computation was an average interest rate of 6.73% per annum. Is that correct?
About correct, yes.
Okay, thanks. Now moving on to the restructuring. Has the company already appointed legal and financial advisor for debt restructuring, and who are they?
Yes, we have an advisor in place, both from a financial perspective, we keep seeking advice as required on legal and tax matters. Yes, we are working on a comprehensive solution with a local financial advisor and also other advisors from time to time, both based in Singapore and the Philippines.
Thanks, Parag. Next is what assets are the company looking to monetize?
I can just share an example. Our divestment of India shares is a very good example of monetizing assets that are not strategic. In the light of the same, we are obviously exploring more.
Thanks, Parag. Next is for the strategy of restructuring, is the company looking to haircut the debt?
We are looking at a comprehensive refinancing, and the banks are obviously supporting us in many ways. We won't be able to share details about the same at this stage, since the discussions have not been approved by the board of Del Monte Pacific or DMPI.
Thank you. The next question is, at $16 million of net profit per quarter versus the $579 million of negative equity, this translates to nine full years before DMPL can go back to positive territory. Is this $16 million per quarter earnings sustainable, or is this number over and under the estimated earnings? Is DMPL pursuing any funding options such as share offering, IPO, et cetera, in order to fast-track recovery of its financial standing?
I can confirm that our Q1 results do not include any extraordinary income or gain. That's number one. Number two, whether it's sustainable, as Angie mentioned, we are in a very volatile environment. It's difficult to say whether this can be sustained, but definitely we have good momentum in our international markets as we have outlined, and we will strive to maintain our profitability from a full year perspective. Definitely, some margin impact can be seen in the second half as the commodity headwinds do continue, and we may see a more stronger impact from El Niño in the coming quarters, particularly in the second half of our fiscal year.
Those are the volatilities that we are dealing with, and we can just say that while Q1 performance was strong, and we will strive to do the same in full year, but we can't say that it'll be sustained at the same levels.
And the funding options to fast-track the recovery of our financial standing?
As I mentioned, I think Angie reinforced it in our strategic priorities, this continues to be our number one important initiative, and we can assure our investors, our stakeholders, that we are working very actively with our lenders and other stakeholders.
Thank you, Parag. We do not have any open questions as of the moment. If the attendees have questions, please type in in the Q&A box. Thank you. We have a new question. When does the company expect to complete the debt restructuring? Based on the discussion with bank lenders, when will that conclude?
I can say that our goal is to complete them in the near future, which is in the next two to three months. We should be in a good position to have a more definite perspective with the lenders.
Thank you.
Are there any other questions from-
Any updates on the negotiations with Sea Diner ?
Again, they continue to be constructive, and we will be obviously communicating more once our plans are approved and agreed with our lenders.
We have a new question: Will the company consider payment in-kind arrangement to reduce interest expense payments?
Yes. Everything when you say in-kind, if you meant future, that could be also an option.
Any other questions from our participants in the call? There's a question, yeah.
Yeah, I asked the earlier guy who asked that question on kind arrangement on what he means by kind arrangement. He said payment of the interest that's not in cash, but in principal amount.
I guess we can probably take it offline, Jen, and understand-
Yeah
It better.
Yes.
But look forward to your suggestion, and we will respond to you separately on that. Thank you.
Are there any more questions? Okay, we have one new question. So far with the creditors, are there discussions to convert debt to equity or warrants or preference shares?
Yes. We have floated the idea of doing so, but that is not what the banks would. That will not be their first option or priority, let me put it this way. Yes, but this idea has been floated and considered.
Can management provide an updated view on the $70 million perpetual securities due for step-up in March 2027? Is redemption at the first call date currently the base case plan?
Can you repeat that, please? I do not know.
Can management provide an update on the $70 million perp securities due for step-up in March 2027?
Yeah.
Is redemption at the first call date currently the base case plan?
Yes. That's the base case plan, redemption, and our overall refinancing, and capital structure discussions include a solution to that, too.
Thank you. What are the bank lenders' priority or demand when approaching the debt restructuring?
Their priority is to see some improvement in debt to equity, which means that there has to be some injection of equity in the near future. What they are looking for is a clear plan on the same, and that will allow us to then consider a more comprehensive capital structure and refinancing discussion.
Do we have any more questions? There's a follow-up. How will the company inject equity without any raise in rights issue?
We are considering raising it at the level of DMPI or using the shares of DMPI to raise equity as one of the main or as one of the approaches to raise funds. As I said, there are more being considered, and that is subject to board approval as we go and share more comprehensive plan with our advisors in the coming weeks and months. As I said, it's through DMPI. That's one of the options being considered amongst a few others.
We don't have any more questions. Does anyone still have questions for us?
Thank you very much.
Are there any more questions? If not, then we would like to conclude our results briefing, and thanks to all for joining us, and do reach out if you have any other questions or follow-ups.
Thanks a lot to everybody.
Thank you, everybody.
Thank you.
Thank you, Jen. Thank you, Angie.
Thank you, Angie, Jen .
Bye.
Bye-bye.