SMC income falls 4.4% to P6.5-B

Leading food and beverage firm San Miguel Corp. (SMC) earned four percent less in 2001 as against the past year due to the costs of two major acquisitions, but the addition of these new companies boosted its consolidated sales by significant 48 percent during the same period.

In a report to the Philippine Stock Exchange, SMC said the acquisitions and their resulting short-term dilutive effect trimmed the company’s net income from P6.8 billion in 2002 to P6.5 billion last year.

However, on an operational basis, the consolidation of Coca-Cola Bottlers Phil. Inc. (CCBPI) and Pure Foods Corp. in the SMC group propped up its operating income by 32 percent to P10.5 billion, from P7.9 billion in 2000.

Moreover, SMC said its EBITDA (earnings before interest, taxes, depreciation and amortization) — which most analysts say reflect the true measure of a company’s value — shot up by 44 percent to P18.6 billion last year largely on account of the improved revenues across all businesses.

In the period under review, SMC broke the P100-billion sales mark as consolidated revenues amounted to P121.6 billion, a huge 48-percent improvement from a year earlier as the annexing of market leaders Pure Foods and CCBPI increased sales output by 90 percent and 48 percent for food and beverages, respectively.

Pure Foods, acquired for P8 billion from the Ayala group in April last year, had the most pronounced contribution to the SMC Group as it added P12 billion in sales to the San Miguel Food Group (SMFG), which include the agribusiness, poultry and livestock and dairy units.

SMFG’s operating income jumped more than three-fold to P2.1 billion, with Pure Foods chipping in P1.2 billion in nine months, on total revenues of P32.7 billion or 90 percent more than the previous year.

CCBPI, which SMC bought back from Australia’s Coca-Cola Amatil also in early 2001 for $1.24 billion, poured in P21.1 billion in sales revenue from May to December, resulting in an operating income of P1.1 billion.

The 2001 financial results still exclude the output of another softdrink company, Cosmos Bottling Corp. (CBC), the sale of which was only consummated last January. SMC purchased CBC from the Concepcion Group for P12 billion.

In the flagship beer segment, financial results were mixed last year as the improved performance in international operations failed to rub off on domestic operations.

The international beer group achieved a 31 percent increase in operating income to $8.8 million, on sales revenue of $237.6 million, as better product mix, continued rationalization of sales efforts and distribution systems, and cost management programs drove output higher.

On the other hand, operating income for domestic beer operations was flat at P4.1 billion, which the company said was due to higher raw material costs and lower volumes. Domestic beer volume, in fact, declined by three percent due to a slowdown in consumer spending and weak farm incomes. SMC purposively corrected trade inventory levels and clamped down on accounts receivables to bring them down significantly from P7.4 billion at the start of the year to P5.4 billion by yearend.

Earlier, SMC’s liquor unit La Tondeña Distillers, Inc. reported a 39 percent gain in net income to P1.9 billion, on eight percent higher revenues of P15.3 billion, as a result of the one-time gain from the sale of its non-liquor businesses (juice and water) to sister company CCBPI.

But another core unit, packaging arm San Miguel Packaging Products (SMPP) posted a near flat revenue growth of one percent to P13.6 billion. Its operating income, however, contracted by 17 percent to P1.6 billion as it was hard-pressed in implementing price increases given the intense competition among local and foreign packaging suppliers.