SMC posts P3-B net income in H1

San Miguel Corp. continued to post strong sales as its corporate acquisition binge last year started to bear fruit, although its bottom line earnings had dropped 20 percent in the first semester due to additional costs related to the group-wide integration.

In a disclosure to the Philippine Stock Exchange, the country’s largest food and beverage conglomerate said net sales in the first half had increased by 25 percent to P66.1 billion on the back of sustained gains from the beer, packaging and food divisions, along with higher contributions from beverage unit Coca-Cola Bottlers Philippines Inc. (CCBPI), which folded in the non-liquor line of sister company La Tondeña Distillers Inc. and Cosmos Bottling Corp.

As a result, operating profit improved 18 percent to P6.08 billion with EBITDA (earnings before interest, taxes, depreciation, amortization) rose by a notable 23 percent to P9.95 billion.

However, SMC’s consolidated net income during the period fell by about 21 percent from P3.8 billion to P3.01 billion, inclusive of P160 million in one-off items related to integration, which include the implementation of various programs to align operation, distribution, processes and systems with the entire SMC network.

Despite the lower net profit, SMC said it continues to focus its efforts to grow volumes, immediately realize operational efficiencies and optimize resources following several business purchase in 2001: CCBPI, Pure Foods and Cosmos.

As part of its corporate integration and group restructuring, SMC consolidated all non-alcoholic products, including that of Cosmos under CCBPI’s umbrella and merged Pure Foods with SMC’s processed food operations, forming a new company named San Miguel Pure Foods Co.

The resulting structure in both these segments has allowed SMC to gain meaningful trade leverage, realize economies of scale, and at the same time deliver a full range of products to the consumers.

During the company’s recent annual stockholders’ meeting, SMC chairman and CEO Eduardo Cojuangco Jr. said they expect to sustain the sales uptrend within the next couple of years, sticking to a target growth of an average 30 percent in total sales.

A looming acquisition of another company, whose revenues amount to $1.5 billion annually – almost half the size of SMC itself – is expected to further contribute to SMC’s sales turnover, although there was no indication of when such a deal would be forged.

Indonesia’s food giant Indofood, controlled by the Salim family and First Pacific Co. Ltd., was earlier rumored to be the target acquisition, with SMC itself saying that it would be interested to buy into the world’s biggest noodle maker if such a sale offer comes along.