McDonald’s expansion to slow down AGI profit growth this year

Listed investment holding company Alliance Global Inc. (AGI) expects its net profit to grow by only five to seven percent this year as it continues to spend for the expansion of fastfood giant McDonald’s.

"We’re expecting a moderate growth of five to seven percent in net income this year. We are only expecting moderate growth because we are in the process of expanding businesses like McDonald’s," said AGI chairman George Yang.

Last year, AGI reported a net income attributable to shareholders of P1.61 million on revenues of P7.94 billion.

Yang, however, expects revenues to significantly grow this year as McDonald’s opens new branches.

"Revenues would be better because as we open new branches, sales would be higher," he said.

Acquiring new food brands is not on the company’s main agenda right now as the group intends to focus on the expansion of McDonald’s.

But Yang said the company is open to acquiring new food brands that would complement its business. "If we’re buying it should complement and not cannibalize our own market when opportunity knocks, we will look at it," he said.

AGI has earmarked P500 million this year for the establishment of 24 new McDonald’s branches and for its real estate development projects. Each store is estimated to cost P25 million. Another 24 new branches are slated for construction in 2007.

Yang said 15 out of the programmed 24 new stores had already been set up as of end-August this year.

AGI expects McDonald’s to be its major revenue contributor. Real estate activities are also expected to contribute additional revenues, particularly the Fort Bonifacio project.

AGI is the exclusive distributor of Campbell Soup Co.’s products and E&J Gallo Winery Inc. wines in the Philippines. It also handles the international marketing of McKester PikNik International Ltd.’s food products.

Aside from food products, AGI also has interests in property development and glass manufacturing. It is a joint venture partner of the Bases Conversion Development Authority and Megaworld Corp. in the Mckinley Hill mixed-use project in Fort Bonifacio.