SMC to consolidate food units under one holding firm

San Miguel Pure Foods Inc. is consolidating its food units Monterey Foods Corp., San Miguel Foods Inc., and Magnolia Inc. under just one holding company to cut on costs and maximize shareholder value.

The three companies will be folded into San Miguel Purefoods through the issuance of shares to parent firm San Miguel Corp. in exchange for the latter’s shareholdings in Monterey, Magnolia, and SMFI valued at P4.6 billion as of end-September last year.

Purefoods will issue to SMC 47.479 million class A shares and 23.385 million class B shares to be taken out of the company’s increase in capital stock from P840 million to P1.46 billion. The shares are valued at its traded price as of Sept. 30, 2006 of P60 per common class A share and P74.50 per common class B share.

In exchange for the issuance of shares to SMC, Purefoods will acquire 137.24 million common shares in Magnolia valued at P216.83 million, 17.741 million shares in Monterey valued at P1.115 billion, and 6 million common shares (P2.112 million) and 11.459 million preferred shares in San Miguel Foods worth P1.145 billion.

As a result of the acquisition, Purefoods will own 100 percent of Magnolia and SMFI and 96 percent of Monterey.

Purefoods said the issuance of shares, which translates to about .0856 percent increase in the shareholdings of SMC in the former, would have negligible effect on the ownership percentage of existing shareholders.

Other subsidiaries of Purefoods include The Purefoods-Hormel Co. Inc., (60 percent), P.T. San Miguel Purefoods Indonesia, (75 percent); San Miguel Super Coffeemix Company Inc. (70 percent); and RealSnacks Mfg. Corp. (100 percent).

In the nine months ending September this year, Purefoods reported a net income of P174.07 million, 37.09 percent lower than the previous level’s P276.69 million. Net sales, on the other hand, slightly went up to P38 million from P36.58 million, primarily due to intense competition and economic pressure which dampened demand.

Cost of sales increased to P32.38 million compared with only P31.51 million, largely a result of higher advertising and promotions spending for new products, increased manpower costs and distribution expenses.

San Miguel Foods’s poultry business, which remained to be the biggest contributor to the company’s revenue, sustained its strong performance and ended the third quarter by posting a six percent increase both in volume and revenue on account of more stable prices resulting from a generally favorable industry supply-demand situation.

The processed meats division under Purefoods Hormel Co. registered revenues at par with last year despite market contraction brought about by weak consumer spending and stiff competition.

Magnolia, on the other hand, hit revenues of P3 billion, 12 percent higher than the previous level due to higher volumes from margarine and cheese and contribution of new products such as ice cream and milk.

The coffee joint venture business, under Super Coffeemix, has already captured a significant market share and revenue growth almost double that of 2005 level.

Amid soft port demand, Monterey, posted four percent and one percent increase in volume and sales revenues, respectively.

Inspite of a sluggish hog industry condition, SMFI’s feeds business managed to post a three percent revenue growth on account of various selling and marketing programs implemented.

Amid a relatively flat market and the threat posed by the continued influx of cheaper flour imports, SMFI wholly-owned subsidiary San Miguel Mills registered an eight percent growth in revenues.