National Foods boosts revenues by 8% to A$1.84B in 2006

Australian dairy giant National Foods Ltd., a subsidiary of Southeast Asia’s largest food and beverage conglomerate San Miguel Corp., reported an eight- percent increase in consolidated revenues last year, helped by higher volume and a wider product distribution network.

In a statement issued yesterday, San Miguel said National Foods’ unaudited revenues in 2006 reached A$1.84 billion. In the fourth quarter alone, revenues grew 14 percent year-on-year.

San Miguel acquired National Foods last year. It later injected its Australian fruit juice unit Berri Ltd., specialty cheese manufacturer Lactos and King’s Creameries into National Foods, as part of efforts to beef up the group’s product offering and widen its consumer base.

National Foods’ unaudited operating income, on the other hand, rose 10 percent to A$170 million. In the juice industry, National Foods reported healthy volume and revenue performances with timely execution of sales and marketing strategies that enabled the company to respond and compete effectively against new entrants. This included increased brand building investment on core brands that has solidified National Foods’ leadership in the chilled juice market.

"The solid performance of National Foods a year after its integration into San Miguel reflects the effective cooperation and support within the bigger organization’s winning brands, effective management and sound operations. San Miguel and National Foods will continue to anchor on these attributes to further reinforce its position across Asia Pacific in the medium to long-term," said San Miguel president and chief operating officer Ramon S. Ang.

San Miguel has stated its intention to increase the revenue contribution of overseas operations, which include beer brewing in Australia, China and other Asian countries. With the inclusion of National Foods, overseas operations and exports accounted for 35 percent of San Miguel’s 2005 group revenue of P226.9 billion. In 2004, overseas operations contributed 17 percent to group revenue.

Analysts earlier expressed concern over San Miguel’s costly acquisitions of National Foods and Berri Ltd., saying these could impact heavily on the food and beverage giant’s profitability.

San Miguel shelled out A$1.9 billion to take over National Foods following a bidding war. The conglomerate also spent A$169 million to acquire 100- percent ownership of the leading Australian juice maker.

San Miguel’s acquisition of National Foods is the largest deal it made in the past years. Its previous record purchase was its 2001 acquisition of Coca-Cola Bottling Philippines Inc. from Sydney- based Coca-Cola Amatil Ltd., in a stock and assumed debt transaction valued at $1.3 billion.

San Miguel justified its high-profile takeover of National Foods and Berri, saying it was meant to reduce its dependence on the local market and reinvigorate its brands and markets outside the Philippines. It aims to triple sales to $10 billion by the end of 2007.

San Miguel said these businesses have access to growth markets that should help it gain further inroads not only in China, Indonesia, Hong Kong, Vietnam and Australia, but also Thailand, Malaysia, Singapore and even India.

It is confident that the two Australian acquisitions would eventually boost its bottom line, given a broader brand and geographic portfolio.

National Foods gives San Miguel control of an Australian dairy company with 37 percent of the country’s fresh milk sales and a third of its yogurt and dairy dessert sales. Australia is the largest dairy exporter after Fonterra and the European Union.

It is also expected to help San Miguel expand its share of the Philippine dairy products market, which is dominated by Nestle Philippines and Alaska Milk Corp.