San Miguel Corp. income jumps to P55.6 billion in first half

MANILA, Philippines - Boosted by asset sales and higher revenues from most of its businesses, diversifying conglomerate San Miguel Corp. said its first half net earnings this year jumped nearly three-fold to P55.6 billion.

In the second quarter alone, San Miguel’s net profit reached P52.92 billion or more than five times the P8.7 billion recorded in the same period a year earlier.

In a financial report filed with securities regulators yesterday, San Miguel said it booked a P50.24-billion gain on the sale of investments from an earlier P5.1- billion gain in 2008.

Last May, San Miguel sold its 43.249-percent stake in local flagship brewery firm San Miguel Brewery Inc. (SMB) to Japan’s Kirin Holdings Co. Ltd. for P58.925 billion. The company booked a gain of P50.7 billion from this transaction, which was used to prepay its debt of $923 million.

Aside from this, San Miguel recorded a P5.7-billion gain from the discontinued operations of Australian brewer J. Boag last year.

San Miguel has been selling substantial stakes in its key food and drinks subsidiaries to fund its diversification into power, infrastructure, telecommunications and water utility to fuel future growth.

Excluding these one-off items, San Miguel reported a recurring net income of P5.3 billion, down three percent from the year earlier level.

Consolidated sales revenues rose seven percent to P84.85 billion as most of its units continued to post strong gains in spite of an economic slowdown, led by the hard liquor business which registered a 26-percent growth in revenues to P9.34 billion.

SMB, on the other hand, posted a net income of P4.86 billion, slightly higher than the P4.66 billion recorded a year ago due lower income tax rate of 30 percent compared with 35 percent in 2008.

Sales revenues rose four percent to P24.82 billion from only P23.82 billion, mainly driven by higher selling prices since sales volume declined slightly to 86 million cases.

Despite the minimal volume shortfall and eight-percent hike in excise tax effective Jan. 1, 2009, SMB achieved an operating income of P7.56 billion.

Consolidated revenues from its international beer operations, on the other hand, fell six percent to $128 million as sales volume also dropped 13 percent to over 21 million cases.

Operating loss amounted to $26,000, which was an improvement from the reported loss the same period last year due to exports and cost management measures in Indonesia, South China and Thailand.

Ginebra San Miguel Inc. (GSMI), the group’s hard liquor unit, sold around 18 million cases during the period under review, 15 percent higher than the previous level on sustained improvements in alcohol production and higher margins. Strong distribution efforts catapulted the company to number one in the brandy category under its “Gran Matador” brand.

 GSMI’s market share in the total liquor market rose five percentage points to 56 percent from 51 percent as of end-2008.

With the sustained sales performance and managed fixed costs, San Miguel’s consolidated operating income improved six percent to P8.68 billion.

Meanwhile, the San Miguel Food Group reported an 11 percent growth in consolidated revenues to P37.51 billion as most business units posted higher average selling prices supported by volume improvements from poultry, feeds, basic meats, flour, milk and ice cream businesses. Operating income amounted to P1.37 billion, surpassing last year’s level by eight percent.

The packaging division, on the other hand, registered sales revenues of P10.4 billion, slightly higher than last year. This was achieved through the overall improved performance of glass, plastic, metal and PET businesses during the first semester. Higher sales volume, cheaper raw materials and lower production costs all contributed to garner a consolidated operating income of P1,09 billion or an increase of

44 percent over last year’s level.

As of end-June this year, San Miguel had cash of P159.59 billion, 36 percent higher than the previous level, due to asset divestments.