Tanduay Q2 income flat on lower sales

Manila, Philippines - Tanduay Holdings Inc., which owns the country’s largest rum company, said its second quarter net income was flat from a year ago due to lower sales in June.

Tanduay president and chief executive officer Wilson Young said June is traditionally a weak seasonal month as people cope with back-to-school costs.

He said he sees a continuing flattish performance in the second half in spite of favorable sugar prices. “We will end this year flat.”

This is in contrast to the 92-percent jump in net profit in 2011 to P1.1 billion.

He said the company is now in the thick of preparations for its maiden foray into the US market, tentatively scheduled in the first quarter of 2013.

Tanduay is looking at penetrating the West Coast by offering rum products.

The company is entering global markets ahead of a government plan to impose higher taxes on alcohol products. The proposal, if approved by both houses of Congress, will be implemented in April. 

Asia Brewery Inc. chief operating officer Michael Tan said the industry will be preparing a position paper on the proposed bill, which was approved by the House of Representatives on third and final reading last month.

“It will be an industry position. It should be deliberate and fair. Like in liquor we want to be compliant with the WTO ruling , we have up to march next year. It doesn’t mean that we have to rush it. It can be value-based, tiered rates. ..the tier specific will also mirror and behave like a hybrid so lower price, lower taxes just like automobiles,” Tan said.

Meanwhile, Tanduay shareholders approved the increase in the company’s authorized capital from P5 billion to P25 billion. Parent firm Tangent Corp. will subscribe to five billion new shares worth P5 billion.

The capital hike is in line with the goal of transforming Tanduay into a global brand as it starts to explore markets overseas. 

Tanduay has tapped three US-based firms – Brand Action Team, Beacon Distributors and MWH Ltd. – to help the Tan-owned company with its overseas venture. 

Brand Action will handle the repositioning and marketing of Tanduay to American customers while Beacon will focus on key account management and provide a “dedicated” sales force for state-by-state representation.

MWH, on the other hand, will be responsible for the administrative, regulatory compliance, transportation, logistics, warehouse, reporting, billing and collection services for Tanduay’s products in the US.

Young said the company has already launched five new products this year, which include Boracay flavored rum, Tanduay Light, Mardi Gras and ready-mixed cocktail drinks.

Tanduay owns two of the largest distillery firms in the country – Asian Alcohol in the Visayas and Absolut Distillers in Luzon.

It has earmarked P2 billion for its capital expenditures over a three-year period, mainly to expand its alcohol production capacity and reconstruct and upgrade its fire-damaged facilities in Cabuyao, Laguna.

Funding will come from a recent follow-on offering, which generated P1.68 billion in proceeds.