LT Group banks on tobacco, liquor to drive growth

MANILA, Philippines - Conglomerate LT Group Inc. is capitalizing on the market leadership of its core businesses of tobacco and liquor for further growth, its top executive said yesterday.

“We will focus on our core business and fully capitalize on our market leadership position to benefit from the strong demand in growth in consumer-focused businesses,” LT Group president Michael G. Tan told reporters.

Non-core businesses like Philippines Airlines (PAL) will end up on the selling block as the company focuses on the consumer sector, he said.

LT Group will also take advantage of synergies in its operating units through cross selling while improving the distribution network, Tan said.

LT Group of tycoon Lucio Tan is into beer (Asia Brewery Inc.), distillery (Tanduay Distillers Inc.), real estate (Eton Properties Philippines Inc.), banking (Philippine National Bank) and tobacco (PMFTC Inc.).

Tan said the group is heavily exposed to the consumer sector, which accounts for two-thirds of the local economy.

“We are right where we want to be as we aim for stronger growth and higher profitability,” Tan said.

In April, LT Group raised P37.72 billion in the largest follow-on share sale of a Philippine company that will allow the conglomerate to support the organic expansion of its property, beer and banking units while paying existing debts.

Specifically, LT Group plans to recapitalize PNB, which formally merged with Allied Bank last February to create the country’s fourth largest bank.

“The initial plan is for PNB to offer new shares. LT Group will subscribe so it will not be diluted,” Tan said.

Tan said there are no ongoing discussions for a potential merger with Ayala-led Bank of the Philippine Islands.

For the real estate segment, Eton Properties has lined up several business process outsourcing (BPO) buildings to build up its recurring income, Tan said.

Asia Brewery is also banking on increasing sales of its newly-introduced yogurt and soy milk products.

“Once we get the critical volume, we will manufacture here,” Tan said, adding that the production plant in Cabuyao, Laguna can accommodate a manufacturing plant that might be an export hub for Southeast Asia.

For liquor and beer, Tanduay, the second-largest producer of rum in the world, will start exporting rum to the US. The beer business will focus on the premium segment as the excise tax structure favors higher-priced beer, Tan said.

Given the focus on the consumer segment, non-core businesses will likely be up for sale.

Tan said the family is in talks with outside investors for the sale of its 51-percent stake in flag carrier PAL.

“Airline is not one of the strategic industries we want to be in that’s why it’s not in LT Group,” Tan said.

“Companies outside [LT Group] are considered non-strategic. We are looking at opportunities to grow it or sell it,” Tan said.

Other non-core businesses are aviation-related services firm Macroasia Corp. and Victorias Milling Co. Inc.

LT Group grew its profits by a third to P3.8 billion in the first quarter. Revenues picked up 14 percent to P17.7 billion “due to higher revenues from banking, distilled spirits and property development, which offset the revenue drop in the beverage and tobacco sectors.”