MANILA, Philippines - Listed sugar miller Roxas Holdings, Inc. is eyeing synergies with the food unit of Pangilinan-led First Pacific Co. Ltd.as it prepares for heightened competition within Southeast Asia when free trade is enforced in 2015.
Late in 2013, Hong Kong-based First Pacific acquired a 34 percent stake in RHI after purchasing a 31 percent share from key shareholder Roxas &. Co. Inc. as well as additional shares from other investors.
RHI executives told stockholders yesterday that the company has a leverage on its connection with First Pacific as it could take advantage of the global conglomerate’s reach in Vietnam, Indonesia and Cambodia.
“The network of First Pacific in Southeast Asia is robust and we want to take advantage of their reach in Indonesia, Vietnam and Cambodia. These are countries that present opportunities for expansion,†said RHI chairman Pedro Roxas.
RHI currently supplies sugar and other sugarcane products to the domestic market while also exporting to the US, Japan and Korea.
Company executives, said however, that there is a need to increase production efficiency and market reach to stay competitive when sugar tariff in the region is reduced to five percent in 2015.
RHI president and CEO Renato Valencia said possible synergies with First Pacific’s PT Indofood include sugar export to Indonesia, refining and milling, as well as exchange of technology on processing of sugar cane products.
Indofood is the largest integrated food producer in Indonesia, engaging in growing of raw materials and processing of these into consumer products which include noodles, dairy, snacks, food seasonings and special food preparations.
“These are still ideas that are being explored. We will disclose any concrete developments on this,†said Roxas.
First Pacific Chief Executive Officer Manuel V. Pangilinan said the conglomerate still has no plans of raising its stake in RHI but would support the expansion plans of the firm.
“For the moment we are very happy with our stake of 34 percent. We will support the company’s expansion plans,†he said.
Before the implementation of free trade in Southeast Asia, RHI wants to improve its production efficiency and develop other revenue sources from sugar cane processing.
Valencia said that with falling world sugar prices and the threat of influx of cheap sugar from neighboring Asian countries, RHI needs to increase revenues from ethanol and other sugarcane by products.
“We cannot depend on sugar alone,†he said.
The company, in fact, is eyeing the establishment of a 40-megawatt (MW) biomass power plant in La Carlota Negros Occidental with Global Business Power Corp., the power generation arm of tycoon George Sy’s GT Capital.
The feasibility study for the project is expected to be completed in May.
The plant will use biomass from its sugar mill in the province.
RHI and Global Business engaged international energy consulting company Poyry Energy Ltd. To undertake the feasibility project.
The plant could divert 25 MW of power to the national grid.
Roxas said the company is also looking for other business opportunities in Mindanao as the signing of a peace agreement between the Philippine government and the Moro Islamic Liberation Front is expected to significantly improve the peace and order situation.
RHI posted a 163 percent increase in its net income in the first quarter of its fiscal year ending on Dec. 31, 2013 on higher sales of refined sugar and ethanol.
RHI’s net income for the first three months of its fiscal year rose to P90 million, up from P34 million recorded in the same period the previous year.
RHI is an integrated sugar milling business exercising full management of Central Azucarera Don Pedro, Inc., in Nasugbu, Batangas, as well as Central Azucarera de la Carlota, Inc., and Roxol Bionergy Corp. In La Carlota, Negros Occidental.
It also holds a 45 percent interest in sugar miller Hawaiian-Philippine Company in Negros occidental.