LT Group banks on other units for growth

MANILA, Philippines - LT Group Inc., the investment holding firm of tycoon Lucio Tan, remains wary of the illicit cigarette trade that cut into its market share but other operating units are poised for growth amid a strong economy company officials said yesterday.

“The environment is competitive but I guess the economy is also growing so there are lots of opportunities,” LT Group president Michael G. Tan said in a briefing.

“The only swing is on the tobacco side,” he added.

Illicit trade remains an obstacle given abnormally low prices, with a competitor’s products sometimes selling below cost and even tax, LT Group officials said.

“A level playing field would enable our tobacco arm to help the group’s profitability over time,” the group pointed out.

The government lost an estimated P15.6 billion in taxes last year, up 497 percent from P2.6 billion a year ago, due to illicit tobacco trade in the country, according to a report by UK-based Oxford Economics and US-based International Tax and Investment Center. The study was commissioned by LT Group’s tobacco arm PMFTC Inc.

PMTFC president Paul Riley said year-to-date, the government has lost P7.3 billion in taxes due to undeclared cigarette volume.

 â€œLTG looks forward to the implementation of tax stamps toward the end of the second quarter of 2014, but will continue to work for the implementation of additional safeguards against illicit trade that include use of CCTV cameras for 24/7 monitoring and third-party audit of all cigarette factories,” LT Group said.

PMFTC, whose sales volume climbed 20 percent to 16.2 billion sticks in the first quarter, is the company behind cigarette brands Marlboro, Philip Morris, Hope, Fortune and Champion.

For other business units, LT Group expects turnover to recover or post growth this year.

“If the April volume is an indication, it would be safe to say we are recovering in terms of volume on flagship brand Tanduay Five Years. We are also recovering lost market share in the province,” said Tanduay Distillers Inc. chief finance officer Nestor Mendones.

“Tanduay is working on increasing its market share through intensified marketing efforts for its flagship five-year old rum and recently launched Compañero brandy blend,” LT Group said.

Beverage maker Asia Brewery Inc. is gearing for growth, driven by Cobra energy drink and its water products despite the difficult operating environment for alcopop and beer brands due to high excise taxes, Tan said.

Philippine National Bank, the county’s fourth largest lender in terms of total assets, total deposits and total loans, will grow its consumer loans business, Tan said.

For the property business, Eton Properties Philippines Inc. is focusing on building business process outsourcing offices at Eton Centris in Quezon City and Eton City in Laguna.

Eton Properties is also looking at more horizontal projects given the softness in the vertical market, Tan said.