In Q1 Big consumer firms suffered low sales

CEBU, Philippines - Big consumer companies in the Philippines expressed dismay at the first quarter performance of the country's consumer products' sales brought about by cutthroat competition and higher cost.

Jed Frederick Pilarca, COL Financial research analyst, revealed that based on the latest survey, retail companies like Puregold, SM and Robinsons Retail Holdings Inc. underperformed during the first three months of this year.

Among the retail companies COL research has covered, only Universal Robina Corporation  outperformed. Jollibee Foods Corporation  and EMP on the other hand, performed in line with expectations.

Meanwhile, results from RFM was below consensus as the Gokongwei-led consumer retail arm suffered from weak flour sales.

These retail giants, Puregold, RRHI and SM, all reported disappointing earnings results during the first quarter of 2014, Pilarca said this was largely due to intensifying competition as all three were expanding aggressively.

Puregold saw profits fall by two percent on weak sales growth margin, while SM Retail's net margins continued to decline from 3.3 percent to 2.8 percent. RRHI's net income also came in below expectations due to higher operating expenses.

Meanwhile, food companies noted a sustained strong demand but threatened by the rising cost. URC, JFC and Emperador Inc (EMP) posted solid results with earnings growth reaching double digit levels.

According to COL Finance report, growth was largely driven by higher sales as consumer demand remained strong. URC and EMP also reported better margins during the quarter while JFC's gross margin was flattish.

For the remainder of 2014, Pilarca revealed that rising input costs due to higher commodity prices could threaten earnings growth.

JFC is already beginning to feel the impact and said that it is already implementing price adjustments. However, adjustments will be done on a staggered basis so as not to shock the consumers, although this would lead to margin weakness in the short term.

Likewise, URC also expects margin pressures moving forward and is anticipating a three percent increase in input prices.

Significantly, the El Niño season could put further pressure on margins as soft commodity prices usually go up due to the said weather phenomenon. (FREEMAN)