SMC buys local food, drinks firm for P3 B

Food and beverage giant San Miguel Corp. (SMC) is buying a local food and drinks outfit for P3 billion and is also considering proposals for a buyout from four international companies in a bid to step up its overseas operations.

As this developed, SMC has expressed optimism about 2000 and is targeting a 40 percent growth in revenue in the next two years, to be led largely by bigger volumes from its core businesses, including overseas operations. SMC said it is also aiming a 10-fold increase in its exports in the next three to four years.

Alberto M. De Larrazabl, SMC senior vice-president and chief finance officer, said: "We have a clear view of the future, we are optimistic about our prospects and our financial position is solid as our strategic direction clearly mapped to capitalize on the anticipated upturn in the economy."

On the buyout of the local food company, he said SMC will be firming up the acquisition by end-March.

"We are on the tailend of a possible acquisition which we intend to announce once it is finalized," Larrazabal said.

At the same time, Larrazabal said SMC is now reviewing the offer of four international companies for a similar buyout, but added, that SMC might only be able to acquire two companies this year which would be in line with its plan to strengthen its presence, especially in the Asian and Latin American markets.

Larrazabal said SMC was able to improve its overseas businesses, trimming its operating losses substantially, from $38.4 million in 1998 to a loss of $6.3 million for 1999.

He said the results of its beer's international operations were particularly strong in the second semester with revenues, volumes, and income uniformly up. Compared to the first half of 1999, volume in the second half grew five percent, while operating income increased to $2.3 million, a turnaround from an operating loss of $8.6 million in the first half. The first semester declines weighed down volume by four percent but revenue was maintained at the same level.

San Miguel Brewery Hong Kong (SMBHK) posted a five percent growth in volume, a result of closer coordination with the trade and new strategic sales programs. SMBHK's operating income last year was $9 million, a reversal from its $1-million operating loss in 1998.

SMC, however, continues to lag behind local breweries in China. While fixed cost reduction and restructuring of distributors and sales offices resulted in a 29 percent improvement in operating performance, its sales have remained poor.

The PT Delta Djakarta brewery in Indonesia posted a 17 percent increase in volume and 69 percent growth in revenue. Its other breweries are located in Vietnam.

This year, SMC will intensify its international operations and make it a major source of revenue for the company.

At the same time, Larrazabal said SMC's direction for its overseas operations would be to pursue businesses from a position of strength, thus, it is cool to joint ventures at this point, preferring to buy out companies or set up shop on their own on foreign shores.

SMC's more aggressive stance on its international operations involves exporting its beer line to at least 16 countries in the Asia-Pacific region, including Hong Kong, and in several Latin American countries.

After a solid year in 1999, SMC has set higher targets over the next two years with revenue growth of as much as 40 percent. This targeted growth will be driven by higher volumes from the company's core businesses.