SMC net income up 25% to P7.5 B

San Miguel Corp. ended the year 2000 with a recurring net income of P7.5 billion, an increase of 25 percent over the previous year’s P6.01 billion, and a reflection of the sustained focus on performance and results of SMC’s management team led by chairman Eduardo Cojuangco, Jr., despite increased business challenges in the second semester of the year.

Operating income amounted to P7.9 billion, 19 percent higher than the year-ago level of P6.7 billion, as greater efficiencies and cost management initiatives offset the increases in production costs brought about by higher raw material prices, fuel costs and the depreciation of the peso.

Including non-recurring items, net income is at P6.8 billion, an increase of 14 percent over 1999. The non-recurring item consists of a P670-million provision on the redemption of HOC Realty, Inc.’s P1.3-billion worth of preferred shares issued in 1996 for the redevelopment of the head office complex.

In a press briefing yesterday, SMC chief financial officer Ferdinand Constantino said the company’s performance "reflect(s) the successful implementation during the last few years of strategies focused on delivering higher sales and better controlling costs, as well as putting into place distribution and marketing initiatives that we believe generated these strong results."

Constantino said with the acquisition of two value-enhancing businesses (juice leader Sugarland and Australian beer maker J. Boag & Son) that strengthened their brand portfolio with an array of new high-potential products, the SMC group’s consolidated net sales reached P88.7 billion last year, an increase of 17 percent from P75.6 billion in 1999.

He said the improvement was brought about by the impressive double-digit growth across all major businesses, with food growing 12 percent; beverages by 14 percent; and packaging by 16 percent.

SMC’s flagship beer operations managed to post gains despite rising cost of raw materials due to the peso depreciation and the shrinkage in volume during the second semester owing to the drop in consumer spending, the Mindanao conflict and weak farm incomes.

Net sales revenue from domestic beer operations grew 2.1 percent, with operating income pegged at P4.1 billion. SMC dominates that local market for beer products with a commanding 90.5 percent share of total sales.

Meanwhile, the international beer operations, excluding J. Boag & Son, sustained the turnaround momentum since late 1999 with an operating income of $3.8 million, a complete reversal of the previous year’s loss of $6.3 million. SMC has four breweries, one each in China, Hong Kong, Vietnam and Indonesia.

In June last year, SMC acquired J. Boag & Son, a leader in Australia’s premium beer segment. Since then, the Australian brewer has contributed significantly to SMC’s overall results with an impressive volume growth of 21 percent on sales revenue of $21.7 million in the second semester alone.

SMC’s other businesses continued to perform well, with liquor subsidiary La Tondeña registering record figures since it was acquired 13 years ago from the Palanca family. With the acquisition of Sugarlnad, the full integration of the Wilkins bottled water brand and the increased volume in hard liquor (mainly Ginebra San Miguel), LTDI’s net income surged 34 percent to P1.35 billion last year.

Sales by the food group (poultry, basic meats, processed food, and feeds) and the packaging business also contributed positively to SMC. increased 12 percent to P17.6 billion while the packaging group turned in a 16-percent improvement in sales to P14.3 billion.

Constantino said that with the recent P1.24-billion reacquisition of the local unit of Coca-Cola, the company is expected to further strengthen its trade clout as SMC becomes the undisputed leader in the Philippine beverage market.

With net sales of about P29 billion, or over 70 percent of the local softdrink market, Coca-Cola Bottlers Philippines Inc. is expected to account for a third of the SMC group’s consolidated revenues.