San Miguel net income rises 2.5% to P6.63 billion in 2002

San Miguel Corp., the country’s largest food and beverage group, reported yesterday that its net income increased by just 2.5 percent last year to P6.63 billion after it booked P837 million in additional costs from restructuring as a result of the integration of the Coca-Cola, Pure Foods and Cosmos operations.

"It was a year of consolidation, rationalization and integration of San Miguel’s various businesses and operations in 2002," the company said in a statement to the Philippine Stock Exchange.

Over the last two years, SMC acquired controlling interest in the three companies, leading to a group-wide restructuring and boosting its already formidable line-up of products.

"The acquisitions and subsequent programs to restructure and synergize sales, marketing and distribution capabilities enabled the San Miguel group to protect and strengthen market positions across majority of its businesses resulting in a 19-percent corporate volume growth," SMC added.

As part of the corporate integration and group restructuring, SMC consolidated all non-alcoholic products, including that of Cosmos, under Coca-Cola Bottelers Philippines’ umbrella and merged Pure Foods with SMC’s processed food operations, forming a new company called San Miguel Pure Foods Co.

Without the one-time restructuring expense which went primarily into retirement and benefit costs, SMC’s net income in 2002 was 40 percent higher at P7.2 billion, from P6.47 billion in 2001. Operating income also increased by 18 percent to P12.4 billion on the back of a 12 percent gain in consolidated sales revenues to P136 billion.

SMC said volume improvement was pronounced across all its major business segments, with beverage growing by 15 percent; food, 18 percent; and packaging, 13 percent over 2001 levels.

Earlier, SMC said it expected net earnings to reach about P7 billion as it overcame the dilutive effects of the acquisitions and reaped the benefits from the additional funds generated from the buy-in of Japan’s Kirin Brewery during the first quarter of 2002.

Stock market analysts pointed out that the benefits of the restructuring and reorganization have begun to slowly flow through to the company’s bottom line as SMC eventually recovered from the profit contraction during the early part of last year. As of the first nine months of 2002, SMC’s net income of P4.56 billion was still 4.7 percent less than a year earlier.

With its sights set toward expanding its international operations in the Asia Pacific region starting this year, SMC is likewise embarking on a nationwide agriculture-based and corporate social responsibility program expected to create jobs and produce various livelihood opportunities in the countryside.

Under the scheme, SMC will enlist as long-term business partners the contract farmers or growers for cassava, corn, soybean, livestock, poultry, hogs and aquaculture and fisheries, assuring them of a guaranteed market and stable prices for their output.

The initiative, SMC said, is in line with its expansion and import substitution and local sourcing program to be able to save on foreign exchange.