SMC ready to buy back CIIF stake

If government plans push through, San Miguel Corp. (SMC) is prepared to spend around P45 billion to buy back the 27-percent interest in the company held through the controversial coconut levy fund, company officials said yesterday.

"In response to the government proposal to sell government-owned shares, San Miguel Corp. is looking at the possibility to buy back the 27-percent stake held by the Coconut Industry Investment Fund (CIIF)," SMC officials told the Philippine Stock Exchange.

Government economic managers led by Finance Secretary Isidro Camacho and Trade and Industry Secretary Manuel Roxas II had earlier floated the idea of selling government shares in attractive assets, among them listed stocks SMC, Petron and Meralco, to generate more funds to finance the state’s budget requirements, particularly for infrastructure projects.

SMC said its management had agreed to study the buyback plan which will be proposed to the company’s board of directors and stockholders for approval.

The CIIF, the single biggest bloc in the country’s largest food and beverage conglomerate, represents taxes levied on coconut farmers during the administration of President Marcos and is currently at the center of a court battle over its owners and intended beneficiaries.

Aside from the CIIF, other major stockholders in SMC include the ECJ Companies of SMC chairman and CEO Eduardo Cojuangco Jr. (20 percent); Japan’s Kirin Brewery Ltd. (15 percent); the Government Service Insurance System (seven percent); Social Security System (six percent); the SM Group of Henry Sy (six percent); and the SMC Retirement Plan (six percent).

The CIIF shares were sequestered by the government and are now under the disposition of the Presidential Commission on Good Government (PCGG).

With Eduardo Cojuangco Jr. at its helm, SMC achieved record growth over the past three years on the back of an aggressive corporate acquisition, logistics build-up and regional expansion program in the Asia-Pacific rim, enabling it to amass at least $1 billion.

In the first two months of this year, SMC posted a 46-percent increase in its consolidated net income from P628 million to P918 million, boosted by a 10-percent growth in sales to P21.51 billion during the same period. SMC said its beverage, packaging and food businesses were the main drivers in the sale volume growth.

Operating income for the same period jumped by 24 percent to P1.52 billion as a direct result of the favorable performance of the domestic beer division, glass, metal and plastics segments of the packaging subsidiary, and the processed meats and flour segments of the food group.

SMC also attributed the improvement in the two-month financial performance to "topline improvements and enhanced cost structures brought about by cooperative efforts in production and logistics, increases in brand power, market share and coverage."

The company also expressed confidence the growth momentum will be sustained this year as it continues to maximize the synergies, particularly in the beverages and food businesses, and implement various initiatives in product development, sales and distribution.

In 2002, SMC’s net income increased by just 2.5 percent 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.