In a corporate analysis report, RCBC Securities said while they have even downscaled their income projection from an earlier 57.5 percent growth coming off a relatively flat 2002 output, a "more subdued" profit growth of 36 percent could be realized this year as SMC’s acquired businesses start driving up sales and income levels significantly.
"Apart from the subdued demand growth, we see the integration benefits far outstripping the costs starting next year. That will reflect on both product costs and operating expenses. Those, combined with continued debt management efforts, will account for most of the bottom line growth," the report said.
Last year, SMC’s net income rose 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.
Over the last two years, the country’s largest food and beverage conglomerate has acquired controlling interest in the three companies, leading to a group-wide restructuring and boosting its already formidable line-up of products.
Without the one-time restructuring expense which went primarily into retirement and benefit costs, SMC’s net income in 2002 would have been 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.
"We believe the new acquisitions will give the company new avenues for growth at a time when a number of its businesses are already in their mature stages," the RCBC report said.
Furthermore, it added SMC, as a conglomerate, is not yet performing as leanly as its liquor unit La Tondeña Distillers Inc. (renamed Ginebra San Miguel Inc.) is, "meaning there could be a lot more corners to cut."
"Thus, 2003’s SMC will be more a cost restructuring story than a recovery story," RCBC pointed out.