SMC allots $700-M for AsPac expansion

Food and beverage conglomerate San Miguel Corp. will spend as much as $700 million over the next three to five years for its ambitious expansion plan in seven countries in the Asia Pacific region, company officials said yesterday.

SMC chairman and CEO Eduardo Cojuangco Jr. said during the company’s stockholders meeting that the regional market remains full of potential and is highly attractive for San Miguel’s products and services.

Cojuangco had earlier identified China, Indonesia, Vietnam, Thailand, Malaysia, Taiwan and Australia as areas where per capita incomes are growing steadily and per capita beverage consumption remains relatively low compared to the Philippines.

"We are determined to go into these countries and offer new products and services that match our selling and manufacturing expertise with local consumer needs," Cojuangco stressed.

Cojuangco said SMC has a cash hoard of P28 billion to pursue the expansion program which would involve the acquisition of existing companies or the formation of joint venture companies where SMC will have majority control.

SMC president and chief operating officer Ramon Ang said they could commit an average of $100 million for each of the seven countries as seed capital for their investments and would be ready to announce in about two months‚ time the launching pad for these forays.

He added that SMC’s international operations presently contribute about 15 percent to their total beer and beverage volume but will significantly increase this share as these countries flow in an additional $300 million in revenues annually.

Cojuangco also said that after booking a one-time restructuring cost last year, SMC’s net income improved by 21 percent in the first quarter of the year as a result of a decline in financing charges.

Consolidated net income reached P1.34 billion, while net sales rose 12 percent to P33.8 billion on the back of strong volumes from beverages, packaging and food.

Beer volume posted growth of 10 percent while beverage volume increased by 17 percent, with further improvement expected entering the summer season.

"We want to be able to continue improving operational efficiencies, continue to buy smarter, manufacture more efficiently and distribute our products at lower cost," Cojuangco said.

In 2002, SMC booked P837 million as restructuring costs related to the integration of the acquired businesses Coca Cola Bottlers Philippines Inc., Cosmos Bottling Corp. and Pure Foods Corp. which brought down SMC’s bottom line earnings to P6.63 billion, a slight two- percent gain from the previous year.

SMC also recently established the San Miguel Logistics Asia Corp. (SMLAC) to elevate logistics into a core SMC business.

"As the supply chain integrator of the San Miguel Group, this new company will enable us to optimize the use of our distribution assets, synchronize supply chain planning and execution activities and ensure the availability of our products throughout the Philippine archipelago," Cojuangco added.

Ang said the logistics operation will target at least 20 port sites nationwide, 12 of which are being readied and would be operational within one year.