Alaska Milk allots P250M for capex

Alaska Milk Corp. (AMC), the dairy business of the Uytengsu family, is setting aside P250 million for the continued expansion of its business and the refurbishment of existing manufacturing facilities.

In a filing with securities regulators, AMC said funding will come from internally generated funds. As of end-December last year, Alaska had a strong cash position of P1.85 billion. While it has existing credit lines extended by banks, these have largely remained unused considering the company’s cash balance.

AMC said it would continue to focus on growing its core milk business by expanding to other categories in the domestic milk market, either through new product development or through strategic alliances.

The company will likewise focus heavily on intensifying sales and distribution of its existing product lines. "The deployment of regional/area distributors to cover downline retail accounts will help expand the company’s penetration levels and develop relationships with new customer accounts," AMC said.

AMC posted a net income of P497 million last year, slightly lower than the P500 million reported in 2003, due to higher cost of raw and packaging materials.

Higher sales volume, helped in part by higher selling prices, brought full year revenues to P5.02 billion or an increase of 16 percent from the previous year’s level of P4.34 billion. The combined sales volume of the liquid canned milk products went up four percent, driven mainly by the strong performance of the value line products, particularly Alaska Evaporada.

AMC said it continued to strengthen its foothold in both the evaporated and condensed milk segments, maintaining overall brand leadership in the liquid milk category.

The company reported that its powdered milk business performed exceptionally well with sales volume posting an eight percent growth year-on-year. As a result, AMC’s market share in this category reached historic highs, breaching the 20 percent mark by yearend.

Likewise, sales volume of Alaska UHT products posted strong double digit growth rates versus year ago levels as a result of the incremental sales generated by Hershey’s Chocolate Milk Drink.

Cost of sales and operating expenses rose 18 percent to P4.41 billion from P3.73 billion as skimmed milk powder (SMP), coconut oil and tinplates raised production costs.

The worldwide shortage of steel, compounded by the unprecedented demand from China, has kept prices of tinplates at peak levels. As SMP and tinplates constitute a substantial portion of its costs, this trend will weigh heavily on the company’s operating margins in 2005," AMC said.

World prices of skimmed milk powder have trended higher levels towards the end of 2004, with prices ranging at $2,200 to $2,400 per metric ton. The continued strength of the euro, as well as the Australian and New Zealand dollar vis-à-vis the US dollar, has contributed to pushing prices higher.

AMC said inflationary pressures brought about by the continued rise of crude oil prices in the international market may contribute dampening consumer demand for milk products. "This may impact on the company’s sales volume and revenues as well as income from operations as consumers may tend to cut back on expenditures to cope with a shrinking purchasing power. This may be further exacerbated by the selling price increase implemented by the company in Feb. 2005.

As of Dec. 31 last year, AMC’s total assets amounted to P3.33 billion as against liabilities of only P1.37 billion.