Alaska sees 15% drop in earnings

Alaska Milk Corp. expects its earnings to drop by more than 15 percent this year due to rising costs of skimmed milk powder.

At the sidelines of the company’s stockholders meeting yesterday, Alaska president and chief operating officer Wilfred Uytengsu said higher prices of skimmed milk powder will affect its bottomline this year.

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 also contributed in pushing prices higher.

Rising costs of skimmed milk powder have already been felt in the company’s first quarter financial results with Alaska suffering a 40-percent drop in its net profit to P93 million from P154 million. The decline was also attributed to a sluggish consumer demand for milk products.

Revenues likewise fell 12 percent to P1.3 billion from P1.2 billion.

Uytengsu, however, said he expects the company to perform better in the second quarter, which is traditionally its peak season.

He said he is also hopeful that the company’s distribution license with US-based Kellogg Co., the world’s leading producer of cereal and other convenience foods, will contribute significantly to its coffers. Alaska has been chosen as the official distributor of Kellogg products in the Philippines starting this month.

Alaska is setting aside P250 million for the continued expansion of its business and the refurbishment of existing manufacturing facilities. Funding for the company’s expansion will be derived from internally-generated funds.

Uytengsu said the company had a strong cash position of P1.85 billion as of end-December last year.

While it has existing credit lines extended by banks, these have largely remained unused considering the company’s cash balance.

Uytengsu said Alaska 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, he said, will likewise focus heavily on intensifying the sales and distribution of its existing product lines.

Alaska 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 level’s 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.

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

The company’s powdered milk business performed exceptionally well with sales volume posting an eight-percent growth year-on-year. As a result, Alaska’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, coconut oil and tinplates raised production costs.