Ginebra San Miguel profit drops 12.3%

Ginebra San Miguel Inc. (GSMI) reported a 12.34 percent drop in its first quarter earnings this year to P367.87 million from P419.66 million a year earlier due to higher costs and expenses and interest charges.

In a financial report filed with securities regulators, GSMI said the 30 percent increase in excise tax in January this year also caused the decline in its income for the period under review.

GSMI said consolidated revenues rose by only three percent to P3.04 billion as volumes have been affected by the price hike that the company implemented to defray tax and cost increases.

The company said while its Gran Matador brand performed better, its volume contribution was not able to compensate for the dampened performance of other brands caused by the excise tax increase. Sales of Gran Matador Brandy increased 945 percent.

Volumes for Northern and Southern Philippines were lower than last year due to the soft performance of the GSM Round, Frasco and Vino Kulafu brands.

New products, however, reflected warm market acceptance. GSM Blue grew 52 percent as it successfully tapped the market of young entry drinkers and penetrated on-premise outlets.

Tondena Premium Rum, despite its smaller volume, remained upbeat as it was able to register double-digit growth since its launch in the fourth quarter of 2004.

Gross profit remained relatively flat at P1.12 billion as the increase in alcohol and packaging material costs eroded revenues.

Operating costs grew 11 percent to P551 million due to aggressive ads, promo and merchandising activities.

High interest bearing liabilities resulted to net financing charges of P27 million.

GSMI expects sales to improve during the second quarter as summer months usually bring in greater consumption.

The company has lined up new products to strengthen market leadership and implemented efficient packaging schemes to protect the company’s bottomline.

GSMI has earmarked P2 billion for its capital expenditures this year, P439 million of which will be used for the continued upgrading and repair of bottling plants. The balance will be used to upgrade existing distillery and additional alcohol production capacity.