SMC profit up 15% to P4.36B in H1

Food and beverage giant San Miguel Corp. (SMC) reported a 15-percent growth in its net income for the first six months of the year to P4.36 billion, largely due to lower raw material costs, stringent cost containment measures, and significant contribution from Australian dairy giant National Foods Ltd.

In a statement issued yesterday, SMC said consolidated net sales sustained double digit growth during the period, rising 21 percent to P121.6 billion.

SMC said the results were boosted by the inclusion of results from National Foods which the Philippine conglomerate acquired last year for $1.5 billion.

SMC, however, did not disclose the results of its local operations which have been providing recurring income for the group.

Australian fruit juice firm Berri Ltd. was folded into National Foods in December last year. Together, they contributed revenues of A$1.19 billion and operating income of A$105.6 million to SMC’s financial results in 2005.

National Foods further expanded its business with the purchase of Lactos, a leading specialty cheese company in Australia. With strong brands and the technology to extend the shelf life of cheese products, Lactos is expected to provide further growth in that segment.

SMC has been expanding overseas to maintain its growth momentum with a broader brand and geographic portfolio. In addition to the acquisition of National Foods last year, SMC undertook the full buy-out of Berri Ltd., which was followed by a San Miguel joint venture for the purchase of Del Monte Pacific. Additionally, SMC acquired King’s Creameries and Guolene Packaging Companies of Malaysia in 2005.

All these businesses are in or have access to growth markets that should help SMC gain further inroads into markets that include not

only those in China, Indonesia, Hong Kong, Vietnam and Australia but also Thailand, Malaysia, Singapore and even India.

The conglomerate earlier said its overseas operations should deliver 40 percent of group revenue this year, up from 35 percent in 2005 and just 10 to 13 percent in 2002 to 2004.

In June, SMC launched its local snack foods business with the introduction of seven variants of E-Aji DipSnax, the first and only savory snack with a dip in every pack.

SMC chairman and chief executive officer Eduardo "Danding" Cojuangco is confident the company can sustain its gains this year, particularly in the foods business.

"It’s very solid, a relatively large business and very profitable and National Foods has opened a new set of opportunities for us, providing scale and huge possibilities for innovation and category extension," Cojuangco said.

SMC is expected to post a 30 percent growth in revenues this year. In 2005, the conglomerate‚s consolidated revenues amounted to P227 billion.

The conglomerate is strengthening its non-alcoholic business in the Asian region with two plants on stream in Indonesia and Thailand and another two in South China and Vietnam to follow.