GSMI net income down 40% to P331.9M in H1

Higher raw material costs and the effect of the incremental VAT (Value-Added-Tax) weighed down on the bottom line of Ginebra San Miguel Inc. (GSMI), the hard liquor unit of food and beverage giant San Miguel Corp.

In a financial report filed with the Securities and Exchange Commission, GSMI said net income dropped 40 percent in the first half of the year to P331.89 million from P552.78 million in the same period in 2005. In the second quarter alone, GSMI earned P102.69 million or a decrease of 44.5 percent from the previous level’s P184.91 million.

"GSMI encountered intense cost pressures arising from increases in raw material costs, the shift in product mix and the absorption of incremental VAT during the first semester of the year," the company said.

Sales revenues also declined to P6.15 billion from P6.24 billion on soft export volumes.

Cost of sales amounted to P2.48 billion in the first semester of the year from P2.39 billion while general and administrative expenses increased by 7.5 percent to P238.37 million.

Interest expense and financing charges jumped 62.3 percent to P98.95 million with more short-term liabilities to support working capital requirements.

GSMI said Gran Matador brandy continued to grow, rising 124 percent from the first semester of last year and GSM Blue, likewise, grew 98 percent. This, however, was not enough to compensate for the decline in gin sales.

The company spent P175 million during the first half this year for the improvement of its distillery and bottling plants.

Meanwhile, the San Miguel Food Group (SMFG), registered consolidated revenues of P31.2 billion in the first six months of the year, up seven percent from the previous level, mainly driven by higher volumes particularly from poultry, pork and flour.

Aggressive sales and marketing initiatives, product innovations and improved distribution network, as well as better production efficiencies also provided continuing growth impetus to SMFG.