SMC food group posts 28% hike in operating income

San Miguel Food Group’s agro-industrial division registered a 28-percent rise in operating income for the first half this year on the strong performance of its poultry operations and lower operating costs, the company said in a statement.

The agro-industrial cluster – composed of San Miguel’s poultry, feeds and basic meats businesses – turned in an operating income of P844 million while revenues increased four percent to P18.2 billion.

The poultry business remained the main revenue contributor in the food group with sales revenues reaching P8.2 billion or five percent higher than the previous level.

On the other hand, basic meats under Monterey Foods Corp. registered revenues of P2.9 billion.

San Miguel said its feed business significantly benefited from its raw material substitution program with sales reaching P7 billion or an increase of three percent on higher demand for feeds from hog, broiler and layer farms.

The conglomerate’s raw material substitution program through its Integrated Agro-Industrial Zone (IAIZ), has led to sizable improvements in management of direct material cost, especially in the food group.

Since its launching three years ago, the program was able to provide a steady source of raw materials in feed milling using cassava and corn contracted from growers in Visayas and Mindanao.

San Miguel was able to substitute around 50,000 metric tons (MT) of cassava for corn and wheat last year.

This is expected to further increase to 84,000 MT for the year.

As the IAIZ program increases coverage, San Miguel’s businesses are expected to cut down on importation cost, which currently represent a huge percentage in the expenses.

The food group has rationalized its businesses into strategic business clusters to promote greater synergy of resources and achieve better operational efficiencies.

This streamlined organization will result in a sharper business focus that will bring the group closer to its goal toward becoming a least-cost producer and a more dominant market leader.

Other clusters include: cereal-based milling product (San Miguel Mills Inc.); processed meats (Purefoods-Hormel Co.); dairy, fats and oils (Magnolia Inc.); and food service (Great Food Solutions).