SMC profit up 17% to P10.6B

San Miguel Corp. (SMC), Southeast Asia’s largest food and beverage conglomerate, said its net profit grew 17 percent last year to P10.6 billion as a stronger peso helped offset higher financing charges and overseas operations climbed.

In a statement, San Miguel said consolidated net sales revenues amounted to P250 billion, an increase of 10 percent from the 2005 level. This was mainly due to the marked improvement in food group sales and significant volume recovery in the liquor business despite weaker consumer spending owing to the strong typhoons that hit the country last year.

Domestic beer operations posted a 15- percent increase to P9.52 billion as sales reached P39.9 billion.

Operating income from international beer operations reached $4.36 million as volumes rose eight percent on corresponding sales revenues of $299.2 million, five percent higher than the year-earlier figure, mainly on the back of strong volumes from operations in Greater China and the export business.

Consolidated operating income also went up 18 percent to P20.6 billion, largely due to the full-year consolidation of Australian dairy giant National Foods Ltd. and savings generated from a group-wide cost containment measures.

Consolidated net financing charges – mainly from the acquisition of National Foods – reached P5 billion, up 28 percent from the previous year.

San Miguel paid $1.5 billion to acquire National Foods and also took over control of juice maker Berri Ltd., both based in Australia.

San Miguel’s hard liquor unit Ginebra San Miguel, on the other hand, reported a 23.7-percent drop in net profit to P280.67 million from P368.11 million a year earlier. Sales, however, went up 21 percent to P12.43 billion from only P10.24 billion.

The San Miguel Food Group, meanwhile, registered consolidated sales revenue of P64 billion, five percent higher than the year ago level. Operating income amounted to P2.83 billion, up 38 percent from 2005 – as breaks in raw material prices and fixed cost management complemented improvements in operational efficiencies.

National Foods, on the other hand, contributed sales revenue of A$1.84 billion, which was eight percent higher than the previous year. Operating income amounted to A$170 million or 10 percent higher than a year earlier. Dairy volumes, on the average, were almost flat despite improved cheese sales while juice volumes rose three percent amid aggressive competitor activities.

After saturating its home market in beer, soft drinks, dairy, processed food and poultry, San Miguel has been expanding aggressively in the Asia Pacific region to reduce its reliance on the Philippines. Analysts, however, expect a further improvement in San Miguel’s financial performance this year with the sale of its 65-percent stake in Coca-Cola Bottlers Philippines Inc. to Atlanta-based Coca-Cola Co.

The sale was made to allow San Miguel to focus on its bread and butter business and pursue further expansion of its existing businesses as investors shifted to healthier drinks. The government is the single largest shareholder in San Miguel with voting rights over a 24-percent interest and nearly 12 percent held by state pension funds.

Japan’s second biggest beer maker, Kirin Brewery Co., has a 20-percent stake while conglomerate SM Investments Inc. holds nearly 11 percent.