Tanduay profit rises 3-fold on robust sales

MANILA, Philippines - Robust sales and effective cost-saving strategies lifted Tanduay Holdings Inc.’s net earnings, rising more than three-fold last year to P338.2 million from a meager P100.6 million in 2007.

Tanduay, the liquor unit of tobacco and airlines tycoon Lucio Tan, registered net sales of P9.05 billion, up 18.3 percent from the 2007 level of P7.65 billion due to higher sales volume and price adjustments made in the middle of last year.

 “The impressive volume growth can also be attributed to the sustained advertising and promotional campaigns, which pushed brand awareness and patronage of Tanduay’s liquor products to higher levels,” the company said in its financial report filed with securities regulators.

Sales volume rose 14 percent as a result of the favorable economic performance in Southern Philippines, the company’s market stronghold.  

The Five-Year Rum brand continued to lead all brands, capturing 79 percent of total sales.

The opening of a new production facility in Cagayan de Oro, Misamis Oriental also contributed to the sales growth as its products are now more accessible and readily available in the Mindanao region. The CDO plant currently serves 50 percent of the region’s requirements.

Total operating expenses declined nine percent on account of lower selling expenses. Tanduay spent more on its various promotional and advertising activities in 2007, which positively resulted in the growth of liquor sales in 2008 despite lower advertising expenses.

Tanduay also focused on the implementation and enhancement of its various quality improvement programs in order to respond to the preferences of customers.

Other charges decreased 23 percent as a result of higher gain on foreign exchange transactions of P69 million, a reversal of the previous years’ loss of P85 million as the peso to dollar exchange rate depreciated from 41.28 as of Dec. 31, 2007 to 47.52 as of end-December last year.

The higher foreign exchange gains and the gain from sale of assets of P27 million negated the increase in interest expense resulting from the additional P500 million short-term loans availed in the last quarter of 2008 and the P60 million impairment loss on the remaining dollar bond investment.

Cost of sales, however, increased by a higher rate of 25 percent as gross profit rate

 The Tanduay group has a market share of approximately 40 percent in the distilled spirits market and 90 percent in the local rum market, thus making Tanduay Rum the number one rum in the Philippines and second in the world market.