SMC to spur growth, boost margins

MANILA, Philippines - Nearly three years since it announced plans to venture into other potentially higher-growth industries, San Miguel Corp. has built a powerhouse portfolio of profitable businesses and continues to invest heavily in a strategy to spur growth and boost its margins, allowing it to be a dominant force in new industries and markets.

For this year, San Miguel president and chief operating officer Ramon S. Ang said the group is hoping to match or even exceed its 2009 earnings of P57.8 billion, banking on the solid performance of its beer and hard liquor sectors, the recovery of its packaging and food businesses and a reduction in fixed costs all across the group.

Ang said the consolidation of Petron Corp. into San Miguel’s books would contribute an additional P200 billion to the group’s topline.

Eduardo “Danding” Cojuangco Jr., chairman and chief executive officer of San Miguel, believes that the conglomerate is stronger from both a financial and portfolio standpoint, than at any time in its 120-year history, saying its core businesses are much more focused, aided by its partnership with industry leaders Kirin Holdings, Nihon Yamamura and Hormel Foods.

“We enter 2010 with a good strategy, revitalized businesses and healthy momentum. When we first started working for you in 1998, it was with the aim of building a company of reliable financial performance one with rich growth possibilities. We believe we have delivered on those objectives. Moving forward, our job now is to deliver on the promise that the future now holds for San Miguel,” Cojuangco said.

“We could choose to be the San Miguel of the last 120 years. But that would be choosing not to grow. Instead, as a result of your management’s very deliberate moves, your company is in position to capture some of the biggest opportunities offered by our national economy today,” Cojuangco added.

Cojuangco said the conglomerate’s expansion plans are as aggressive as ever, encompassing new industries that will steer the group to new heights and shore up weaknesses in some industry segments.

The San Miguel investment portfolio includes businesses in the banking, energy, power, telecommunications, infrastructure and mining sectors.

“In many respects, the San Miguel of today is virtually unrecognizable from the San Miguel of even just five or six years ago,” Cojuangco said as he stressed that its new portfolio of businesses - comprising heavy and basic industries as well as of fast moving consumer goods, gives the conglomerate confidence.

In the last five months alone, San Miguel has put together a portfolio of power companies that include Limay power plant and three IPAs, Sual and San Roque plants and most recently, the 1,200 Ilijan natural gas combined cycle plant. The first three plants generated for us revenues of P11.4 billion for the first quarter alone.

“Self-sufficiency in power is critical to the national economy and we are determined to play an active role in this sector, particularly now that the combination of private sector efficiencies and an open market can bring prices down for consumers and industry in the foreseeable future,” Cojuangco said.

San Miguel also acquired a stake in Private Infrastructure Development Corp. (PIDC), a consortium constructing the 88-kilometer Tarlac-Pangasinan-La Union expressway and just recently acquired a majority stake in Caticlan International Airport and Development Corp., which owns the right to upgrade, expand and redevelop the Caticlan Airport serving the Boracay Island resort. The project will be carried out under a build-operate-and-transfer scheme with a 25-year concession period.

Aside from this, San Miguel is seeking to acquire majority shareholdings in Universal LRT Corp., the consortium behind the Metro Rail Transport Line 7, a BOT project to develop, finance, operate and maintain a 22-kilometer metro rail transport system for the MRT 3 North Edsa terminal to San Jose Del Monte, Bulacan and a stake in Ausphil Tollways Corp., which will develop the North Luzon East Expressway.

While its plate seems to be full, San Miguel remains on acquisition mode as it aims to increase the contributions of its power, energy and infrastructure investments.

At present, food, beverages and packaging constitute 50 percent of San Miguel’s total portfolio. “ In the medium-and-long-term future, I’m looking to a more even distribution. Twenty percent from these traditional businesses and an equal share for power, energy and infrastructure,” Ang said.

Cojuangco, who is divesting his stake in San Miguel, retained his position in the country’s largest food and drink firm while Top Frontier Investment Holding Inc.’s main shareholders - former finance undersecretary Eric O. Recto and condiments maker Jose Campos - were elected as directors of San Miguel for the first time. Former trade minister Roberto V. Ongpin entered the San Miguel board last year.