RFM income slips 46% to P213M in H1

MANILA, Philippines - Higher commodity prices weighed on the financial performance of food and beverage conglomerate RFM Corp. with its net income slipping 46 percent in the first half this year to P213 million.

The profit decline was attributed to the general economic slowdown since the first quarter this year due to rising prices of wheat, sugar and milk, as well as power and utilities cost which significantly affected the company’s margins.

“Selling prices could not be adjusted as fast as the cost increases since consumers may not be able to adjust easily. Price adjustments must always be carefully examined,” RFM said in its financial report filed with securities regulators.

RFM said it would continue to look for ways to improve cost structures and operating efficiencies to lighten the impact of these cost shocks.

The company joins a host of food and drink producers that have reported effects of higher commodities in their quarterly earnings statements this year.

 Sales managed to post a modest seven- percent growth, ending the period with P4.5 billion as against P4.2 billion in 2010.

While consumer demand was generally soft compared to last year and the summer season was quite short with more rains this year, RFM’s stronger brand equity and product innovations have influenced the buying pattern of consumers.

The company’s Selecta ice cream, Selecta milk, Fiesta pasta, White King mixes, Sunkist litro pack and Swift corned beef pack (60-g sachet) boosted sales.

Selecta Ice Cream, a joint venture with global giant Unilever, is further enlarging its dominant foothold in the industry with its market share approaching 70 percent, while the flour- based businesses led by White King Fiesta improved its market leadership position from 27 percent just three months earlier to 32 percent.

In the second quarter, RFM’s net profit fell 56 percent to P113 million even as revenues went up 13 percent to P2.6 billion. The income drop was also a result of increased marketing and selling expenses of the consumer business.

Despite the early coming of rains compared to last year, Selecta ice cream posted a hefty growth, as it grew by double-digit levels in the second quarter.

The White King group drifted higher for the second quarter, benefiting from spaghetti and macaroni organic growth, coupled with incremental sales from bundle packs, Spartygetti and the newly launched Fiesta Meaty Filipino Blend spaghetti sauce.