Pepsi investing P1.5 B on add'l bottling lines

MANILA, Philippines - After posting a 606-percent increase in first quarter net profits, Pepsi-Cola Products Philippines Inc. (PCPPI) is expanding its production capacity by investing roughly P1.5 billion for three more bottling lines that will be put up this year.

The company is embarking on aggressive expansion activities this year, through capacity building and widening of its distribution base, to make up for a measly one-percent growth in gross revenues last year.

In an interview following the company’s annual stockholders’ meeting held at the Palms Country Club in Alabang yesterday, PCPPI president Partho Chakrabarti said the company is seeing a more favorable business environment this year.

“We had a terrific first quarter and we hope to sustain that for the remainder of the year. We are investing more on infrastructure and increasing our capacity,” he said.

The company is pouring in around P500 to P600 million into a new plant that will be put up in La Union this year. Construction of the plant has begun and it is expected to begin operations at the end of the year. Both carbonated soft drinks (CSD) and non-carbonated beverages (NCB) will be bottled in the plant. Around 200 workers will be employed in the plant.

Next year, two more bottling lines will be put up in Visayas and Mindanao, the exact site of which has not yet been determined. Chakrabarti said each bottling line costs P500 million on average.

He said PCPPI intends to increase its production capacity in Luzon by 10 percent this year.

In August year, PCPPI put up a new bottling line for carbonated soft drinks (CSD) in Zamboanga which was completed early this year. A CSD and non-carbonated beverage (NCB) bottling line was also put up in Cagayan de Oro last year to produce NCBs in returnable glass bottles (RGB) for distribution in Mindanao.

“In fact, we are one of the few companies that put up a plant in Zamboanga recently,” he said.

In the first quarter of 2012, PCPPI’s net profit rose 606 percent to P225 million from the same period last year because of higher sales volume and lower input cost.

Last year, the company’s gross revenues grew only one percent to P20 billion from the previous year because of volatile prices of sugar, other raw materials and packaging inputs. As a result, its gross profit in 2011 amounted to P3.7 billion, down by six percent from 2010.

Its operating income for 2011 fell to P408 million from P613 million in 2010.

As a result of slow earning for 2011, the company will not pay dividends for the year and will instead reinvest its earnings and attempt to sustain strong growth in the long term.

“Strong sales over the medium term should give us double-digit growth. That should be over the next five years,” said Chakrabarti.

He said growth this year would be driven by improved infrastructure and distribution channels as well as the introduction of new products.

PCPPI manufactures the brands Pepsi, Sting, Tropicana Twister, Mountain Dew, Milkis, Gatorade, and Lipton.

The company is also expanding its distribution capacity to include had-to-reach areas and small outlets.

PCPPI chairman Oscar Reyes said the business environment is becoming more positive this year, and hopefully, will be more favorable to the company.

“We expect the Philippine economy to perform better in 2012 with higher public and private spending, a net exports turnaround, stronger capital inflows and an accommodative monetary policy,” he said.