URC raises 2014 capex to record $150 M

MANILA, Philippines - Food and beverage giant Universal Robina Corp. (URC) is jacking up its capital spending for the fiscal year 2014 to a record $150 million to support local and regional expansion.

The Gokongwei-led snacks firm wants to become a major player with strong brands in Southeast Asia as it looks at a potential $1-billion acquisition while tapping Myanmar as its newest market, an executive said.

“We’re accelerating our capital expenditures. It’s been $120 million in the last three years and this year, it will be $150 million because we are starting in Myanmar,” Michael Liwanag, vice-president for corporate planning and investor relations chief of URC, said during a forum organized by BPI Securities.

The record spending will be funded by internally generated cash, with URC enjoying a net cash of around $200 million, Liwanag said. URC’s fiscal year starts in October and end in September the following year.

URC is investing heavily to retain its market leadership in the Philippines and strengthen its foothold in countries in the Association of Southeast Asian Nations (ASEAN).

“The priority is to become an ASEAN multinational down the road with strong brands,” Liwanag said.

Specifically, the company’s expansion is hinged on Jack n’ Jill for the chips, biscuits, packaged cakes, confectioneries, candies and chocolates; C2 for ready-to-drink tea and Great Taste white coffee.

“The reason we went outside the Philippines is because the addressable market in ASEAN is larger. You have a population of 100 million in the Philippines but there is 500 million outside,” Liwanag said.

So far, the Philippines accounts for two-thirds of the revenues of URC, which started as a cornstarch producer  in 1954 and it is now one of the fastest growing ASEAN food company.

For fiscal year 2013, URC expects its net sales to jump 13 percent to P80.7 billion from P71.2 billion a year ago, Liwanag said. The branded foods segment is seen to climb 22 percent to P42.2 billion from P34.4 billion last year.

“The branded foods business is growing around 12 to13 percent to $1.5 billion from $1.3 billion last year...from $1.5 billion, we want to be $3 billion in next five to six years,” Liwanag said.

URC is a local market leader in many categories. It controls 39 percent of the snacks market, 37 percent for candies, 25 percent for chocolates, 16 percent for biscuits, 80 percent for canned beans, 43 percent for cup noodles and 80 percent for ready-to-drink tea.

The company is beefing up its presence in the Southeast Asian region.

“In the next six months we are entering Myanmar,” Liwanag said, adding that URC will introduce biscuits and confectionery in the country.

URC corners 23 percent of the biscuits market and 26 percent of the wafers segment in Thailand while it controls 36 percent of Vietnam’s ready-to-drink tea sector.

Vietnam has the potential to become a $1-billion market in the next 10 years while Thailand is already a mature market and Indonesia is scaling up, Liwanag said.

“Our difference is no matter what happens in the Philippines, we have an ASEAN geography and our future is hinged on the effective execution in ASEAN,” Liwanag said.

Aside from expanding its present businesses, the snacks and beverage company is also looking at acquiring another entities.

“Other than organic growth, we have evaluated several merger and acquisition opportunities outside the Philippines but we are at a deadlock at this point in time,” Liwanag said.

Liwanag said the company’s balance sheet is strong that it can enter into a $500-million to $1-billion acquisition.

In the nine months ending June, URC’s net income surged 38.7 percent to P8.49 billion compared with P6.12 billion a year ago. Sales grew 13.3 percent to P60.09 billion from P53.04 billion last year.