‘Sin products’ drag LT Group’s income to P6.8B in Jan-Sept

MANILA, Philippines - The tobacco and rum businesses dragged the earnings of LT Group Inc. in the nine months that ended in September this year, the company said.

In a regulatory filing, the umbrella holding firm for the business of tycoon Lucio Tan said its net income declined 17.6 percent to P6.85 billion in January to September from P8.3 billion a year ago.

Total revenues slipped 1.23 percent to P43.38 billion from P43.92 billion in the same period last year.

In terms of its operating units, Philippine National Bank (PNB) contributed P3.01 billion to net income, followed by tobacco firm PMFTC Inc. at P2.78 billion.

Asia Brewery Inc. (ABI) contributed nine percent to LT Group’s earnings or P625 million while Eton Properties Philippines Inc. added P195 million.

Tanduay Distillers Inc. and other income from business combination accounted for the balance.

Banking unit PNB posted a 40.6-percent income growth to P6.67 billion in the nine-month period.

“Interest income slightly declined despite the 13-percent year-on-year growth in loans, as the low-interest rate regime resulted in a contraction of net interest margin. However, trading gains in the first half helped boost the bank’s bottom line,” LT Group said.

PNB is planning to raise up to P15 billion through a rights offer to improve the lender’s capital and grow its consumer loans business through the savings bank.

But PMFTC’s earnings sank 37.7 percent to P2.78 billion in the nine-month period from P4.47 billion last year as partner Philip Morris International reported that volume eased 20.7 percent in the third quarter, 16.5 percent in the second quarter and 42.5 percent in the first quarter.

“Due to the illicit trade that has allowed a competitor to sell cigarettes at an economically unsustainable price of P1 per stick, and the down-trading of consumers, the share of the super-low priced segment has increased to 44 percent of the overall market in May to July from only 15 percent in 2012,” LT Group said.

ABI’s net earnings hit P626 million, up 13.6 percent from P551 million in the nine-month period last year.

“ABI has sustained its growth by introducing its own products (Cobra energy drink, Absolute and Summit water and Tanduay Ice) that remain market leaders, or by forming partnerships with well-known brands,” LT Group said.

However, rum maker Tanduay incurred a net loss of P41 million in the nine-month period, reversing the P489-million income last year.

“Tanduay’s earnings were adversely affected by the one-time expenses amounting to P105 million, arising from the closure of the old plant in Quiapo, Manila, coupled with the impact of higher excise taxes, higher alcohol prices and stiff competition,” LT Group said.

Republic Act 10351 or the Sin Tax Law took effect on Jan. 1, imposing higher excise tax on tobacco and alcohol products that aims to increase the government’s revenues while discouraging heavy consumption of cigarettes, beer, liquor, wine, and other tobacco and alcohol products.

On the other hand, real estate unit Eton Properties recorded an income of P196 million, way above the P12 million a year ago on the back of P2.7 billion in real estate revenues and P378 million in rental income.

In April, LT Group raised P37.72 billion in the largest follow-on share sale of a Philippine company that will allow the conglomerate to support the organic expansion of its property, beer and banking units while paying existing debts.

LT Group’s consolidation program last year aligned all of Tan’s assets under one roof, allowing the group to leverage emerging opportunities in different sectors and provide better realization of value for investors.