Higher excise tax drags SM Beer profit in 2013

MANILA, Philippines - Higher excise taxes for alcoholic beverages dragged sales and earnings of San Miguel Brewery Inc. (SMB) last year.

In a disclosure, the flagship unit of diversified conglomerate San Miguel Corp. (SMC) said its net income sank 17 percent to P12.5 billion from P15.1 billion in 2012.

But without the impact of the foreign exchange fluctuations on the company’s dollar-denominated term facility and without non-recurring items in 2012, SMB said its consolidated net income in 2013 would have only declined 3.4 percent year-on-year.

“Higher excise taxes imposed in January 2013 took a toll on beer sales volumes resulting in a nine-percent decline for the year as SMB was forced to raise selling prices on its major beer brands,” the company said.

SMB’s net sales revenue hit P75.1 billion as it sold 204 million cases last year. In 2012, SMB’s revenues reached P75.6 billion.

Republic Act 10351 or the Sin Tax Law took effect early in 2013, 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. Excise taxes were further increased last Jan. 1.

SMB said its operating income amounted to P21.6 billion last year, 3.5 percent lower than the P22.3 billion in 2012.

“Despite the drop in volumes, SMB managed to maintain operating income margins within 2012 levels due to efforts to manage the company’s fixed costs and improve operational efficiencies for both domestic and international operations,” SMB said.

In May, SMB delisted from the Philippine Stock Exchange after failing to jack up its minimum public ownership level to the 10 percent required by the local bourse.

In a series of meetings last year, parent firm SMC failed to urge partner Kirin Brewery Co. to sell shares to the public.

Kirin, Japan’s largest beer company, owns 48.39 percent of SMB while the majority 51-percent stake belongs to SMC, which wants to retain its control of the brewer.

SMB is the company behind leading beer brands San Miguel Pale Pilsen, Red Horse, San Mig Light and Gold Eagle.