Lockdowns hurt RFM Corp. first-quarter earnings

"Prior to the lockdown, we saw strong growth across most units. However, the lockdown affected our ice cream sales, especially in the out-of-home segments as consumers were restricted to their homes," Concepcion explained.

MANILA, Philippines — Listed food and beverage company RFM Corp. reported Wednesday a decline in profits in the first quarter as lockdowns meant to fight the coronavirus outbreak disrupt its operations and sap demand for some of its products.

In a disclosure to the stock exchange, RFM said net income in the first three months declined 4% year-on-year to P212 million, with Jose Ma. Concepcion III, company president and chief executive, expecting sales and income for the second quarter "to be more subdued" than in 2019.

While revenues grew 3% to P3.2 billion, changes in people's consumption patterns and production strain all because of the community quarantine weighed on profits, the company said.

RFM said its manpower including delivery personnel were still limited even as the company decided to house some staff at its sites to ensure steady production of our food products.

"Prior to the lockdown, we saw strong growth across most units. However, the lockdown affected our ice cream sales, especially in the out-of-home segments as consumers were restricted to their homes," Concepcion explained.

"On the other hand, the stay-at-home situation shifted more buying to our Selecta Milk, Royal and Fiesta Pasta and sauces, as well as White King hotcakes, champorado and arroz caldo. Institutional bread and flour sales were hit by closures of fastfood outlets," he added.

“The limited mobility and spending power of consumers will bear down on the sales of ice cream and istitutional sales to fastfood outlets even as milk and pasta will see sustained demand,” he continued.

In a scramble to curb the health crisis, President Duterte on March 17 sealed off the entire Luzon, shuttering two-thirds of businesses and displacing a fifth of workers. Movement restrictions in some areas were relaxed last May 1, while further easing is set on May 16, except in Metro Manila, Laguna and Cebu.

While businesses deemed essential were exempted from the quarantine, delays in supply deliveries and limited manpower are hampering production, making it difficult for them to meet overwhelming demand for key consumer items.

To protect its balance sheet as earnings take a heavy beating,  Concepcion said RFM "has scaled back capex spending and reconfigured expenses to the new normal." He did not cite figures.

"RFM has paid 30% of its P1.2B 2019 net income last March, and despite the hit on income, there is still more than enough company liquidity and retained earnings to look forward to the second tranche dividends, albeit at a scaled down magnitude," he said.

Shares in RFM dropped 6.44% to close at P4.21 apiece on Wednesday.

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