Pilmico to get substantial share from AEV's 2011 capex budget

CEBU, Philippines- Aboitiz Equity Venture’s (AEV) food arm, Pilmico Foods will get a bigger chunk of the allocated capital expenditure (capex) for this year, as P900 million will be spent for expansion of its operations from the P2 billion allocated for other subsidiaries of the Cebu-based conglomerate.

AEV chief finance officer (CFO) Steve G. Paradies announced that the company is going to invest on newer equipment, and improve its logistical operation for Pilmico’s support facilities, such as larger vessels.

The group reported its food group contributed P422 million in the first quarter of 2011, a 24 percent lower than in the same period of last year, which was a result of increase in input cost.

Paradies further explained that the two-digit decline of its food arm, is affected also by the upswing of commodity prices in the world.

“The commodity prices gone up since last year, our profit margin has been squeezed, although the volumes are increasing,” he said.

However, Paradies is hopeful that before the end of this year, Pilmico will post a moderate growth that will level that of last year.

In 2010, Pilmico Foods, recorded a 25 percent increase year-on-year to P1.5 billion. Despite lower average selling prices, the flour division’s income contribution posted a 79 percent year-on-year improvement, as volume expansion drove bottom line performance.

The expansion of Pilmico’s Iligan feed mill was completed in July 2010, which involved the construction of a second production line with a capacity of 115,000 metric tons, effectively doubling the facility’s total production capacity. Commercial operation began in October last year.

For its swine business, Pilmico plans to build additional company-owned finisher farms given the efficiencies of the newly completed finisher farms that became operational also last year.

“Pilmico will continue to be on the look-out for growth opportunities and diversify into other segments of the business that will complement existing product lines,” said AEV president and chief executive president Erramon I. Aboitiz.

Meanwhile, its banking group arm, both the Union Bank of the Philippines and CitySavings Bank (CitySavings), posted robust earnings last year coupled with the increased ownership of AEV in both banks, resulted to a net earnings contribution of P2.6 billion in 2010, up by 45 percent year-on-year.

Paradies added that the banking group will invest around P400 million this year, as part of the P2 billion capex distribution of the EAV for opening of more branches, and improvement of its Information Technology system.

Over-all, the company announced to spend about P42 billion this year, the P40 billion investment will be dedicated to expand its power generation and distribution businesses, Aboitiz said.