Sugar regulator keen on retaining lower taxes for sugary drinks
From AB Capital's The Opening Bell: Three Moves
Event
The Sugar Regulatory Administration (SRA) is keen on retaining lower taxes on sugar-sweetened beverages, which could help preserve affordability and support demand for sugary drinks.
View
This is a potential positive for Universal Robina Corp. (URC), as retaining the P6-per-liter excise tax for beverages made with locally produced cane sugar would help contain costs and support affordability. However, the Department of Finance's (DOF) proposed increase to P20 per liter for Tier 1 beverages and P40 per liter for Tier 2 could still pressure the industry if implemented, particularly for products using other sweeteners.
Catalyst
Maintaining lower excise taxes would limit potential price increases for sugar-sweetened beverages, supporting consumption volumes and reducing pressure on manufacturers to pass higher costs on to consumers. For URC, the benefit would depend on its exposure to affected beverage products and the extent to which lower taxes translate into stronger sales rather than simply lower retail prices.
Action
Neutral to mildly positive for URC pending legislation; monitor the final tax structure and URC's sweetener mix before making earnings or valuation adjustments.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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