Philippines: Rapid International Gains Pace SMC Growth, Consolidated revenue grows to P226.9 billion

San Miguel Corporation (SMC) reported on March 13 a landmark year for 2005 as its consolidated revenue grew to P226.9 billion, a gain of 30% from 2004 that was boosted by the consolidation of National Foods Ltd. (NFL), a leading Australian food company that SMC acquired last year, the company reported on March 13.

Significantly, the contribution of SMC’s overseas operations and exports last year to total Company revenue more than doubled to 35% from 17% in 2004. Annualizing the sales contribution of NFL, this share will actually top 40%, manifesting a rapid reduction in the Company’s dependence on the Philippine market.

Operating income amounted to P17.5 billion, at par with 2004 amid higher prices of raw materials, increased excise taxes on hard liquor, and one-time cost increases due to new packaging formats specifically for the soft drink and hard liquor businesses.

EBITDA or earnings before interest, taxes, depreciation and amortization rose 13% to P30.3 billion.

Net of financing charges and one-time expenses related to the National Foods acquisition, net income reached P9.15 billion, 3% ahead of 2004. Excluding the one-offs, net income would have increased by 10%.

For the 2005 reporting year, San Miguel and its subsidiaries adopted and are now fully compliant with the Philippine Accounting Standards (PAS) and Philippine Financial Reporting Standards (PFRS).

With this shift, 2004 comparatives in SMC’s 2005 financial statements were restated as follows: 2004 operating income, previously reported at P16.7 billion, is now posted at P17.5 billion; 2004 net income, earlier reported at P8.08 billion, is now stated at P8.86 billion. The audit of the 2005 accounts is still being finalized.

SMC likewise secured last year a capacity to maintain its growth momentum with a broader brand and geographic portfolio.

In addition to the acquisition of National Foods last year, SMC undertook the full buy-out of Australian fruit juice firm Berri Ltd., which was followed by a San Miguel joint venture for the purchase of Del Monte Pacific.

Additionally, SMC acquired King’s Creameries and Guolene Packaging Companies of Malaysia in 2005.

All these businesses are in or have access to growth markets that should help San Miguel gain further inroads into markets that include not only those in China, Indonesia, Hong Kong, Vietnam and Australia but also Thailand, Malaysia, Singapore and even India.

SMC’s efforts to reinvigorate its brands and markets outside the Philippines have started to pay off in its international beer business whose consolidated operating income rose 33% in 2005.

Benefiting from a good market mix with particularly strong growth performance in the higher-margin market segments, San Miguel’s 2005 international beer operations posted an 8% gain in revenues and an 11% increase in volume.

Growth has been exceptionally strong in Indonesia and Australia. Performance has also been healthy in North and South China as well as in Hong Kong.

Gains were likewise achieved in San Miguel’s Philippine beer operations which posted revenues up 10% from 2004. Operating income for 2005 rose 13% following effective cost management efforts.

In Australia, National Foods and Berri, which was folded into the former in December last year, combined for a revenue contribution of A$ 1.19 billion and operating income of A$ 105.6 million.

For the entire San Miguel Food Group, consolidated revenue grew 6% to P61.1 billion. Operating income increased 10% to P2.05 billion due to fairly stable selling prices and good volumes.

In packaging, revenue grew 21% to P20.8 billion due to the strong performance of SMPP Malaysia and other offshore operations. Operating income increased 7% to P2.70billion, a result of continued cost containment, favorable prices of some major raw materials and improvements in productivity.

The Coca-Cola Beverage Group’s operations have improved substantially in the latter part of the year such that the fourth quarter can actually account for half of 2005’s P1.17 billion operating income. This growth momentum was largely due to a general improvement in sales across all product lines and the benefits from continued efforts to reduce fixed costs.

Ginebra San Miguel Inc., now focused on diversifying its product portfolio to expand its revenue base and to ensure its long-term sustainable performance, registered revenue of P10.5 billion and operating income of P 906 million.

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