San Miguel Corporation (SMC), the Philippines’ largest food and beverage company, ended the year 2000 with a recurring net income of P7.5 billion ($170 million(a)), an increase of 25% over the previous year’s P6.01 billion ($136 million). This reflects the sustained focus on performance and results of SMC’s management team led by Chairman Eduardo Cojuangco, Jr., despite increased business challenges in the second semester of the year.
Operating income amounted to P7.9 billion ($179 million), 19% higher than the year-ago level of P6.7 billion ($151 million), as greater efficiencies and cost management initiatives offset the increases in production costs brought about by higher raw material prices, fuel costs and the depreciation of the peso.
San Miguel’s consolidated net sales reached P88.7 billion ($2 billion), up 17% from P75.6 billion ($1.7 billion) the year before. This was brought on by double-digit growth across all businesses. Growth was at 14% in beverages, 16% in packaging and 12% in food. The significant improvement in copra supply likewise contributed to the strong sales performance as the coconut oil business grew more than three-fold.
Including non-recurring items, net income is at P6.8 billion ($153 million), an increase of 14% over 1999. The non-recurring item consists of a P670 million ($15 million) provision on the redemption of HOC Realty, Inc.’s P1.3 billion ($29 million) worth of preferred shares issued in 1996 for the redevelopment of the Head Office Complex.
San Miguel’s domestic beer operations increased sales revenue by 2.1% from 1999 levels. The Company succeeded in containing costs, despite rising costs of raw materials due to the peso’s depreciation, through tighter management of resources and higher efficiencies. Operating income amounted to P4.1 billion ($93 million).
Domestic beer volumes, affected in the second semester by declining consumer spending, the Mindanao conflict and weak farm incomes, declined by 3% against a 4.2% drop in industry volumes. The Company managed a slight gain in market share from 90.1% to 90.5% through optimized trade coverage and availability.
SMC’s international beer operations (excluding J. Boag and Son) sustained the turn-around momentum that began in the last quarter of 1999. Operating income of US$3.8 million in 2000 is a complete reversal from the previous year’s loss of US$6.3 million. The improvement in operating performance was driven by volume growth of 11%, rationalized sales and distribution systems and continuing cost management programs.
Last June, SMC acquired Australian brewer J. Boag and Son, a leader in Australia’s premium beer segment. J. Boag contributed significantly to SMC’s over-all results with an impressive volume growth of 21% since the acquisition, driven by its flagship brand James Boag Premium. Sales revenue in the second semester of 2000 amounted to US$21.7 million with operating income at US$2.86 million.
La Tondena Distillers, Inc. performed outstandingly as revenues and operating income reached record levels since San Miguel acquired it 13 years ago. Revenues are up 34% from the previous year at P14.2 billion ($321 million), operating income is up 23% at P2.9 billion ($66 million), and net income is up 34% at P1.35 billion ($31 million). This unprecedented growth is the result of increased volume in hard liquor, the full integration of Wilkins in the bottled water segment and the acquisition of Sugarland.
Sales volumes of San Miguel Food Group improved significantly in 2000 with most products registering growth rates ranging from 4% to 113%. Improved poultry prices and better demand for basic meats and feeds drove the Group’s revenues to P17.6 billion ($398 million), up 12% from the 1999 level of P15.7 billion ($355 million). Operating income was at P576 million ($13 million).
Revenues of the Packaging division rose 16% to P14.3 billion ($323 million) in 2000, resulting from revenue increases of 30% in the glass business, 21% in paper and 39% in plastics. The increased total revenues combined with higher levels of efficiency and tighter reign on costs boosted operating income by 84% to P1.9 billion ($43 million) from P1.03 billion ($23 million) the year before. The positive operating results of the offshore packaging facilities also contributed to the bottom line of the division.
Founded in 1890, San Miguel is the largest food and beverage company listed in Southeast. Asia and is active within the brewing and beverages, food and food-related, and packaging areas. San Miguel’s ordinary shares trade on the Philippine Stock Exchange and trade in ADR form in the US (each ADR is equal to ten SMC Class B common shares). Prices for the ADRs may be accessed on the NASD OTC Bulletin Board under the symbol SMGBY. Quotes for San Miguel ordinary shares may be accessed on Bloomberg under the symbol SMC/B PM and on the Reuter Equities 2000 Service under the symbol SMC.
(a) Income Statement figures have been converted for reader convenience at the exchange rate US $1=P44.242.