PSE Circular for Brokers No. 309-00

February 9, 2000 PSE CIRCULAR FOR BROKERS NO. 309-00 SMC SEES HIGHER SALES VOLUMES San Miguel Corporation (SMC) which has reported a P6.02 billion consolidated net income in 1999 on sales of P75.6 billion, said that its targeted 40% growth in revenue during the next two years will be driven by higher volumes across the Company's core businesses, and that it is now much better equipped to meet this growth target. cdll The company's net income rose 82% last year as a result of various operational productivity improvements and cost reduction measures following SMC's organizational restructuring and synergies achieved from its corporate integration. The Company said it will pursue volume growth though its continuing initiatives in new product development, optimizing synergies within the San Miguel Group's marketing and distribution network, and launching more aggressive marketing and selling programs that will extensively penetrate the market. In 1999, SMC registered a robust performance across its core businesses after nearly two years of refocusing the Company into a much leaner and stronger organization. San Miguel Beer Division (SMBD) posted local sales revenue of P28.3 billion last year, up 4% from 1998. Its volume picked up in the fourth quarter as a mild recovery in the agricultural sector further stimulated beer consumption in southern Philippines. Extensive sales and distribution initiatives coupled with various marketing efforts like San Miguel Beer's new and campaign and the introduction of San Mig Light, resulted in market share gains. San Miguel now owns 85% of the domestic beer market. Results of beer's international operations were particularly strong in the second semester with revenues, volumes and income uniformly up. Compared to the first half of 1999, volume in the second half grew 5%, while operating income increased to US$2.3 million, a significant swing from an operating loss of US$8.6 million in the first half. Operating losses improved on an annualized basis to US$6.3 million from US$38.4 million. The first half declines weighed down volume by 4% but revenue was maintained at the same level. San Miguel Brewery Hong Kong (SMBHK) posted a 5 % growth in volumes, a result of closer coordination with the trade and new strategic sales programs. SMBHK had an operating income of US$9 million in 1999, a significant reversal from the US$1 million operating loss in 1998. In the rest of China, renewed focus on heightening profitability through fixed cost reduction and the restructuring of distributors and sales offices, resulted in a 29% improvement in operating performance, though still leading at a loss. cdlex The PT Delta Djakarta brewery in Indonesia posted a 17% increase in volumes and 69% growth in revenues. An intensified trade and distribution drive sustained sales growth despite market disruptions in the latter half of last year. La Tondea Distillers Inc.'s (LTDI) revenue rose by 8% to a record P10.55 billion from P9.74 billion in 1998. Its net income nearly doubled to P1 billion from the P515 million registered in the previous year. Operating Income rose 8% to P2.2 billion from P2 billion in 1998. LTDI reinforced its leadership in northern Philippines, growing hard liquor volumes by 5% in that region. Its total market share rose to 52% from 50% in 1998. Total volumes, however, remained at par with 1998, reflecting slower consumption in southern Philippines where depressed copra incomes resulted in a volume decline. To reinvigorate weak consumption in the south, the company introduced Bravo Rum, a sweet, smooth 80 proof rum made from premium alcohol. Since its launch in late-August, over 300,000 cases of Bravo Rum were sold. La Tondea's bottled water sales grew 11% despite difficult market conditions and intense price competition. Market share grew to 54% from 20% as a result of the acquisition of Metro Bottled Water Corporation. In the ready-to-drink juice market, LTDI remains well-positioned with volumes up 6 percent. Aggregate net income of the San Miguel Food Group (SMFG), excluding the coconut oil business, rose by 240% to P439 million owing to continued productivity and cost improvements, better management of working capital, and lower interest expense. Its revenues, without the coconut oil operations, reached P15.7 billion, a 3% increase compared to 1998. Volume improvements were attained in SMFG's basic and value-added meats, processed meat and dairy products. and B-Meg feeds. cdlex San Miguel Packaging Products' (SMPP) operating income advanced 22% to P1.03 billion as a result of improved efficiencies and cost management efforts. Its sales revenue grew by 1% even with the slow market and a sluggish regional economy. Strong volume gains were achieved in SMPP's plastic crates and pallets, composite and paper packaging. Despite the lingering economic slowdown, SMC's balance sheet remains strong. The Company continues to enjoy a net cash position in 1999, enabling San Miguel to buy back its shares and declare dividends amounting to P3.9 billion. These included a special one-time cash dividend of P0.40 per share and 10% stock dividend. The Company has a current ratio of 1.9 and a debt-to-equity ratio of 1.11. Return on average stockholders equity was 9.8 percent. Consolidated assets reached P137 billion in 1999, a decline from P139 billion the previous year. The Company continued to manage its working capital efficiently last year as it maintained its current assets net of cash balance at P27 billion. LibLex