PSE Circular for Brokers No. 369-00

February 16, 2000 PSE CIRCULAR FOR BROKERS NO. 369-00 AMC ENDS '99 WITH 12% EARNINGS GROWTH 4Q99 Review . Sales in the fourth quarter of 1999 were up 13% to P914MM from P810MM in the same period last year. The growth in revenues was attributed to brisk sales of liquid canned milk as demand surged during the holiday season. Intensified selling and distribution efforts as well as marketing and promotional activities largely pushed liquid canned milk sales during the period. Cost of sales and operating expenses amounted to P753MM, up 3% from 4Q98 levels of P731MM The marginal increase in costs was a result of a significant decline in prices of major raw materials, particularly skimmed milk powder and tin plates. Consequently, operating income in 4Q99 rose 103% year-on-year to P161MM from P79MM in 4Q98. Operating margins improved significantly during the period to 17.7% from 9.8%. Earnings were further fuelled by a substantial increase in interest income with the company's higher average cash balances negating the effects of lower placement rates. Earnings before tax jumped 94% year-on-year to P184MM from P94MM. The fourth quarter ended with a 95% surge in net income, to P131MM from P67MM in 4Q98. Full Year 1999 Review . Revenues in 1999 grew 10% to P3.3B from 1998 recasted revenues of P3.0B. For consistency and better comparability of results, January to first half August 1998 revenues were recasted to reflect selling prices on a net price to trade basis, assuming the company absorbed distribution operations as early as January 1998. Higher volume sales as well as the continued expansion in volumes of Nabisco and Quaker products lifted revenues. Cost of sales and operating expenses reached P2.9B. up 10% from 1998 recasted cost of sales and operating expenses of P2.6B. As a result, operating income increased 7% to P422MM during the year from P394MM in 1998. Operating margins declined slightly in 1999 to 12.8% from 13.1 % in 1998. The higher average cash balance generated interest income of P88MM, which further pushed earnings. Net income reached P374MM or 11.3% of sales, which is P41MM or 12.5% higher than year ago earnings of P333MM or 11.0% of sales. Summary of Results : Sales Volume . Pronounced demand for liquid canned milk during the fourth quarter buoyed whole year 1999 liquid canned milk sales. Liquid canned milk volumes ended the year with single-digit growth despite a sluggish first half 1999, while powdered milk sales volume was marginally higher. Intensified selling and distribution efforts as well as marketing and promotional activities directed at inducing off-take in retail stores and supermarkets helped drive volumes. Sales of Nabisco and Quaker, and to some extent Alaska Fresh, made significant contributions as volumes improved substantially year-on-year. Sales Revenues : Total milk revenues grew 4% year-on-year. Revenues from Nabisco and Quaker combined increased substantially from last year, now contributing 13% of total company revenues. Operating Costs : Cost of sales and operating expenses in 1999 increased by 10% to P2.9B from recasted 1998 cost of sales and operating expenses of P2.6B. Despite higher average foreign exchange rates, costs were contained with the decline in SMP and tin plate prices. The increase in expenses is partly attributed to intensified marketing and selling activities. -Operating margin in 1999 was relatively stable at 12.8% from 13.1% the previous year. Interest income : Interest earnings in 1999 amounted to P88MM compared to P69MM last year. The higher interest earnings is due to a higher average cash balance of over P1B for the full year 1999. This lifted interest earnings despite lower average placement rates. Net Income : Full year 1999 net income jumped 12% to P374MM from P333MM in 1998. This is equivalent to an EPS of P0.405 versus P0.352 in 1998. 1999 Financial Highlights (Unaudited) *Recasted Values - in PMM 1999 1998 % Inc(Dec) Net Sales P3,306 P3,016 10% Operating Income 422 394 7% Net Income 374 333 12% Total Assets 2,809 2,444 15% Stockholders' Equity 2,259 1,919 18% Ratios: Earnings Per Share P0.405 P0.352 15% Operating Margin 12.80% 13.10% Return on Sales 11.30% 11.00% Return on Equity 16.60% 17.40% Current Ratio (x) 4.6 4.1 Debt to Equity Ratio (x) 0.24 0.27 * January to partial August 1998 revenues and operating expenses were recasted to assume AMC absorption of ATCI distribution operations as of January 1, 1998. UPDATES & OUTLOOK Skimmed Milk Powder (SMP): SMP prices in the international market are expected to edge up between US$1,400/MT to US$1,500/MT as demand from Asia improves. Share Buy Back : Shares bought back to date for the Stock Buy Back Program total 38MM shares or 4% of total issued shares with a total value of P75MM.