PSE Circular for Brokers No. 426-98

March 20, 1998 PSE CIRCULAR FOR BROKERS NO. 426-98 March 19, 1998 SWIFT TO RAISE UP TO P1.5 BILLION WITH CONVERTIBLE PREFERRED SHARE ISSUE Swift Foods Inc., the poultry and meat subsidiary of food and beverage giant RFM Corporation, secured approval from its shareholders yesterday, the issuance of about 100,000,000 150,000,000 convertible preferred shares to raise up to P1.5 billion, to restructure the company's liabilities, and strengthen its balance sheet. cdlex The company also reported yesterday record sales of P7.6 billion up slightly from the previous year's level, and a bottomline that still reflected a net loss of P107 million. This was however, a vast improvement from the P200 million loss it incurred in 1996 because of a severe chicken glut which kept poultry prices at unprofitable levels. While the chicken business saw much better prices and margins in 1997, the meat side of the business was negatively affected by unrealized foreign exchange losses arising from the peso devaluation, a spike in the peso costs of imported raw materials, more intense price competition, and the increase in interest rates, which combined to erode its income for the said year. "The year 1998, however will definitely be Swift's year, and this is why we are keen on putting in more money into Swift to strengthen its balance sheet for what we believe will be a stream of very profitable years." stated B.J. Sebastian, Vice President and Chief Planning Officer of RFM. Sebastian said that the infusion of capital into Swift is RFM's show of confidence on the 1998 prospects of Swift. With planned transfer of RFM's tuna division into Swift, the latter will now enjoy a natural dollar hedge, since the tuna division exports about $3-4 million worth of canned tuna to the US and Europe every month. A solidly profitable business, the tuna division is expected to shore up the revenues and earnings of Swift in the ensuing year. Sebastian added that key developments on the poultry side are expected to pump up earnings in 1998, to around P250-300 million. The upside in the poultry business is expected to still account for the bulk of this income expectation. "With the losses of 1996 and 1997 causing a consolidation in the poultry industry and a contraction of chicken supply, we expect chicken prices to return to its pre-glut levels, and margins to even be better because the crisis years forced us to crash our costs and raise our efficiencies in order to survive." Sebastian said. "With much lower costs, more efficient operations and better prices, we expect the earnings of Swift to return to where they were in 1994 and 1995." Sebastian added. Sebastian also said that the meat side of the business is expected to recover strongly. With investments in automation and the streamlining of its operations completed, Swift is expected to be among the lowest cost producers in the industry. Adjustments in selling prices and improvements in its selling and distribution capabilities nationwide are expected to boost Swift's position in the meat category, and improve its earnings dramatically in 1998. "With these upsides in the horizon for Swift, we are confident in investing more of our money in this company. We believe that with our lower cost structure, higher efficiencies, and the consolidation that took place in the industry, the business can look forward to substantial earnings growth over the next few years." Sebastian stated. Swift Foods is the Philippines' largest producer of chicken and the second largest in meat. The company is also the country's dominant supplier to the fast-food sector which is among the largest and fastest growing segments in the economy today.