San Miguel Nets P103 Million in First Quarter

April 28, 1997 PSE CIRCULAR FOR BROKERS NO. 860-98 April 28, 1997 PRESS RELEASE SAN MIGUEL NETS P103 MILLION IN FIRST QUARTER San Miguel Corporation reported a net income of P103 million in the first quarter of 1998, 91% lower than P1.11 billion for the same period last year, as sharply higher financing charges and the economic slowdown took their toll on the company's operations. Consolidated net sales for the first three months of 1998 amounted to P18.7 billion, up 21% from P15.4 billion, as a result of higher sales volumes which grew collectively by 9%, and price increases. Cost of sales and operating expenses increased by 21% to P17.9 billion from P14.8 billion due to higher sales volumes and raw material costs offset by cost-cutting and productivity programs. Consolidated operating income increased by 36% to P854 million from P629 million a year ago as margins improved. Cdphil Volumes of most of San Miguel's domestic business performed strongly during the first three months of the year, with beer growing by 9%, food and agribusiness by 22% and packaging by 14%. However, the gains from this performance were offset by an increase of 90% in financing charges, the weak performance of the real estate business and a squeeze on margins in the packaging operations. Financing charges amounted to P1.42 billion versus P746 million due to increased borrowings and higher interest rates. Equity income from unconsolidated affiliates, mainly Nestle Philippines, Inc. and Coca-cola Amatil Ltd./Coca-Cola Bottlers Philippines, Inc., increased by 2% to P437 million from P430 million. Domestic beer sales volumes in all regions posted robust growth as a result of favorable crop prices and improvements in product sales, distribution and availability. Revenue went up by 16% to P6.64 billion from P5.73 billion and operating income jumped by 85% to P1.04 billion from P563 million. International beer sales volumes fell by 14%, reflecting the economic downturn to Indonesia, Hong Kong and Vietnam. Sales volumes also softened in China due to the restructuring of the company's distribution system. Sales revenue amounted to P1.67 billion, up 21% from P1.38 billion. Operating losses increased by 9% to P391 million from P360 million, although in dollar terms the amount declined to US$10.3 million from US$13.6 million. Earnings from the company's soft drinks interests amounted to P308 million, including income from the non-compete agreement with CCA. CCA started the year strongly, with sales volumes in the first quarter remaining around year-ago levels in Indonesia and growing by around 30% in the Philippines, 10% in Australasia, and 2% in Europe. La Tondea Distillers, Inc. generated P2.53 billion in sales revenue, up 2% from P2.48 billion. Hard liquor volumes were lower than a year ago by 9%, but sales volumes of mineral water and fruit drinks increased by 54% and 48%, respectively. However, due to higher manufacturing costs and advertising and promotion, operating income declined by 9% to P437 million from P478 million. In addition, financing charges more than doubled, contributing to a 72% decline in net income to P58.5 million from P207 million. Sales revenue of the food and agribusiness segment increased by 37% to P5.32 billion from P3.88 billion and operating income jumped to P223 million from P5 million as all businesses showed remarkable improvements in their performances. Volume increases ranged from 7% for butter, cheese and margarine, to 9% for chicken, 11% for pork and beef and 63% for processed meats. Coconut oil export volume in the first quarter doubled following the improvement in the country's coconut oil production last year. aisadc While sales volumes of packaging products grew by 14%, margins were squeezed by the high cost of imported raw materials on one hand and on the other hand by a glut in supply of packaging products resulting from the slowdown of various economies in the region which allowed for only small price increases. Thus packaging revenue grew by 26% to P3.29 billion from P2.61 billion, but operating income fell by 48% to P216 million from P378 million. Monterey-San Miguel Properties, Inc. was affected by the weakness of the real estate market and sustained a net loss of P46 million as the high interest regime campaigned demand for housing. Last year, Monterey-San Miguel Properties, Inc. booked a profit of P671 million from the sale of shares in a realty subsidiary.