PSE Circular for Brokers No. 966-99

May 4, 1999 PSE CIRCULAR FOR BROKERS NO. 966-99 La Tondea Posts 181% Growth for First Quarter Even as persisting economic difficulties and extreme weather conditions caused the beverage industry to contract during the first quarter, La Tondea Distillers, Inc. registered a net income almost triple its 1998 record. This growth was attributed to higher revenues and significantly reduced interest expenses, following the company's successful initiatives to pare down debt level. Net income amounted to P164 million, 181% higher than the P59 million posted during the same period last year. Net sales revenue increased by 4%, from P2.3 billion to P2.4 billion. with the higher revenues, together with lower molasses costs, operating income reached P472 million, up by 8% from P437 million. Cdphil Liquor volumes increased in the northern Philippines, as the company took advantage of improved rural incomes with its tri-media "Barangay Ginebra" advertising campaign. This growth was negated by the volume showdown in the south, however, after heavy rains and flash floods adversely affected consumption and logistics. with lower farm incomes, there was also some shifting to much cheaper tube.. Despite a 3% decline in volumes, revenues for liquor increased by 7% due to higher selling prices. Continued competition from cheaper water refilling stations and purified brands resulted in a 22% volume decline in our bottled water products. Juice sales dipped by 4%, as lower prices of soft drinks continued to attract consumers. Despite the slowdown in volumes, the company continued to strengthen its margins through aggressive efforts to reduce costs and increase efficiencies. The company further reduced its interest-bearing debt in the first quarter, bringing down consolidated debt-to-equity ratio 1.4. The Company awarded P1 billion worth of convertible preferred shares issues to Bank America Equity Partners and orchid Asia Holdings last March. This amount, together with another P1 billion advanced last year by parent company San Miguel Corporation for the same issue, is being used to retire La Tondea's short-term debts. With a broader product portfolio, higher efficiencies from an expanded distillery, and stable manufacturing costs, the company is confident that it can achieve the performance targets it has set for the rest of 1999.