SMC pursues shakeup, eyes new share floats

07/25/2008

Food conglomerate San Miguel Corp. (SMC) is fortifying its bid to diversify to new grounds including heavy industries as it unveiled yesterday plans of a new restructuring plan for its main food and beer businesses.

SMC yesterday said it obtained stockholders approval to implement a corporate restructuring program. The company’s major subsidiaries will pursue either a public listing; a secondary offering, or strategic partnerships following the successful public offering of SMC’s domestic beer operations, the food giant said in a statement.

“This will enable each of our operating businesses to focus more fully on optimizing the underlying potential of each business which investors could more easily appreciate,” SMC chairman and CEO Eduardo Cojuangco Jr. said in a report to stockholders.

SMC said it is now laying the groundwork for the listing of its packaging division and a secondary offering for its food division.

In all of the restructuring scheme, SMC will retain control of the units, according to Cojuangco.

“In any of these undertakings, SMC would retain controlling interest of at least 51 percent,” he said.

The first five months of this year saw SMC’s net income growing over 200 percent to P17 billion from over P5 billion from the same period last year.

SMC also ended 2007 with fairly strong results. Revenue was 10 percent higher from 2006 to P155 billion while earnings from continuing operations stood at P8.21 billion, slightly higher than 2006.

“We achieved these results not only facing a headwind of cost inflation but while still fundamentally reshaping our company,” Cojuangco said.

Despite a difficult operating environment of high fuel prices and raw material costs, Cojuangco said the company was able to cover the cost pressure through cost savings.

“We used our scale to drive business efficiency. That’s why we are confident that SMC’s portfolio of well-known, quality food and beverage brands will stand it in good stead during this economic slowdown.”

Listed SMC brewery unit San Miguel Brewery Inc. (SMB), meanwhile, reported first semester net sales of P23.8 billion, 9 percent higher than last year’s P21.9 billion, directly attributable to a 7 percent increase in sales volume.

Operating income grew 25 percent to P7.2 billion from P5.7 billion a year ago.

“Despite a more challenging economic environment and added pressure on the consumer’s disposable income, we’ve turned in very strong results. We continue to invest in brand building and are focusing on improving sales momentum and efficient execution across all distribution levels,” SMB president Ramon Ang said.

The company’s marketing resources were focused on outlet-based promotions and on reinforcing flagship brand San Miguel Pale Pilsen.

Trade management efforts, including rationalization and training, are being implemented to streamline and maximize product distribution. SMB is also undertaking new programs to offer wider availability and ensure consumer satisfaction.

To conserve financial resources, programs to reduce inventory and trade receivable levels were also implemented alongside other cost saving programs.

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