Solid performance from SMC in 2004
performance from San Miguel Corporation (SMC), the
Philippines-based food and drink group, in 2004. But with the
performance falling short of many analysts' expectations, and the
government looking to sell its stake in the company, 2005 looks
likely to be an uncertain period for the company.
SMC reported a 10 per cent rise in net profits for 2004 on the back of an excellent performance from its domestic and international beer operations, which helped push up revenues by 18 per cent to P174.7 billion.
In the Philippines, the beer unit posted its third successive year of growth, with sales up 21 per cent to P36.9 billion. The company said that the performance was helped by its expanded distribution network and by an increase in the number of beer drinkers in the country, although observers suggested that much of the increase was due to consumers and retailers stocking up on beer ahead of a 20 per cent rise in duty rates in January.
Whatever the reasons for the increase in domestic volumes, SMC must take the credit for boosting sales at its international brewing business, which it claimed was due to "greater familiarity with market dynamics in the localities where it operates" as part of a focus on its local brands such as Boag in Australia.
San Miguel's overseas beer operations reported 13 per cent volume growth and a 12 per cent revenue rise to US$263 million.
Other drinks businesses also performed well, with an 8 per cent increase in sales for SMC's Ginebra San Miguel spirits unit, and a 3 per cent gain from the company's Coca-Cola bottling operations. Food and packaging sales were also higher than in 2003.
But 2005 is likely to prove a lot tougher for SMC, with a number of factors expected to curb growth. The duty increase, for example, will make beer and spirits far more expensive this year, and volumes are likely to decline as a result, while SMC';s aggressive acquisition programme (it recently acquired a packaging company, and is bidding for Australia's National Foods,) is expected to mean a significant increase in the company's debt burden. For example, the company plans to borrow US$1.8 billion to finance the National Foods acquisition.
There is also some uncertainty about the company's future direction, with the Filipino government looking for a buyer for its 39 per cent stake. The Manila government took control of a large chunk of SMC back in the 1980s after allegations that the company's president, Eduardo Cojuangco, had illegally used funds from a levy on coconut farmers to buy into the food and drink giant.
While Cojuangco is keen to develop SMC into the region's biggest food and drink company, there are fears that a new investor could seek to focus on just one or two areas of growth - potentially putting the National Foods bid under threat, for example.
