Packaging drives SMC profits

San Miguel Corporation (SMC), the Philippines' largest food and beverage company, has announced a 27 per cent increase in its profits.

Operating income was P3.55 billion (€72m) in the second quarter, up from P2.79 billion recorded a year earlier as the company's recent acquisitions started bearing fruit.

The healthy showing boosted first half operating profits 18 per cent to P6.08 billion from P5.17 billion in the first half of 2001.

Net sales in the first half increased 25 per cent to P66.11 billion as revenues for the second quarter rose 17 per cent to P35.94 billion on the back of sustained gains from Coca-Cola Bottlers Philippines, domestic beer, packaging's glass and metal segments, and the food group's feeds and processed meat segments.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) grew 50 per cent in the second quarter to P5.4 billion from P3.61 billion last year, boosting first half EBITDA to P9.95 billion up 23 per cent from P8.06 billion in 2001.

With the favourable growth in both top-line and operating profits, SMC posted hefty second quarter net profits. This boosted the first semester consolidated net income to P3.01 billion, which is inclusive of P160 million in one-off items related to integration. On a recurring basis, net profit is at P3.2 billion for the period.

San Miguel has focused its efforts on growing volumes, immediately realise operational efficiencies and optimise resources following several business acquisitions in 2001 that included CCBPI, Cosmos and Pure Foods. SMC implemented various programmes to align operations, distribution, processes and systems with that of San Miguel.

The realignment included consolidation of all the non-alcoholic products under CCBPI's umbrella and the merging of Pure Foods and SMC's food operations into San Miguel Pure Foods company. The resulting structure in both these segments have allowed SMC to gain meaningful trade leverage and at the same time deliver a full range of products to the consumers.

The completion of the ongoing business integration and distribution alignment is critical to achieve a solid platform for growth and long-term profitability. In this regard, SMC is happy to report that the execution of such changes is very much on track. The integration of the acquisitions and synergies derived from the realignment will enable SMC to further enhance its position in the processed meats, soft drink and non-carbonated beverage markets. Significant benefits are anticipated once the shift to dealership is completed.

By managing resources on a group-wide level, SMC was able to leverage its buying power and realise scale economies. San Miguel also expects to capitalise on the pooling of expertise between various companies and subsidiaries.

Founded in 1890, San Miguel is the largest food and beverage company listed in South East Asia and is active within the brewing and beverages, food and food-related, and packaging areas.