San Miguel nets P57.8B, seeks investor approval of diversification moves

Strong demand for alcoholic beverages and better-than-expected results from its packaging and food businesses, along with a one-time gain from a stake sale, allowed San Miguel Corp. to triple its net income to P57.8 billion last year. The release of the results also came with the announcement that the conglomerate was asking shareholders to waive their preemptive rights and allow the board to reduce the firm’s holdings in core businesses in support of diversification plans. "Full-year consolidated net income was up significantly higher than a year ago to P57.8 billion, which includes the one-time gain from the sale of San Miguel’s 43.25 percent stake in San Miguel Brewery, Inc. to Kirin Holdings [Co., Ltd. of Japan]," San Miguel said in a statement. Another statement quoted company President Ramon S. Ang as saying the appeal to shareholders aimed to "bolster our company’s capital base and gain flexibility when it comes to financing our own growth — whether this involves future acquisitions or investments." The board is seeking the authority to sell down more than 51 percent of San Miguel’s stake in its core businesses. Also up for shareholder approval is a move to declassify the firm’s A and B shares. "San Miguel’s strategy to significantly enhance and create long-term shareholder value by looking at new drivers of growth may require the further selldown of our stake in existing core businesses. We want to be able to act with speed when an opportunity to divest at an attractive price materializes," Ang said. "Given that both sets of shares have essentially the same rights and privileges, and are, at present, trading at the same level, the board believes it is an opportune time to declassify. Declassification would facilitate the entry of foreign investments," he added. San Miguel’s class A and B shares gained 50 centavos each yesterday, closing at P74.50. "I think they’re ready to let go of certain businesses to be able to enter into other businesses which they think present better returns in the future," AB Capital Securities analyst Prince Yeung said. In the statement announcing the 2009 profit, Ang said: "While it may take a while to realize the expected returns from our new businesses, we are confident that these returns will drive much higher growth in the company’s revenue, profit and cash performance." The firm said consolidated sales were up by 4 percent to P174.2 billion, while consolidated operating income rose by a third to P19.7 billion. It said San Miguel Brewery had earned P10.03 billion, down slightly from P10.04 billion. Ginebra San Miguel, Inc. reversed 2008’s P279-million loss to post a net income of P701 million last year. The consolidated revenue of the food group went up by 5 percent year-on-year to P77 billion, while operating income rose more than doubled to P4.53 billion. Net sales of the San Miguel Yamamura Packaging Group, meanwhile, slid by a percent to P19.696 billion, while operating income rose by almost a fifth to P1.62 billion. San Miguel said it would continue its strategic investments in higher growth ventures such as infrastructure, energy, mining and telecommunications. The conglomerate started selling parts of key businesses in 2007 to fund its diversification. Major deals included the sale of its 65 percent stake in the Philippine unit of Coca-Cola Co. for $590 million, and the sale of 43.3 percent of San Miguel Brewery to Kirin for $1.3 billion. Its investments include a joint venture with Qatar Telecommunications Co., a stake in Manila Electric Co., and an option to take majority of Petron Corp. The company is also in talks to buy into railways, toll roads, airport projects and coal mines. Last month, it said it was studying the feasibility of building a bullet train in Luzon. On Monday, San Miguel said it would buy majority of Caticlan International Airport Development Corp., which is developing the airport near the tourist getaway of Boracay. — BusinessWorld with a report from Reuters