Coco oil mills bounce back, post 110% export growth

A group of five giant coconut oil processing plants grew by 110 percent to $240 million in combined export revenues in 2010, from $114 million in 2009. The CIIF-Oil Mills Group — Legaspi Oil Co. Inc., San Pablo Manufacturing Corp., Cagayan de Oro Oil Co. Inc., Southern Luzon Coconut Oil Mill Inc., and Granexport Manufacturing Corp. — reported its members have recovered after undergoing rehabilitation. “This was a huge turn-around from the over P1.45 billion in aggregate losses that the company incurred during the previous management headed by Danilo Coronacion based on audited reports from 2005 to 2008," group president Jesus Arranza said. The government-sequestered firm posted massive losses of P51 million in 2005, P696 million in 2006, and P746 million in 2007 under its previous management, according to the group. The previous year saw a turnaround as CIIF-Oil Mills increased its revenues by 57 percent to P14.187 billion, and more than doubled its operating income to P171 million in 2010 from P82 million in 2009. The group also boosted its coconut oil exports by 77.6 percent to 252,651 metric tons (MT) from 142,248 MT in the same comparable period. Poor reading of the market An internal audit showed that the previous losses were partly caused by a poor reading of the market, making management enter into forward contracts with buyers even without the physical inventory of copra. The previous management also contracted freight at $80 per ton, and had some questionable copra buying strategies where the group was exposed to risks while the suppliers were protected. The audit report also said the group's former president used company funds for at least 27 overseas travels in a span of two and a half years. When its new management took over, the group implemented a number of belt-tightening and cost-cutting measures that allowed it to increase its operating expenses by only 12 percent to P738 million in 2010. The management team also brought down the freight cost to $50 per ton and increased its plant utilization to 74 percent. “This is quite an achievement considering there is excess crushing capacity in the country today. Total capacity is more than double the total copra production," Arranza said. The group was also able to pay in full the acquisition price for the 40-percent equity holdings of Mitsubishi Corp. in Manila Refining Corp., which is principally engaged in producing specialty fats and oils. — With Paterno Esmaquel II/VS, GMA News