San Miguel plans $34-bn investments, eyes Saigon Beer stake

San Miguel plans to invest $34 billion in an oil refinery, an integrated steel complex and an ocean-tide power plant as the Philippines’ largest company by sales expands amid forecasts for robust economic growth in the country, according to its president.

The company, which sells nine of every 10 beers in the Philippines, is also “evaluating and may bid” for Saigon Beer Alcohol Beverage, President Ramon Ang told reporters on March 31. Vietnam may provide an anchor to increase its brewery business as consumption in the country is growing at an annual rate of at least 10 per cent, five times that in the Philippines, he said.

“The businesses we ventured into have matured, such that the company is in a very stable position,” Ang said, citing compounded annual 20 per cent growth in recurring profit and a near fourfold increase in assets since 2008 following San Miguel’s diversification from food and drinks into non-allied industries such as toll roads and resources. Excluding oneoff items, profit will rise at least 20 per cent to about 60 billion pesos ($1.2 billion) this year, he said.

Election-related spending, remittances from Filipinos overseas and a booming outsourcing industry have helped raise sales of hot-dogs and beers, while record car sales boosted oil demand. The momentum is expected to stay strong this year, with gross domestic product forecast to rise 6.8 per cent, Fitch Ratings said on March 29, when it kept its investment-grade rating and positive outlook on the Philippines. Profit at the company that started as a brewer more than a century ago rose 80 per cent to 52.2 billion pesos last year, boosted by higher sales at its oil, beer and food units. An 11.8 billion peso one-time gain from the sale of its telecommunication assets helped offset a 9 billion peso foreign exchange loss. “Ang is trying to ride on the wave of Philippine economic growth,” said Astro del Castillo, managing director at investment advisory company First Grade Holdings Inc. “Like its previous infrastructure and industrial bets, these won’t make a quick buck, so it will take time for the stock to appreciate. San Miguel is for investors with a long-term view.”

San Miguel plans to build an oil refinery complex with a capacity of 250,000 barrels a day and an integrated steel plant, which will entail investments of $15 billion each. An ocean-tide energy project with initial capacity of 1,200 megawatts and costing $3.6 billion is also in the pipeline.