SMC allocates P281 billion for big-ticket projects

SAN MIGUEL CORP. (SMC) is spending P281 billion to finance the expansion of its businesses in line with efforts to grow its revenues by half and double earnings before interest, taxes, depreciation, and amortization (EBITDA) by 2020.

The planned spending forms part of its P543-billion capital expenditure program “across major projects,” P262 billion of which had been spent, said Ferdinand K. Constantino, senior vice-president, chief financial officer and treasurer of the diversified conglomerate, during the company’s institutional investors’ briefing for its maiden retail bond offering in Makati City.

The big-ticket projects cover the expansion of its food (P3 billion), oil and fuel (P119.9 billion), power (P156.7 billion) and infrastructure ( P210.7 billion) businesses. The toll roads accounted for bulk of the capex at P119 billion, while the refinery upgrade of Petron Corp. was the single biggest expense at P93.3 billion.

This year, SMC may spend P63 billion, the bulk of which will be allocated to complete the development of its power facilities, Mr. Constantino said. A total of P191 billion will be earmarked for capex in “2018 and beyond,” according to a presentation to investors.

“Revenue will be 1.5x and EBITDA (earnings before interest, tax, depreciation and amortization) will be 2x in 2020 compared to 2015,” Mr. Constantino said. SMC registered consolidated sales revenue of P674 billion and EBITDA of P108.6 billion in 2015.

By 2020, new businesses will retain its contribution to revenues at 66% and will increase its share of EBITDA to 67% from 60%.

Meanwhile, the diversified conglomerate is set to undertake the “first” capital market issuance for the year, with demand for its P20-billion bond offer expected to be brisk.

“I’m sure it will be a success. It’s just a matter of signaling from the Federal Reserve,” BDO Capital and Investment Corp. President Eduardo V. Francisco said during the briefing.

The proposed P20- billion bond issue forms part of the three- year shelf registration approved by the SMC board of directors on Nov. 10.

The conglomerate has earmarked the proceeds mainly for the refinancing of loans with local banks and prepayment of a portion of its dollar-denominated debt.

“It is not expected to leverage the company as this will be used for refinancing purposes,” Mr. Constantino said.

The parent company has a remaining foreign debt of $500 million, SMC Senior Vice-President and Head of Treasury Sergio G. Edeza said.

In the first nine months, SMC booked a 125% increase in net income to P42.95 billion from the P19 billion recorded in the comparable 2015 period, with its recurring net income rising 54% to P31 billion from P20 billion.

Shares in San Miguel shed 40 centavos or 0.40% to P99.10 apiece on Thursday.