URC to bank on organic growth as it eyes recovery of Vietnam business

UNIVERSAL ROBINA CORP. (URC) is focusing on strengthening its existing businesses for now amid intensifying competition, as the Gokongwei-led multinational firm rebuilds its Vietnam operations following a product recall that hurt the overall company’s performance last year.

On the sidelines of the firm’s stockholders meeting on Wednesday, URC President and CEO Lance Y. Gokongwei told reporters the snack food giant plans to “primarily focus on organic growth in the next couple of years” after taking over New Zealand’s biggest snack producer Griffin’s and Australia’s second largest salty snacks maker Snack Brands Australia in the last two years.

“One of the priorities we have is to simplify the business. We try to get management focused on key priorities which is strengthening the business in the Philippines and Vietnam,” Mr. Gokongwei said.

URC is projecting that operations in Vietnam will recover 60-70% of the peak sales level and achieve a “decent” positive earnings before taxes, interest, depreciation and amortization by yearend, Mr. Gokongwei said.

Monthly sales in Vietnam hit a high of $20-$25 million before a recall of two beverage brands C2 and Rong Do for alleged excessive lead content sent sales plunging to a low of $2 million.

“We hope to end the year at $13-$14 million. To bring it back to $20-$25 million, we’re probably looking at a 2-3 year timeframe,” Mr. Gokongwei said.

Asked when the Vietnam business will fully recover, he said: “We knew it will be difficult and it’s a long road but we’re willing to invest.”

To start the road to recovery, URC has relaunched C2 and Rong Do “under a passion for quality” brand- building exercise, with a fresher look and packaging. The company has secured certifications from independent organizations, assuring that its factories adopt the highest standards in food safety manufacturing.

The product recall in Vietnam coupled with intense price competition in salty snacks and coffee segments in the Philippines resulted to a slower-than-expected annual sales growth of 2% in P111.6 billion in 2016.

URC plans to focus on innovation and launching brands in untapped segments within snack foods and non-alcoholic beverage segments in the local market.

These include more premium iterations in snacking such as indulgent biscuits from Griffin’s, premium salty snacks from Snackbrands Australia and Calbee, on- the- go beverage in the Philippines and Vietnam as well as targeted launches under the Jack ’n Jill brand across Southeast Asia.

The company will also introduce two new innovations in the coffee-market category to reinforce the market position of Great Taste White.

URC has embarked on stock keeping unit rationalization and a cost-volume-profit optimization through better pricing and mix will be put in place on a more deliberate basis to bring back sales momentum and maintain profitability for the branded business, Mr. Gokongwei said.

MERGER WITH CCPI

In a separate development, URC secured shareholder approval to proceed with its merger with its unit CFC Clubhouse Property, Inc. (CCPI), which it said would allow for increased efficiency and less operating cost.

In a disclosure to the stock exchange, the Gokongwei-led firm said its shareholders approved the revision plan for CCPI’s merger with URC. A total of 500,000 common shares of CCPI priced at P1 each will be exchanged with 2.5 million common shares of URC.

“The proposed merger is expected to benefit URC in the reduction of expenses through the economies of scale, centralized administration and greater efficiency,” the company said.

The transaction is now pending approval from the Securities and Exchange Commission.

CCPI produces flexible packaging materials for URC, which it looks to expand in order to accommodate the increased demand of URC for dry laminated and extruded papers.

URC’s net income attributable to the parent declined by 4.7% in the first quarter of 2017 to P3.37 million, amid a 7.9% increase in revenues to P31.29 million in the same period.

Shares in URC jumped P1.50 or 0.94% to close at P161.50 apiece on Thursday.

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