URC takes full control of overseas business unit

Food and beverage firm posts 24% profit growth to P6.13B

GOKONGWEI-led food and beverage conglomerate Universal Robina Corp. is taking full control of its overseas operating unit, URC International Co. (URCI) Ltd., by buying the 23-percent stake held by another firm for P7.2 billion.

In a disclosure to the Philippine Stock Exchange on Wednesday, URC said its board had approved the purchase of the 23-percent stake in URCI from International Horizons Investment Ltd., a private firm likewise controlled by the Gokongwei family.

This means URC will own 100 percent of its international operations, as control will be consolidated into the listed entity. The transaction is expected to be completed by mid-September.

URC also reported yesterday that its net income from October 2011 to June 2012, the first nine months of its fiscal year, rose by 24 percent to P6.13 billion due to higher operating income and finance revenue, and significant marked-to-market gains from its bond and equity holdings.

“The acquisition of the shares of URCI will allow URC to fully capture the strong growth from its international operations,” URC said in its disclosure.

The transaction values 100 percent of URCI at P31.3 billion, which is 15.5 times its estimated earnings for 2013. URC is presently valued at 16.7 times 2013 earnings, based on Bloomberg estimates.

“The acquisition is therefore accretive for the company,” the company said in the disclosure.

URCI manufactures, markets and distributes consumer food products under its own brands in China, Malaysia, Indonesia, Thailand, Vietnam, Hong Kong and Singapore. In 2011, its revenues amounted to $440 million, up from $84 million in 2003.

On its nine-month results, URC said sales coming from its flagship branded consumer foods group remained buoyant, rising by 11.1 percent year-on-year. However, the decline in sales of the sugar division—as selling prices decreased compared to year-ago levels—tempered the company’s overall performance. As a result, total URC sales grew by 4.9 percent in the first nine months.

Net sales and services for the nine-month period amounted to P53.05 billion, up from P50.58 billion in the same period last year.

Operating income stood at P5.78 billion in the first nine months, 6 percent higher year-on-year. “This was mainly due to higher operating income from the branded food business as prices of key inputs are relatively lower than year-ago levels. The agro-industrial business started to contribute positive income as recovery of the hogs business can already be seen,” it said.

Sales registered by its international branded consumer food business increased by 5.7 percent in dollar terms, to $350 million or P15.072 billion. This was attributed to the double-digit sales growth of Vietnam as URC continued to expand in the ready-to-drink (RTD) beverage industry. The company noted the sustained momentum and market share growth of C2, which is now the number one RTD tea brand, as well as the encouraging performance of Rong Do, its offering in the energy drinks segment.

“Indonesia also contributed to the growth as our renewed entry into the extruded/pelletized snacks line showed good traction. However, overall top-line growth was tempered by Thailand’s softer sales as consumption for biscuits and wafers, which are discretionary in nature, declined as a consequence of the flooding,” the disclosure said.