Lorenzo wrings more revenues, higher efficiency out of Luisita refinery
One year after taking over the Hacienda Luisita refinery from P-Noy’s relatives with borrowed funds, former Pancake House owner Martin Lorenzo is giving the Cojuangcos lessons on how to wring more revenues out of the smokestack, commodity-based industry.
In a report to the shareholders, Lorenzo said the Central Azucarera de Tarlac “has unleashed its potential into higher profitability” after the new management adopted a three- pronged strategy of increasing factory efficiency, reducing operational and management costs, and laying off old or excess personnel. The listed refinery reported P144 million profit for the fiscal year 20142015 just ended, a 14 percent increase from the previous year, despite a 13-percent reduction in the volume of sugarcane being milled. Among Lorenzo’s significant cost reductions: • Terminated the management contract of Jose Cojuangco and Sons, immediately saving P16.5 million in a year.
The new management also offered an early retirement program for the Tarlac-based employees, replacing everyone, including officers, with probationary or contractual hires.
The “right-sizing” program also reduced annual payroll to P37 million from nearly P42 million.
• Cut the lease on the Cojuangco building in Legaspi Village, with the Makati office relocated to Lorenzo’s own building along Pasong Tamo Extension, shaving P3.1 million off the annual rent.
• Squeezed transportation, travel and representation expenses, saving another P14 million last year.
Strategically, Lorenzo bulked up the refinery’s balance sheet by folding in subsidiary Luisita Land Corp, which owns the Luisita Industrial Park, Luisita Business Park and the residential subdivision Las Haciendas de Luisita, enabling him to book P1.36 billion in real estate available for sale.
The magic of accounting revaluation also resulted in a 36 percent increase in stockholders’ equity.
“The change is triggered by the decision of the new management to release the previously earmarked land for expansion, following its strategic direction to improve factory efficiency and productivity,” the audit firm SGV said.
“As a result, such land area is no longer required for cane milling and sugar refinery operations,” thereby freeing 505 hectares out of the 628-ha refinery complex, making them available for “sale and development.”
In addition, the company also plans to sell its stake in Liberty Insurance Corp. within a year.
Lorenzo, in partnership with Central Azucarera de Tarlac president Fernando Cojuangco, son of the late chairman and chief executive Pedro Cojuangco, borrowed P2.1 billion from an undisclosed bank to acquire 73 percent of the Luisita refinery, using the refinery assets as collateral.
Integral into the sale agreement is that Lorenzo and company would also assume the almost P1 billion debt of Jose Cojuangco and Sons to Luisita customers.
Lorenzo, 50, is banking that the world sugar economy will now enter, after five years of surplus, “a phase of production deficit,” especially with the onset of the El Nino weather pattern.
“In preparation, CAT continues to implement the necessary upgrades and repairs and maintenance programs geared toward ensuring improving operational efficiency,” Lorenzo said.
The new management thinks the combination of improving sugar prices, the increased efficiency of the refinery, and the windfall from expected land redevelopment of the 500-plus hectares will provide the company with sufficient cash for the bullet loan payment of P2 billion by 2020.
The dark clouds on the immediate horizon? The continued smuggling of sugar, as well as the reduction of tariff on the imported commodity to 5 percent this year.
Gov’t goes after dead deposits
National Treasurer Roberto Tan has confirmed that his office has initiated wholesale escheat proceedings, not a classsuit as initially reported, against two dozen banks, laying the basis for the national government to forfeit the so-called dead/dormant accounts.
The cumulative accounts may still run up to hundreds of millions of pesos, even after the bank depositories have had imposed their respective fees for the ten-year dormant period.
Based on a Commonwealth-era law, banks and deposittaking institutions are periodically required to report to the national treasurer all deposit accounts and balances that have remained dormant or unclaimed after ten years.
The owners of these dormant accounts almost always have passed away, without having informed their heirs about the existence of their squirreled monies.
The national treasurer, through the Office of the SolicitorGeneral, then initiates escheat proceedings against each dormant account in each and every reporting bank branch, with the current batch all being heard by Makati Regional Trial Court Judge Andres Soriano.
Heard through the grapevine
San Miguel Corp. has filed a trademark complaint against lawyer Lowell Yu of Datu Inciong Yu Law Offices over the use of the name “Aldea Homes” for residential projects. Both Yu and his law office did not answer emails requesting comment.
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