Oversupply, cost pressure weigh down SMFB earnings in H1

San Miguel Food and Beverage Inc. (SMFB) reported lower earnings in the first half despite strong revenues driven mainly by healthy volume expansion across key products.

SMFB said consolidated net income fell by five percent to P14.7 billion in the first semester from a year ago.

The company’s poultry segment, in particular, reeled from an industry-wide oversupply that began late last year.

Cost and pricing pressures from the food group also weighed on margins, resulting in a six percent drop in consolidated operating income to P21.6 billion.

SMFB’s consolidated revenues, however, jumped by 10 percent year-on-year to P151 billion.

With current prices showing signs of recovery, SMFB expressed confidence in getting out of the slump sooner than expected.

“Despite challenges impacting some of our businesses, we remain positive about the company’s overall growth prospects given our unique position to capture the opportunities directly linked to our fast-growing economy,” SMFB president and CEO Ramon Ang said.

SMFB’s beer business continued to deliver strong revenue growth of 12 percent to P70.3 billion during the period behind strong nationwide consumption of brands such as Red Horse and San Miguel Pale Pilsen.

The food group continued to benefit from higher volumes from a strong portfolio of brands that includes Magnolia, Purefoods, B-MEG, Star, Magnolia, DariCreme and La Pacita, resulting in a five percent increase in revenue to P66.1 billion.

Earnings of hard liquor unit Ginebra San Miguel lnc., meanwhile, nearly doubled in the first half on higher volumes, driven by wider distribution and improved efficiencies.

Ginebra said its net income surged by 94 percent to P980 million from a year ago, while consolidated EBITDA reached P2 billion, 66 percent higher than the previous year.

The company’s revenues grew by a fifth as it reached Pl4.7 billion during the first half.

“Aside from wider distribution and improved efficiencies from operations, the campaigns of core brands Ginebra San Miguel and Vino Kulafu for the first half helped to further drive growth as volumes rose 17 percent against last year,” Ginebra said.

It said supporting brands GSM Blue Light Gin and the GSM Blue Flavors line registered an aggregate volume growth of 70 percent.

Ginebra, which is celebrating its 185th anniversary, is expecting its net income to grow to P2.5 billion this year from P1.05 billion in 2018, with Ang believing that 2019 would be a good year for the company.