Alaska Milk net income declines to P461M

MANILA, Philippines—Alaska Milk Corp. posted a double-digit decline in first-semester net profit due to higher input costs as sales slowed down compared with an extraordinary period last year when milk consumption was boosted by election spending and the El Niño dry spell.

Net income for the first six months amounted to P461 million, 56 percent lower than the level in the same period last year. Second-quarter net profit was likewise down by 61 percent to P208 million from a year ago, AMC reported to the Philippine Stock Exchange on Tuesday.

“Sales volume of liquid canned milk products registered declines year on year as consumers put a tighter rein on spending given rising food and fuel prices,” AMC said.

The company’s net sales declined by 15 percent to P4.97 billion in the first semester from a year ago.  For the second quarter alone, sales declined at a slower pace of 3 percent to P2.75 billion.

“The entire liquid canned milk category was likewise affected by cooler-than-normal weather conditions this year which dampened demand for cold beverages and related food preparations,” the company said.

But after a sluggish first quarter, AMC noted that domestic milk consumption, particularly of liquid canned milk, recovered in the second quarter despite a mild summer.

Due to higher commodity costs, operating income fell by 61 percent in the first half to P514 million. For the second quarter alone, it declined by 63 percent to P233 million.

Cost of sales and operating expenses increased by 14 percent to P2.56 billion in the second quarter despite lower sales mainly due to the sharp rise in commodity prices, particularly skimmed milk powder, sugar, vegetable oil and tinplates.

To partly mitigate the effects of substantially higher costs of raw materials, AMC sanctioned a 5 percent selling price increase for selected products last February 1. Selling and administrative expenses were also tightly managed.

Meanwhile, operating expenses likewise increased on sustained advertising and promotion spending as well as trade marketing support to drive consumer demand for current and new products, thereby resulting in improved market share.

But after peaking in May and June this year, AMC noted that prices of skimmed milk powder recently softened in the international market amid expectations of a strong milk production season particularly in Australia and New Zealand.

To further drive demand for its products, a 5 percent selling price rollback for selected products was carried out effective June 6. “While this move will add margin pressure in the short term, the additional sales volume to be generated by the price adjustment will more than compensate for the reduced margins and will translate to a higher market share,” AMC said.