Gokongwei-led Universal Robina Corp. is intensifying its Southeast Asian expansion program in line with plans to diversify and boost profits, with Vietnam seen growing to match the current size of the Philippine market over the next 10 years.
The roadmap for the next five to six years was to double the branded food business to $3 billion, which would imply an annual growth rate of 12-15 percent, URC vice president for corporate planning and investor relations chief Mike Liwanag said at the recent briefing for BPI Securities clients. Over the same period, URC also aims to boost its return on equity (ROE) to 23-25 percent from 17-18 percent at present, Liwanag added.
URC’s net sales for fiscal year 2013 was seen hitting P80.7 billion from P71.2 billion the previous year while cash flow based on earnings before interest and taxes (EBIT) was projected to rise to P10 billion from P7.8 billion, based on Liwanag’s presentation.
“More than a Philippine play, our difference is no matter what happens to the Philippines, we have the Asean (Association of Southeast Asian Nation) geography and our future is hinged on our effective execution of that Asean strategy, more than just depending on our home market, the Philippines,” he said.
URC, which has built a regional industrial base from the ground up, is also evaluating merger-and-acquisition opportunities outside the Philippines although nothing has been finalized for now. Liwanag said that based on URC’s balance sheet strength and credibility to the capital market, the company could tap acquisitions worth around $500 million to $1 billion.
In a disclosure to the Philippine Stock Exchange yesterday, URC clarified that while exploring acquisition opportunities was part of its ordinary course of business depending on various factors such as valuation, brand equity and distribution capability, it was “not looking” for a $1-billion acquisition.
To fund its expansion plans, URC still has about 46 million treasury-held shares that could be reissued to the market if the company needed to raise fresh funds, Liwanag said.
URC is increasing its capital spending to $150 million in 2014 from $120 million in the past few years as the company ventures into Myanmar in the next six months, he said.
“We are one of the few Filipino companies that have made inroads into the Asean market and we are profitable,” he said.
URC’s international business turned the corner in 2009. This segment is growing at a compounded annual rate of 21 percent and margins are higher than in the local market. The biggest market to date is Vietnam, where it sells $240 million worth of products against the $1-billion Philippine market where it has been operating for 53 years.
Based on a growth trajectory of 17 percent a year, URC’s Vietnam business could hit $1 billion in 10 years, Liwanag said, which indicated that Vietnam “could be the next Philippines.”
“The Vietnamese don’t consume a lot of potato chips or chocolate bars. We’re trying to teach them to snack Western style,” he said.
The strategy is to choose a few segments in each market and aim to be among the top three players in that segment.