Biggest canned food firm goes public
The second company to try the market for funding this year through an initial public offering (IPO) is Century Pacific Foods Inc., at the offer price of P13.75 a share to raise P3.1 billion in fresh funds.
It will trade under the trading symbol and company alias of “CNPF.”
The offer period started on April 23 and will end at noontime on April 29. Listing date is scheduled on May 6.
Offered under the IPO are 229.7 million new common shares, 20 percent of which is for distribution through trading participants or brokers of the Philippine Stock Exchange, while 10 percent is allocated for direct distribution to local investors or LSI.
The remaining 70 percent of the offered shares “is allocated to the QIBs or qualified institutional buyers and the general public through the Joint Lead Underwriters.”
Following PSE rules, existing shareholders of CNPF owning at least 10 percent of the outstanding shares of the company are “not allowed to sell, assign or in any manner dispose of their shares for a period of 365 days after the listing of the shares.”
“A total of 1,999,999,993 common shares (along with any addition, if there is any issuance of shares before the listing date) held by Century Canning Corp. will be subject to such 365-day lock-up.”
As a result of the IPO, CNPF’s main stockholders’ structure will be as follows: 89.7 percent Po family (through their whole ownership of CNPF’s parent company Century Canning Corp.) and 10.3 percent public.
Organization
The company is “the largest canned food company” in the country that is primarily engaged in the development, processing, marketing and distribution of processed fish and meat, as well as processed dairy products in the Philippines.
CNPF was the result of a corporate reorganization program implemented by the Po family to rationalize as well as maximize the Century group of companies’ organizational strengths, dividing business operations into four main business segments namely: canned and processed fish, canned meat, dairy and mixes, and tuna export.
Thus, on Oct. 23, 2013, CNPF was established. Folded into it are the business operations of Century Canning Corp. or CCC, the group’s unit that handles the 555 brand; Columbus Seafood Corp. or CSCI, the manufacturing plant for sardines, and Pacific Meat Co. Inc. or PMCI, manufacturer of canned and frozen processed meat under the names Argentina, Swift and 555.
Snow Mountain Diary Corp. or SMDC and General Tuna Corp. or GTC remained as separate corporate entities and wholly owned subsidiaries of CNPF.
SMDC handles the dairy and “sinigang” mixes under the brands of Birch Tree, Angel, Home Pride and Kaffe de Oro and GTC handles the private label for canned, pouched and frozen tuna products for local and export sales.
Performance
Having gone a long way since it started 35 years ago, CNPF now controls about 87 percent of the local canned tuna market. Through the same organizational grit, the company now also controls 43 percent of corned meat, 26 percent of luncheon meat and 28 percent of “vienna sausage.”
This dominant position of the company was made possible by the excellent distribution system maintained by the company as follows: 200 manufacturer direct-to-retail accounts reaching 3,772 retail outlets in the country; distribution agreements with 39 distributors, reaching directly 225,168 retail outlets—ranging from supermarkets to sarisari stores—and indirectly 330,749 served points of sale, totaling over 559,689 points of sale throughout the Philippines.
Such leadership was also augmented by its export of private branded products, which CNPF does through affiliates and network of retailers found “across North America, Europe, Asia, Australia, and the Middle East.”
As of Dec. 31, 2013, CNPF reported net revenue of P19.02 billion and net profit after tax of P744 million—or an earnings per share (EPS) of P0.50 equivalent to 27.5x at the offer price of P13.75 a share, a price to book value of 7.21x and return on equity of 26.21 percent.
This was realized through a gross profit of 17.5 percent or Php3.326 billion and operating income of 5.7 percent or Php1.087 billion.
Bottom line spin
CNPF intends to pursue an aggressive plan of growth and profitability through a combination of strategies. These are through the retirement of debts whose financial burdens otherwise reduce overall profitability, increase production capacity and cost efficiency, and further increase sales by expanding distribution network in the country, particularly in the Visayas and Mindanao and other underserved areas in Luzon, along with further market penetration in North America out of the 42 countries it is currently serving.
In this connection, CNPF plans to apply the bulk of the IPO proceeds for the payment of financial obligations. The rest will be used to address the following: Construction of a tin can manufacturing facility that will not only help increase production capacity but improve cost efficiency, boost working capital and support capital expenditures requirements for the acquisition of new brands and products like, among others, CNPF’s plan to market and distribute coconut water this year.
As claimed, CNPF expects to improve net margins by as much as 6 percent through the completion of the facility by the third quarter of this year.
Lastly, market insiders are, again, divided on CNPF’s pricing in the same way they were divided before in the case of Double Dragon Properties Inc. (DD). How about you?
The writer is a licensed stockbroker of Eagle Equities, Inc. You may reach the Market Rider at [email protected] , [email protected] or at www.kapitaltek.com
