LT Group 2014 profit down by nearly 50% to P4.2B

MANILA, Philippines–Tycoon Lucio Tan-led conglomerate LT Group Inc. posted a net profit of P4.2 billion last year, about half the level registered in the previous year, as cutthroat competition gnawed on the earnings of its tobacco business.

In a statement, LTG reported that 52 percent of attributable profit for the year or P2.4 billion was contributed by the group’s banking arm, Philippine National Bank (PNB),  while Asia Brewery’s share was P1.1 billion or 27 percent.

Property arm Eton Properties contributed P119 million or 3 percent while Tanduay Distillers Inc. (TDI) and the tobacco business had a respective share of P101 million and P99 million of about 2 percent each.

The balance was largely from the P335-million gain on the purchase of Victorias Milling Co. (VMC) shares and P45 million from LTG’s share in VMC’s income.

LTG’s income from the tobacco business slumped to P99 million from P3.9 billion in 2013.  The group reported that Philip Morris Fortune Tobacco Corp.—a partnership with Philip Morris International—or PMFTC continued to be “adversely affected by the illicit trade in cigarettes.”

But Philip Morris International said it had witnessed “significant” positive price movements at the lower end of the market.  “We believe that the introduction of tax stamps will further improve the competitive environment in a market where cigarette consumption remained resilient last year at around 100 billion units.  These developments augur well for profitability to improve over the mid-term and we remain bullish on the prospects for this market,” LTG’s tobacco partner said.

The government recently started implementing the Internal Revenue Stamps Integrated System (IRSIS).  From Dec. 1, 2014,  local manufacturers are required to affix numbered stamps on each pack of cigarettes. By March 1, 2015, all locally manufactured cigarettes should bear the said stamps.

PNB’s unaudited profit was P5.6 billion last year, 10 percent lower than the previous year where earnings were bloated by higher trading gains. The bank booked P7.2 billion in trading gains in 2013, while earnings from this segment slid to P2.6 billion in 2014.

In the meantime, core earnings as indicated by net interest income rose by 19 percent to P16.9 billion due to lower costs and growth in loans.

For its beer unit,  Asia Brewery’s unaudited net income for 2014 reached P1.1 billion or 8 percent higher than the level reported in the previous year.  Its brands—Cobra (carbonated energy drink), and Absolute and Summit (water)—continued to enjoy market leadership while Tanduay Ice kept more than 90 percent share of the alcopop market, the company reported.

Eton’s unaudited net income amounted to P120 million in 2014.  Leasing revenues were higher with the contribution of CentrisCyberpod Three, the latest business process outsourcing office building at Eton Centris, in Quezon City.

TDI’s sales volume increased by 17 percent last year, which the holding firm attributed to intensified marketing efforts for its flagship product, Tanduay Five Years.

TDI reversed the net loss of P172 million in the first half of 2014, generating an income of P273 million in the second half, ending the year with an unaudited net income of P101 million.

LTG’s cash balance at the parent company level ended the year at P8.1 billion.