URC braces for rally after Vietnam hitch

Regional industrial powerhouse Universal Robina Corp. (URC) sees a path to recovery this 2017 following the unexpected recall of its beverage brands in Vietnam alongside cutthroat domestic competition that gnawed on earnings last year.

This year, URC expects sales to rebound to a mid-teen growth but with lower growth in earnings before interest and taxes (EBIT), URC president Lance Gokongwei told shareholders in an annual meeting late Wednesday.

“Our overall aim is to take the URC business on the path to recovery in (calendar year) 2017,” Gokongwei said.

After several years of strong performance, 2016 was cited as URC’s most challenging by far. Sales last year fell by 2 percent to P111.6 billion while core earnings before interest and taxes slipped by 3 percent to P15.9 billion.

The company had faced a price war in the Philippines for its coffee and salty snack businesses while two of its beverage brands, C2 and Rong Do, were recalled in Vietnam for exceeding the lead content prescribed by regulators.

Gokongwei said it may take time for the operations in Vietnam to fully recover but noted that URC remained committed to rebuilding its brands in this market. As Vietnam is a significant contributor to URC’s revenue and profits, the product recall last year dragged down overall performance.

URC’s peak sales in Vietnam are seen to return to $20 million per month in two to three years from $10 million at present. “We hope to get to $10 to $13 million by end of the year,” Gokongwei said.

“We will rebuild our Vietnam business and repair the damage both to our corporate reputation as well as to the equity of our two strong brands,” Gokongwei said. “We know it’s a long road and we’re willing to invest in that.”

In line with these goals, URC has relaunched C2 and Rong Do products in Vietnam with a fresher look and packaging. Gokongwei said URC had also secured certifications from independent bodies assuring the quality of its factories.

Gokongwei said URC’s P7-billion capital spending this year would allow it to expand capacities.