URC net income down 14.2% in H1 to P6.25B

Gokongwei-led Universal Robina Corp. booked P6.25 billion in first-semester net profit, down by 14.2 percent year-on-year on lower operating income and foreign exchange gains alongside higher finance costs and income tax provision.

Consolidated sale of goods and services grew by 9.6 percent year-on-year to P60.79 billion for the first half, as sale of branded consumer food, excluding packaging division, expanded by 9.2 percent to P49.27 billion.

Domestic operations of the branded food business saw a slight decline in six-month net sales to P29.31 billion from P29.46 billion. URC said the strong performance of snackfoods and joint ventures was offset by the underperformance of beverages due to intense competition in coffee and the high base last year in ready-to-drink tea.

The international operations of the branded food business reported a 27.4 percent increase in net sales to P19.95 billion.

Topline growth in the international business came from Thailand and New Zealand and sales contribution from Snackbrands Australia, which the group consolidated into URC International starting October 2016.

Thailand grew as a result of double-digit growth from snacks, wafers and confectionery. New Zealand sales improved as volumes remained solid, with crackers and wrapped snacks gaining shares with the launch of new products. Vietnam is still on its path to recovery, with beverages showing signs of traction after the relaunch of C2 and Rong Do last February.

Sales from URC’s packaging division increased by 31 percent to P688 million for the first half due to higher prices and volume.

URC’s agro-industrial segment contributed P4.79 billion, an increase of 5.4 percent year-on-year.

The feeds business was affected by the slowdown in sales resulting from lower demand for hog feeds while the farms business increased by 10.3 percent driven by higher prices.

The commodity foods segment, meanwhile, contributed P6.05 billion, marking a

15-percent increase year-on-year. The sugar business increased by 22.2 percent due to higher sales volume of raw and refined sugar despite decline in prices while renewables business increased by 40.4 percent mainly coming from higher volume. The flour business declined by 6.5 percent due to lower prices and volume as a result of aggressive competition.

Higher cost of sales as well as general and administrative expenses, however, curbed operating income by 7.9 percent to P7.61 billion for the first half.

Meanwhile, net foreign exchange gain amounted to P741 million for the first half, slower than P974 million in the same period last year due to the combined effects of the depreciation of international subsidiaries’ local currencies and Philippine peso vis-à-vis the US dollar. URC’s finance costs also increased by 24.4 percent to P672 million due to higher level of financial debt.

The company booked provisions for income tax amounting to P1.47 billion for the first half, rising by 8.6 percent year-on-year due to higher taxable income of the parent company, recognition of deferred tax liability on unrealized market valuation of hogs and utilization of deferred tax assets on realized foreign exchange losses and tax credits.