SMC issuing perpetual notes to raise $1B

Conglomerate San Miguel Corp. (SMC) is preparing to raise as much as $1 billion through the issuance of perpetual securities to fund future growth even as the coronavirus pandemic has taken a heavy toll on its earnings in the first quarter.

In the first quarter, SMC’s consolidated revenue fell by 15 percent year-on-year to P214 billion. Cash flow as measured by earnings before interest, taxes, depreciation and amortization hit P27 billion, down 34 percent year-on-year. “This is an unprecedented crisis we are in, and many countries all over the world continue to struggle to cope. Like most businesses in the country, we are also affected but we maintained our focus on cost reduction and cash preservation amid the COVID-19 crisis,” said SMC president Ramon Ang.

“Right now, our priority is really to ensure the continuous and efficient delivery of our products and services for the people, strengthen and expand new programs we’ve initiated during this crisis that have worked for us, implement our plan to safely bring our workforce back, and continue to help the country manage the impact of this pandemic,” Ang said.

SMC has obtained its board’s approval to issue the perpetual securities either in US dollars or in peso. Based on a disclosure to the Philippine Stock Exchange on Thursday, the perpetual securities will not be offered to the public. They will have a fixed rate, cumulative and payable on a quarterly basis. The date of issuance, amount, and terms and conditions will be determined by the management.

The board has also given the SMC management the authority to reactivate, when deemed suitable, a previously shelved bond offering worth up to P25 billion and adjust the terms on the use of proceeds.

Meanwhile, SMC’s consumer arm, San Miguel Food and Beverage Inc. (SMFB), saw a 20-percent year-on-year drop in first quarter consolidated net income to P5.8 billion as the enhanced community quarantine (ECQ) and liquor bans in key cities gnawed on its beer and hard liquor businesses alongside the increase in excise.

Its consolidated revenue fell 9 percent year-on-year to P69 billion, while consolidated operating income declined by 20 percent to P8.6 billion.

While its beer and spirits divisions started the year with good momentum, the declaration of the ECQ and the imposition of liquor bans across key cities dragged down sales of its alcoholic beverages. This was partially offset by higher sales from the food division, which grew its consolidated revenue by 2 percent to P33.2 billion.

The food division managed to keep all its plants running and maintained the “highest levels of safety and hygiene in all its premises,” SMC said. Revenue of the processed food unit grew 16 percent, on strong demand for processed meats, dairy, spreads, biscuits and coffee. The beer division’s consolidated revenue was down 18 percent year-on-year to P28.4 billion.

Volumes for San Miguel Brewery Inc. were up in the first two months of the year but volume in March dropped due to the ECQ and the liquor ban. Similarly, the spirits division grew sales volumes by 15 percent year-on-year in the first two months, but ended the quarter 14 percent down. First quarter revenue hit P7.5 billion, down 10 percent from a year ago. —Doris Dumlao-Abadilla