Tanduay profit down 5%

Despite a slight drop in sales in the first quarter, Tanduay Holdings Inc., one of the country’s top liquor distillers, is sticking to its profit growth targets for 2012 as the company banks on the country’s stronger economy.

Tanduay Holdings said sales volume for January to March fell by 8 percent, driving profit down by 5 percent to P207 million. Revenue for the quarter reached P2.8 billion, lower than the P2.9 billion booked a year ago.

Tanduay president and CEO Wilson Young on Wednesday said the launch of new product lines and the improvement in the country’s economy were expected to boost the company’s sales and profit for the year.

“We are sticking to our earlier projection of a 7-percent volume increase,” he told reporters at the sidelines of the firm’s annual shareholders’ meeting.

“We are hoping that our new products will do well this year,” he said.

Tanduay started 2012 with four new product lines that were not present in January of 2011. These were Boracay flavored rum, Tanduay Light, Mardi Gras and ready-mixed cocktail drinks.

He said the company was optimistic that sales would improve starting July with the unofficial start of the 2013 election campaign season—a time characterized by heavy spending by politicians seeking office.

“Historically, the campaign really starts in July. Sales should bounce back,” he said.

Tanduay chief finance officer Nestor Mendones said the company had earmarked P1 billion for capital expenditure this year, up by more than two thirds from the P600 million spent last year.

The bulk of the outlay would be spent on efforts to increase the production capacity of Tanduay’s distillery in Lian, Batangas. He said this was part of a three-year, P2-billion expansion program that started last year.

In the meantime, Young said the biggest threat to the company’s profitability—and the entire local liquor industry’s health—was the current proposal to increase the taxes on alcohol products.

He said the finance department’s proposal to raise “sin” taxes would lead to lower sales and, most likely, dislocation of workers.

“This is why our labor unions have been very active in the discussion of sin taxes,” Young said.