San Miguel Purefoods’ earnings growth picked up pace in Q3

MANILA, Philippines—San Miguel Purefoods Co. Inc. posted flat net profit in the first nine months due to high raw material and distribution costs, although growth in earnings picked up pace in the third quarter given an improved operating environment and increased efficiency.

The company’s January-September net profit attributable to parent equity holders inched up to P2.96 billion from P2.94 billion in the same period last year. In the third quarter, however, net profit surged by 31.6 percent year on year to P1.23 billion with the softening of some raw material prices, improved production efficiencies and favorable supply-demand environment for hog meat and chicken.

Consolidated revenues in the nine months to September went up by 8 percent to P69.4 billion as business volume grew in view of improved sales and marketing activities, new product introductions and better distribution network, combined with slightly better selling prices.

Cost of sales increased by 9 percent mainly due to high costs of some major raw materials, particularly in the agro-industrial segment and the limited supply of alternative lower-priced raw materials.

The growth in sales revenues and the group’s initiatives to improve operational efficiencies tempered the impact of the rising cost of raw materials, resulting in a 3-percent growth in gross profit from year-ago level.

Selling and administrative expenses went up by 17 percent on higher distribution and transportation costs brought about higher volume and increased shipping and hauling rates, rental, warehousing and third party services costs, and advertising and promotions spending on brand-building activities.

The company also booked gains from the sale of property and equipment, on account of the gain realized from the disposal of certain equipment during the first nine months. On the other hand, it incurred loss last year from the rationalization of food-shop outlets.

SMPFC also recognized mark-to-market gains from the group’s embedded third currency transactions brought about by the favorable foreign exchange rates and better market price of wheat options in the first nine months of 2012.

Gain was also recognized from the sale of its Rockwell Land Corp. shares which were received as property dividend from Meralco in the early part of the year.

Quarter-on-year, the company sustained improvements but compared to last year, raw material prices remained high and supply of certain alternative lower-priced raw materials remained low, driving up production costs.