SMC readies $9B to finish infra projects by ’16

San Miguel Corp.—the country’s largest business group by assets—will spend up to $9 billion over the next two years to complete its largest infrastructure projects before President Benigno Aquino III steps down in 2016.

The capital expenditure program is being undertaken amid expectations that the Philippine economy will continue with its present growth path, said Ramon Ang, president of the conglomerate.

“For the next two years, you will see organic expansion in our businesses, from oil, petrochemicals, power, infrastructure and telecommunications,” he said in an interview. “All told, these expansion programs are worth a combined $9 billion, all sourced from internally generated funds.”

“You will see all of these bear fruit before the end of the present administration,” he added.

The architect of San Miguel’s transformation from Southeast Asia’s largest food and beverage company into a conglomerate with large investments in power, infrastructure and the airline industry said he expected the group’s growth to continue in lock step with the growth of the economy.

“Over the last six years, San Miguel’s sales increased by an average of 55 percent annually,” Ang said. “Our assets have grown by 41 percent annually, and equity by 20 percent each year. In effect, you see San Miguel’s revenues doubling every 22 months, while our asset base doubles every two years.”

Data compiled by Bloomberg showed that San Miguel has made 41 acquisitions worth a combined $7.8 billion since 2000, the bulk of which were made starting 2008, when Ang put the conglomerate on its present expansion paths.

San Miguel owns Petron Corp., the country’s largest petroleum refiner and distributor.

It is also the country’s largest power firm with a combined 2,545 megawatts in installed capacity, with more power plants under construction.

It has a 49-percent stake in flag carrier Philippine Airlines, and has a portfolio of tollroad projects, including the South Luzon Expressway, Southern Tagalog Arterial Road tollway, Naia Expressway and a controlling stake in Citra Metro Manila Skyway Corp., whose Skyway elevated tollroad is being expanded to the north of the metropolis.

“Do I believe this will continue? I believe so. Why? We are looking at several deals abroad, and if even only one of these happens, you will see this [trend] continue,” he said.

The San Miguel chief said that one particular long-running acquisition target has the ability to add P400 billion in annual sales to the group’s current P750-billion-a-year revenue stream.

He declined to name the acquisition target, saying only that it is a regional player in the oil and energy fields.

As such, Ang said he was also setting his eyes farther afield to take advantage of attractive companies that are up for sale around the region.

“Over the next two years, we believe you will see a lot of opportunities overseas for acquisitions—companies that are relatively cheap,” he said.

According to Ang, the conglomerate can mobilize up to $10 billion in equity and debt on short notice should overseas acquisition opportunities arise.

The conglomerate has $12.6 billion in liabilities, with $393 million falling due this year, versus a cash hoard of $5 billion.

Ang said he was comfortable using leverage to fund his acquisitions because all of San Miguel’s businesses provide a steady stream of cash.