San Miguel first-quarter more than doubles as beer sales grow
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By Rosemarie FranciscoMANILA (Reuters) - San Miguel Corp , Southeast Asia's largest food and drinks group, said first-quarter net profit more than doubled, excluding gains from asset sales, helped by strong sales of beer and cost cutting.The company said it hoped for growth through the year, but was aware that rising prices of food and raw materials -- particularly malt and hops for its flagship beer business -- would put pressure on the bottom line."Food poses a downside risk for San Miguel," said an analyst from a foreign brokerage house, who asked not to be named, regarding 2008 prospects. "Almost every segment of its food business would be subject to price and cost pressures."San Miguel, valued at around $3.6 billion, said January-March net income was 11 billion pesos ($257 million), including one-off gains from the sale of assets in Australia, more than four times its restated net income of 2.39 billion pesos a year earlier.Net profit was 4.1 billion pesos without the gains, it said, more than double its restated 1.57 billion pesos net profit excluding asset sales of a year ago.San Miguel also announced its 2007 full-year results on Thursday, delayed because of an audit at one of its subsidiaries.Net profit dropped 16 percent to 8.63 billion pesos, missing forecasts for 11.39 billion pesos, according to Reuters Estimates.Analysts expect San Miguel, which makes Southeast Asia's oldest beer brand, to post 2008 net income of 12.19 billion pesos.BEERFirst-quarter sales climbed 11 percent and operating income jumped 40 percent as domestic beer sales increased 18 percent and hard liquor sales rose 14 percent.The company's domestic beer business in the first quarter benefited from rising consumption by young urban professionals and the resumption of sales in previously slow markets in the provinces, analysts said.San Miguel Brewery , the group's cash cow that was spun off and listed earlier this week, recorded a 37 percent rise in net profit to 2.5 billion pesos.Shares in the brewing unit, which accounts for about 40 percent of parent company operating profit, rose 4.9 percent on Thursday, while the main share index <.PSI> gained 0.6 percent.San Miguel A shares , exclusive to locals, closed up 1.2 percent, while the B shares, open to all investors, ended flat. The B shares fell 19 percent in January-March amid uncertainty over the direction of the company's investments, but in line with the broader index.San Miguel said last year it would sell its core food and beverage businesses and venture into heavy industry, such as mining, power and infrastructure, to boost growth in a saturated home market where nine out of 10 beers sold are San Miguel brands.Sell-offs included a 65 percent stake in the local Coca Cola bottler to partner The Coca Cola Co . In Australia, Lion Nathan Ltd paid $301 million for brewer James Boag, and Japan's Kirin Holdings <2503.T>, which owns a fifth of San Miguel, bought dairy and juice producer National Foods for $1 billion.The deal with Lion Nathan, where San Miguel's partner Kirin owns about 46 percent, was completed in early January.Company President Ramon Ang said earlier this week the group would focus on the home market after global downturns soured its previous international forays, particularly National Foods.Ang said San Miguel remained open to new non-core business ventures domestically despite the group's failure to win government auctions for power assets, including a 25-year license to operate the national power grid."We will buy new businesses and give the shareholders of San Miguel the best return. We will not overpay for anything," Ang said referring to previous bids for state power assets.New investments should deliver at least 15 percent return on equity, he added, but he did not identify which sector the group was more keen on investing.($1=42.8 pesos)
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