Vitarich back in the red after 2 good years

After two profitable years, poultry and feeds company Vitarich Corp. again suffered losses as its fastfood subsidiaries remained a thorn in its operations.

In 2001, the Sarmiento-controlled firm posted net losses of P115.861 million, a sharp reversal from the P28.564 million earnings in 2000, mainly on the back of the P119.745 million in accrued losses from its equity investments in its subsidiaries. Minus the equity losses, Vitarich would have earned a mere P3.88 million during the period.

Vitarich’s subsidiaries are Philippine’s Favorite Chicken, the local franchisor of the US fastfood chain Texas Chicken, marketing firm Gromax, Inc., which is engaged in the sale and distribution of animal health products; and Breeder Master Inc., which is into farm and commercial breeding.

Last year, the Vitarich group sued their US-based franchisor for damages arising from the latter’s attempt to prematurely terminate their development and franchise agreements for Texas Chicken and Popeye’s.

Texas Manok ATBP Inc., Popeye’s Manok ATBP Inc. and PFCI jointly filed the complaint with the Regional Trial Court of Pasig against AFC Enterprises Inc., four of its officers and some still unidentified persons for damages amounting to P462.7 million and the refund of at least $2.2 million of overpaid franchise fees.

Texas Manok and Popeye’s Manok are affiliates of Vitarich while PFCI is a wholly-owned subsidiary of the listed poultry firm. AFC, meanwhile, is the American franchisor which granted a franchise to Texas and Popeye’s to develop and operate the Texas Chicken and Popeye’s Chicken fastfood restaurants, respectively, in the Philippines.

PFCI alone invested at least P700 million for the infrastructure and support facilities to supply Texas Manok equipment and other goods to provide land, mall sites, buildings and other improvements for the Texas Chicken chain, which has been on the auction block for about two years now.

As a debt restructuring company, Vitarich, however, was able to secure the formal nod of its creditor banks for the accelerated payment and restructuring of its P1.155 billion convertible notes into a term loan and revolving credit line.

The restructuring will involve P1.005 billion in convertible notes plus the accrued interest of P150 million as of Sept. 30, 2000. Based on the agreement, P655 million (inclusive of the P150-million interest) will be converted into a seven-year term loan with interest rate computed on a graduated basis while the remaining P500 million will be converted into a revolving credit line with interest based on the 91-day Treasury Bill.

The 10-year convertible notes form part of Vitarich’s P3.176-billion total debt load, which include another P1.668 billion in seven-year term loans and P503 million in revolving credit line.

The company derives most of its revenues from poultry, which contributes 63 percent to gross sales with the rest accounted for by the feeds business, 30 percent and farms, seven percent.