SMC to post strong H1 results

San Miguel Corp. (SMC), after posting steady improvements in April and May, appears firmly on track in achieving substantially higher second quarter results, helping boost overall performance for the first semester.

An analyst from a reputable foreign house estimates second quarter profit from operations to be no less than P3.5 billion or 25 percent above last year. This will drive first semester earnings before income tax (EBIT) to around P6 billion, or 16 percent higher than the previous year despite the relatively slow first quarter.

Alex Pomento, head of research of CLSA Philippines, noted that the smooth integration of SMC’s recent acquisitions translated to very favorable results. Operating income rose 18 percent to P4.8 billion as of May pushed by the P1 billion and P1.22 billion operating profit generated in April and May, respectively. "The healthy increases in operating profit is due to San Miguel’s relentless initiatives which include growing volumes, maximizing operational efficiencies and optimizing resources group-wide after the string of acquisitions that included Coca-Cola Bottlers Philippines, Cosmos and Purefoods," the analyst noted.

Given the year to May EBITDA (earnings before interest, taxes, depreciation, amortization) growth of 21 percent to P7.8 billion, and the likely sustained growth in June, the analyst figures that SMC will report EBITDA of about P10 billion for the first half, some 26 percent higher than last year.

The acquisitions similarly allowed SMC to post healthy increases in revenues. Based on SMC’s disclosure, April sales amounted to P11.3 billion while May revenues reached P12.7 billion. CLSA believes that "the trending is highly favorable" and anticipates stronger results as demand peaks in June due to the tail-end of the summer season and school opening, which has historically been good for food and beverage consumption. Pomento expects consolidated sales for the first sememster to hit at least P65 billion, some 26 percent higher over last year.

With a reported net income of P625 million in May, SMC has started to overcome the short-term dilutive effects of recently purchased businesses. CLSA expects San Miguel to announce first half earnings of at least P3 billion, suggesting that SMC’s second quarter net profits reached P1.9 billion, 70 percent up versus what SMC made in the first quarter.