LT Group boosts commitment to tobacco, banking sectors

MANILA, Philippines - The investment holding firm of tycoon Lucio Tan has strengthened its commitment in the tobacco and banking sectors.

In a disclosure, LT Group Inc. said its unit disposed an option to exit a tobacco joint venture while the conglomerate pledged its participation in the P15-billion fundraising of Philippine National Bank (PNB).

The board of directors of LT Group and Fortune Tobacco Corp. (FTC) “have agreed to terminate the exit rights agreement entered into in 2010 between FTC and Philip Morris Philippines Manufacturing Inc. (PMPMI).”

FTC previously owned the right, at its sole option, to sell its $1.17-billion stake in PMFTC Inc. to joint venture partner PMPMI anytime from Feb. 25, 2015 through Feb. 24, 2018.

FTC merged with PMPMI to form 50-50 joint venture company PMFTC that then controlled roughly 90 percent of the local tobacco market through brands like Marlboro, Philip Morris, Hope, Fortune and Champion cigarettes.

The boards of FTC and LT Group also approved an amended dividend policy starting next year “that will substantially increase the benefits to its shareholders.”

FTC’s board allowed management to declare P9.625 billion worth of stock dividends.

For the banking sector, the conglomerate affirmed its plan to help increase the capitalization of PNB.

“The board of LT Group approved and confirmed the corporation’s firm commitment to subscribe to at least 97.8 million shares of PNB through the corporation’s holding companies pursuant to the bank’s planned stock rights offering,” LT Group said.

PNB is planning to generate P15 billion in fresh capital through a share sale to existing stockholders “to strengthen its capital base as the bank seeks to expand and deepen its lending capabilities.”

In January to September this year, net income of LT Group declined 17.6 percent to P6.85 billion from P8.3 billion a year ago. Total revenues slipped 1.23 percent to P43.38 billion from P43.92 billion in the same period last year.

In terms of operating units, PNB contributed P3.01 billion in net income. But PMFTC’s earnings sank 37.7 percent to P2.78 billion in the nine-month period from P4.47 billion as cigarette volume eased 20.7 percent in the third quarter, 16.5 percent in the second quarter and 42.5 percent in the first quarter.

“Due to the illicit trade that has allowed a competitor to sell cigarettes at an economically unsustainable price of P1 per stick, and the down-trading of consumers, the share of the super-low priced segment has increased to 44 percent of the overall market in May to July from only 15 percent in 2012,” LT Group said.