URC net income drops by 21.2% in 1st 9 months of 2017

MANILA, Philippines – Despite stronger sales, Gokongwei-led food manufacturer Universal Robina Corporation (URC) saw its net income drop by 21.2% in the 1st 9 months of the year compared to its performance in the same period last year.

In a disclosure to the Philippine Stock Exchange (PSE) on Tuesday, November 7, URC reported a net income of P8.408 billion for the January to September period, down from P10.66 billion in the same period last year.

For the 3rd quarter of 2017 alone, URC reported a net income of P2.02 billion, also down from the P3.26 billion in the same quarter in 2016.

The firm attributed the year-to-date decline in net income to "lower unrealized net forex gains and the lower market valuation gain on financial assets at fair value through profit or loss."

URC's net sales hit P92.415 billion, up 13.1% for the 1st 9 months of the year compared to the same period in 2016, due to strong performances of core snacking and joint ventures (JVs) in Branded Consumer Foods (BCF) Philippines, BCF Thailand, Farms and Sugar & Renewables, along with sales coming from Snack Brands Australia (SBA).

URC noted that BCF Philippines, including the packaging division, was flat, while BCF International grew by 38.9%.

Revenue from the Non-Branded Consumer Foods Group (Non-BCF) which includes Agro-Industrial Group (AIG) and Commodity Foods Group (CFG) increased by 16.8%.

Weak profitability

URC, however, said "profitability remained weak as the company faced a decline in volumes and a change in mix particularly on the coffee category of BCF Philippines, a slower than expected recovery in Vietnam, and an overall unfavorable forex and input cost inflation."

Operating income was down 7.4% year-on-year to P10.767 billion, while core earnings before tax registered also dropped 13.3% to P9.735 billion, versus last year.

This was due to "higher net finance costs from the additional long-term debt interest expense from the loan used for SBA's acquisition as well as the continued servicing of the onshore debt in New Zealand."

URC also had to deal with a "higher share of equitized losses from both the consolidation of the new JVs with Vitasoy, and the continued heavy investments in advertising & promotions and distribution for the joint ventures with Calbee and Danone."

The firm also noted that it was in a net debt position of P28.206 billion due to its long-term debts in Australia and New Zealand.

But URC pointed out that its earnings before interest, tax, depreciation, and amortization (EBITDA) stood at P15.272 billion, with a cash position of P11.610 billion.

The firm's major cash outflows for the period were capital expenditures, dividends payment, and working capital which amounted to P5.443 billion, P7.189 billion, and P3.149 billion, respectively. – Rappler.com