Universal Robina CorporationURC

Press Release "URC’S TOPLINE GREW BY 10% WHILE PROFITABILITY REMAINED CHALLENGED DUE TO MAJOR ISSUES IN BRANDED CONSUMER FOODS GROUP PHILIPPINES AND VIETNAM"

URC reached net sales of Php 60.795 billion, a 9.6% increase for the first six months of calendar year 2017 (beginning January 2017 and ending December 2017) driven by strong performances of Branded Consumer Foods (BCF) Thailand, Farms and Sugar & Renewables, and the additional sales of Snack Brands Australia (SBA). BCF Philippines including Packaging division sustained the same level of sales last year while BCF International grew by 27.4%. Sales of Non-Branded Consumer Foods Group which is composed of Agro-Industrial Group and Commodity Foods Group, were up by 10.6% with growth of 5.4% and 15.0%, respectively.

Operating income remained challenged posting Php 7.614 billion, a 7.9% drop due to a decline in volumes in BCF Philippines and additional investments in Vietnam to recover the business. Core earnings before tax registered at Php 7.095 billion, also a 7.6% decrease driven by higher net finance cost as we continue to pay interests on our long-term onshore debts used for Griffin’s and SBA’s acquisitions; and higher share of equitized losses on our joint ventures as we consolidate our newest joint venture with Vitasoy and continue our heavy investments on advertising & promotions and distribution for Danone.

Net income amounted to Php 6.386 billion, a decline of 13.7%, attributable to lower unrealized net forex gains.

EBITDA remained robust at Php 10.701 billion which led to a strong cash position of Php 10.493 billion. Major cash outflows for the period were capital expenditures, dividends payment and working capital which amounted to Php 3.255 billion, Php 7.041 billion and Php 4.170 billion, respectively.

URC was in a net debt position of Php 31.675 billion due to its long-term debt in Australia for the acquisition of Snack Brands Australia.

SALES PERFORMANCE PER BUSINESS

Branded Consumer Foods Group

Sales of BCF excluding Packaging reached Php 49.266 billion, a 9.2% growth.

BCF Philippines’ topline excluding Packaging was flat at Php 29.311 billion as favorable results of Snackfoods and Joint Ventures were offset by the double-digit decline of Beverages. Snackfoods, which includes Salty Snacks, Bakery, Candies and Chocolates, grew by 9.4% with category growth of 8.9%, 11.7%, 5.9% and 9.9%, respectively. Total Joint Ventures increased by 22.4% driven by Nissin and Danone. On the other hand, Beverages declined by 14.6% due to the intense competition in coffee, high first half comparables in RTD Tea from the effect of election spending last year and the temporary supply issues in Water.

BCF International sales registered at Php 19.954 billion, a 27.4% growth as a result of Thailand and Malaysia’s strong performance and incremental sales from SBA. In local currency terms, Thailand grew by 13.0% as a result of the double-digit growth of Snacks, Wafers, Confectionery and Exports. Malaysia sales increased by 3.2% with all of its categories growing. Conversely, Indonesia declined by 6.3% due to the weakening Fast-Moving Consumer Goods (FMCG) growth and less selling days this year given that the Lebaran holiday fell last June. Vietnam was down by 48.1% but has already been showing signs of recovery. The business has already reached close to half of its average monthly sales in 2015 as a result of higher investments in advertising & promotions for beverages and in better distribution for snackfoods. On our Oceania market, Griffin’s declined by 2.1% but showed improvement in New Zealand as volumes remained solid. The shift of selling branded bars through SBA has also resulted to better sales in Australia. SBA continues to outperform the salty snacks market in Australia with 9.3% growth vs the market’s 5.3% based on the latest scan data.

Non-Branded Consumer Foods Group

Sales amounted to Php 10.842 billion, a 10.6% increase driven by Farms and Sugar & Renewables (SURE).

(See continuation below under "Other Relevant Information")

Agro-Industrial Group (AIG)’s sales reached Php 4.791 billion, a 5.4% growth. Feeds was flat as higher average selling price was offset by lower sales volume. Farms, on the other hand, generated a 10.3% growth. Total hogs was up as higher average selling prices pushed up lower sales volumes for the period. Given our thrust to sell more value-added products to stabilize margins, we sold more Fresh meat vs live hogs. Fresh Meat’s growth was also supported by expansions of Hotel, Restaurant and Institution accounts and concessionaires.

Commodity Foods Group (CFG)’s topline posted Php 6.050 billion, up by 15.0%. SURE grew by 26.8% due to higher volumes of raw and refined sugar albeit the decline in sugar prices, and higher Distillery sales. However, Flour posted a decline of 6.5% driven by lower sales volume and average selling prices.