San Miguel Net Beats Estimates After Energy Acquisitions

San Miguel Corp. (SMC), the Philippinesbiggest company, reported 2011 profit that beat analyst estimates amid acquisitions in energy and infrastructure.

Net income declined 13 percent to 17.5 billion pesos ($407 million), the company said yesterday. That exceeded the 16.2 billion-peso average of five analysts’ estimates compiled by Bloomberg.

The brewer founded in 1890 expanded into businesses such as power retailing, oil refining and infrastructure to boost its profitability by more than half and reduced reliance on beverage operations. Refiner Petron Corp., whose control San Miguel bought in 2010, will become a flagship and the single biggest source of revenue in 2011, San Miguel President Ramon Ang said last year.

Sales more than doubled to 536 billion pesos last year, from 246 billion pesos, helped by contributions from new businesses including Petron (PCOR) and SMC Global Power Holdings Corp., the company said yesterday. That missed the 563 billion-peso average of five analysts’ estimates compiled by Bloomberg.

Operating profit, or sales minus the cost of goods sold and administrative expenses, rose 62 percent to 56 billion pesos, San Miguel said. Net income excluding one-time gains and charges climbed 36 percent to 17.3 billion pesos.

Esso Malaysia, Thailand

“It will take time before we see a normal profit picture for San Miguel,” said Astro del Castillo, managing director at Manila-based First Grade Finance Inc. “The company has made lots of acquisitions that will take some time to be reflected in the bottom line.”

Assets were 890.5 billion pesos in 2011 and the company had 129 billion pesos in cash, San Miguel said in a presentation yesterday.

Net income at Petron, the Philippines’ biggest oil company, rose 7.6 percent to 8.5 billion pesos in 2011, and revenue gained 20 percent to 274 billion pesos, it said March 7.

Petron plans to invest 8 billion pesos to double the capacity of a 70-megawatt plant that runs the refiner, President Eric Recto told reporters yesterday. The company, which will complete the purchase of 65 percent of Esso Malaysia Bhd this month, is open to buying into Esso Thailand Pcl if an “opportunity comes,” Recto said.

Power, Telecommunications

San Miguel also owns part of Manila Electric Co. (MER), the Philippines’ largest power retailer, and stakes in telecommunications and mining operations. Manila Electric’s 2011 net income rose 37 percent to 13.2 billion pesos and revenue increased 6.6 percent to 257 billion pesos, the company said in presentation materials posted on its website last month.

San Miguel expanded its operating margin, the percentage of revenue left after taking away the cost of sales and general expenses, to 14.1 percent in 2010, from 8.8 percent in 2008, after acquiring diversifying its operations, according to data compiled by Bloomberg.

The company and Indonesia’s Citra Group agreed to buy controlling stakes in operators of a toll road linking Manila to provinces in the south of Luzon. Last August, San Miguel agreed to buy three Exxon Mobil Corp. units in Malaysia for $610 million in its first purchase of overseas oil assets.

San Miguel is in discussions to buy a stake in Philippine Airlines Inc., President Ang said last month. The carrier expects to get $500 million for the 49 percent stake that San Miguel offered to buy, people familiar said last month.

San Miguel has announced or completed at least 17 acquisitions with a combined value of $1.9 billion in the past three years, according to data on the Bloomberg. The company plans to invest more than $4 billion in a bid to almost double revenue to 1 trillion pesos by 2016, Ang said in February last year.

To contact the reporter on this story: Clarissa Batino in Manila at cbatino@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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