March 28, 2014

San Miguel core earnings up 42% YoY

In a disclosure, San Miguel Corp (SMC)reported earnings of P53.6b, up 210% YoY on P40b in gains from the sale of its stake in Meralco. Net of this and P15.6b in forex losses, core attributable net income was 42% higher P38.1b. Revenues grew 7% to P748b,mainly on growth in subsidiary Petron's revenues, with core food and liquoroperations staying flat. SMC Global Power sales of P74b were lower on depressed WESM prices.

Our take: The poor performance of SMC's core liquor operations was widely expected as a result of the higher excise tax regime. Its power segment likewise disappointed in 4Q13 as the ERC mandated a rollback in WESM prices. SMC is positioning in the PPP/infrastructure space as its next growth area,a capital-intensive area which may require additional financing. – WealthSec