July 24, 2014

RFM posts 1H14 net income of P427m

RFM Corp (RFM, Not Rated) disclosed that its 1H14 net income grew 10% to P427m as sales rose 5% to P5b. This implies 2Q14 earnings growth of 12% to P260m, compared to 8% growth registered in 1Q14. Management attributed the improvement to the double-digit growth of high-margin core businesses, specifically its ice cream and pasta lines, as well as better cost control. However, management also blamed congestion and supply chain disruption caused by the Manila truck ban for sales opportunity loss of 15% - 20%.

Our take: The 1H14 earnings figure make up 42% of consensus earnings for RFM. As 1H earnings typically account for 49% of full year totals, RFM is on track to make P869m this year, equivalent to just 86% of the P1.0b consensus figure. It remains to be seen whether the company can make up for this shortfall in 2H14 especially if it has to endure the impact of the truck ban assuming that the latter is not lifted.– WealthSec