August 18, 2014

URC core net income up 21% in 9MFY14

In an investor’s briefing, Universal Robina Corp (URC) has announced 9MFY14 net income of P8.55b, up a mere 1% YoY. This was due to the huge one-time gain from the sale of its investment portfolio of almost P1b last year. Otherwise, core earnings for the period were up 21% YoY to P10.69b on sustained strength of its Branded Consumer Foods Group (BCFG). Overall BCFG net sales increased 20% to P57.6b while EBIT rose 50% to P8.2b. EBIT margins gained 270bps YoY and 30bps QoQ to 14.6% and is currently at an all-time high.

In particular, domestic BCFG sales continued to benefit from double-digit growth across all major product categories. Domestic net sales of the group grew 25% to P39.6b while EBIT rose 61% to P6.3b. The beverage category sustained its strong performance as the C2 RTD tea and Great Taste coffee products continued to gain market share from its competitors. International sales of the group were up 10% but EBIT improved 21%.

The non-BCFG segment sales declined 6% YoY but only because sugar sales declined 38%. The company traced the latter to the seasonal decline in demand and expects this to recover towards the end of its fiscal period. On the other hand, agro-industrial sales grew 11% but EBIT improved 44% mainly due to strong performance of its hogs business amid recovery in pork prices (and boosted EBIT by 106%).

Our take: URC’s core income came well ahead of expectations (equivalent to 92% of consensus forecast). The company also raised its EBIT guidance to P14b (from the earlier 20-25% growth target which would have implied a P12.8 EBIT goal vs. the P13.4b consensus estimates) given the strong growth momentum. We will review our numbers given the results and to take into account its consolidation of its newly acquired Griffins (pending more figures on the company) as well as the operations of its Biomass Ethanol project.– WealthSec