December 21, 2014

URC’s FY14 reported net income up 15% yoY

In a conference call yesterday, Universal Robina Corp (URC) announced FY15 (ending 30 Sep) net income of P11.6b, up 15% YoY. Taking out the impact of the extraordinary items, URC computed the core earnings growth at 25%. EBIT however grew 37% YoY to P14.1b and came on a 14% growth in net sales.

Branded consumer food (BCF) group not only maintained its double-digit sales growth (+18% YoY to P77.3b) but also showed a significant rise in margin to 14.3% (+290 bps YoY) on lower commodity input prices. This fuelled the 48% growth in EBIT to P11.1b. This has more than offset the 3% decline in non-BCF group sales to P15.1b which were weighed by the 15% drop in commodity foods on lower prices even as the agro-industrial segment posted an 11% hike in sales. The non-BCF group EBIT managed to grow 4.2% YoY

Our take: URC’s reported net income came within expectations but we take note of the positive momentum in its margins triggered by falling commodity input prices as well as the positive impact of declining oil prices to PET bottle packaging costs. While we anticipate URC to posts losses on its new JV initiatives owing to costs related to ramping up, the improvement in overall margins and possible contributions from its recent acquisition (Griffin) should help compensate for such initial jv losses. We will recast our numbers for URC pending more details in today’s analysts’ briefing. – WealthSec