Universal Robina Corp. (PSE: URC) posted net sales for the first nine-months of calendar year 2018 of PhP95.5 billion, a 3% increase versus last year. Sales growth in the third quarter ending September decelerated to 1% from the 6% posted in the first half. Recovery in Branded Consumer Foods (BCF) Philippines and Vietnam growth were partly offset by weaker New Zealand trading and the shift in timing on sugar sales. Operating income showed good improvement in third quarter posting 5% growth driven by the impact of selling price increases in BCF Philippines, continuous recovery in Vietnam, and effective cost management. This helped improve nine months operating income to Php10.1 billion, a tapering decline of 6% versus last year compared to the 11% decline in the first half.
URC nine months net income amounted to PhP7 billion, a decline of 17% due to lower operating income and foreign exchange loss due to the weaker peso. URC’s financial position remains strong with ending cash balance of PhP14.6 billion and a net debt position of PhP27.3 billion due to the remaining debt associated with the Oceania acquisitions. Gearing remains low and manageable at 0.51.
Sales Performance per Business
Branded Consumer Foods (BCF): Sales of domestic and international branded consumer food reached PhP25.8 billion in the third quarter, which is flat versus last year. This resulted to a 2% growth in the first nine months versus last year, amounting to PhP76.2 billion. Domestic revenues comprised PhP14.7 billion increased by 2% in the third quarter while nine-months showed a decline of 1% amounting to PhP43.4 billion. Growth in the third quarter was driven by snackfoods and noodles while decline for the quarter was seen in beverages. On a positive note, coffee exhibited slower decline in the third quarter versus last year and absolute sales has stabilized month-on-month. Internationally, third quarter was slightly down with a decline of 2% as Vietnam recovery and the contributions of Australia were offset by the weaker performance of Thailand exports and slower recovery of New Zealand from price increases that improved margins. This led to a 5% growth in international in the first nine-months versus last year amounting to PhP32.7 billion.
Agro-Industrial & Commodities (AIC) continue to be a relevant contributor to total URC. Sales amounted to PhP18.2 billion, a 10% increase versus last year, driven by higher volumes in Flour and Feeds as well as higher selling prices of Hogs. Agro-Industrial grew by 14%, Flour posted 13% growth, while Sugar & Renewable (SURE) achieved a 5% topline growth. Operating income from AIC remains robust with nine-months contribution of PhP3.5 billion mainly driven by our commodity foods businesses, flour and sugar.
Building the Path to Sustainable Growth
Irwin Lee, URC President and CEO, said, “The environment remains to be very challenging with macro-economic pressures especially in the Philippines. The weaker peso and inflation continue to affect our conversion and operating costs thus margins are continuously affected. We will be proactive and look for opportunities to manage our portfolio better and implement plans and programs to mitigate the effects to our topline and bottomline in the near term.”
For the balance of the year, URC will continue to fast track transformation programs in the business that will have a longer term impact like improvements in distribution and supply chain capabilities. These programs will enable the organization to execute better starting in 2019 with the objective of bringing back the business to growth in a more sustainable manner.