Business

Alaska Milk Nets PhP1.1B in 2011

Makati–(PHStocks)–Sales volume across Alaska Milk Corp.‘s (PSE: AMC) line of milk products staged a strong recovery as various consumer and trade initiatives were carried out to drive consumption during a seasonally strong fourth quarter. Revenues for the quarter ended 13% higher at PhP4.049 billion from PhP3.591 billion in the same period last year and faster than the 2% revenue growth posted in 3Q11.

Sales volume of the Company’s portfolio of liquid canned milk products (evaporated milk and sweetened condensed milk) grew at double-digit rates even as the market contracted amidst a slowing economy. In-store merchandising and display initiatives reinforced Alaska Milk’s dominance in the liquid canned milk category, providing higher level of awareness and consumer pull across all brands. In addition, incremental export sales of liquid canned milk in 4Q11 lifted sales volume higher.

Sales volume and market share of Alaska Powdered Milk Drink, on the other hand, expanded on the back of continuing promotional efforts and brand-building initiatives, notwithstanding increased market competition. The accompanying advertising and media support for the brand as well as trade programs translated in brisk sales.

Sales volume of the UHT ready-to-drink line (flavored milk, yoghurt drink and UHTprocessed fresh milk) and ready-to-use product (Alaska Crema All-Purpose Cream) sustained its growth trajectory on robust offtake, posting strong double-digit growth rates. Market share of Alaska Crema expanded to its highest in December 2011, solidifying its position as the second leading all-purpose cream brand in the market.

The Company’s non-dairy coffee creamer business, Alaska Krem-Top, likewise remained brisk amidst continuing efforts to expand the brand’s consumer base. Increased levels of product awareness, driven by extensive trade and consumer promotions supported by media campaign, translated to market share gains for Alaska Krem-Top making it the number two brand in the market.

With the strong rebound in sales volume in 4Q11, revenue shortfall for 2011 narrowed down to 3% at PhP11.802 billion from PhP12.163 billion in 2010.

Notwithstanding the 13% revenue growth, operating income for the quarter grew at a slower pace of 1%, at PhP516 million from PhP511 million a year ago, brought about by higher raw material costs despite cost containment programs. Operating margin, on the other hand, dropped to 12.7% in 4Q11 from 14.2% in the same period last year.

Cost of sales grew 22% to PhP2.951 billion in 4Q11 from PhP2.412 billion a year ago as cost of skimmed milk powder, sugar and vegetable oil rose substantially from their year-ago levels. Operating expenses, however, dropped 13% to PhP582 million in 4Q11 primarily due to the non-recurrence of a one-time impairment loss recognized in 4Q10. In addition, prudent spending and the deferment of selected advertising and promotional activities attendant to reduced sales and profitability contributed to lower operating expenses.

Operating income for 2011 ended 32% lower at PhP1.247 billion from PhP1.828 billion a year ago, largely due to higher cost of production inputs. Cost of sales grew 12% to PhP8.471 billion from PhP7.589 billion a year ago. Operating expenses, however, went down by 8% to PhP2.084 billion on lower administrative expenses and non-recurrence of a one-time impairment loss. Operating margin for the year, on the other hand, narrowed to 10.6% from 19.1% in 2010.

After considering other income and corporate income tax, net income for the quarter stood at PhP432 million or 10.7% of net sales, 7% higher compared to net income of PhP405 million or 11.3% of net sales in the same period last year. This brought the full year net income for 2011 at PhP1.104 billion or 9.4% of net sales, down 39% from the year-ago record net income of PhP1.816 billion or 14.9% of net sales.

International prices of SMP softened slightly after a brief rally in 4Q11 with potential indications of further easing given ample dairy supply. At Fonterra’s February 1, 2012 online auction, SMP price dropped at an average 0.5% to $3,300 per metric ton. Demand for dairy products remained strong, especially from regions that are already short of milk, such as China and South East Asia. Supply, however, is expected to be abundant through early 2012 as a result of a strong milk production season.

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