Thursday, 19 February 2009

Philippines' SMC sets P10-B food group expansion

K. J. R. Liu and Reuters
BusinessWorld Online
http://www.bworldonline.com/BW021909/content.php?id=002

DIVERSIFYING food and beverage giant San Miguel Corp. (SMC) has earmarked nearly P10 billion for the expansion of its food group program.

In a presentation to President Gloria M. Arroyo yesterday, San Miguel President and Chief Operating Officer Ramon S. Ang enumerated the key components of this P9.93-billion expansion plan as follows:

  • P4.89 billion for the expansion of the Monterey Hog Farm;
  • P3.37 billion for the expansion of the Magnolia Poultry Farm;
  • P840 million for the B-Meg Animal Feeds Progam;
  • P231 million for the Purefoods-Hormel Corp. Nuggets line; and
  • 215 million for the new Magnolia Ice Cream Plant.

Ms. Arroyo visited the company’s head office in Pasig City after delivering a speech at the opening of a conference of city mayors in Ortigas Complex.

Mr. Ang explained that the company would no longer outsource production of Magnolia ice cream and, instead, will build its own plant in Sta. Rosa Laguna.

Mr. Ang said San Miguel’s expansion program would generate about 10,000 direct and 50,000 indirect jobs.

Mr. Ang’s presentation to the President also showed that the joint venture between San Miguel Kuok Food Security, Inc. and the Department of Environment and Natural Resources, signed on Nov. 10 last year, to develop an agroforestry plantation in Davao del Norte under the department’s Upland Agroforestry Project could start establishing the plantation by this September.

The project covers a total of 18,494.75 hectares in four municipalities, namely: 7,865.23 hectares in Talaingod, 5,860.49 hectares in San Isidro, 3,246.5 hectares in Kapalong and 1,522.52 hectares in New Corella.

The company’s "Feeding our Future Project," however, is considering a total of 3.8 million hectares nationwide for evaluation and possible development.

Bond issue

Mr. Ang later told reporters that San Miguel Brewery, Inc. will launch a peso-denominated bond issue within this month.

San Miguel said last month that it targets to raise as much as P38.8 billion from the debt issue. In a disclosure then, San Miguel Corp.’s beer unit said it would use the proceeds of the bond offer — expected to be the country’s biggest ever domestic corporate bond issue — to pay for the beer brands, intellectual property rights and real estate from its parent. San Miguel Brewery told the exchange the plan to buy the beer assets from its parent was a strategic initiative to secure a competitive advantage since it would be able to maximize the use of existing brands and develop its own brands that will cater to varied consumer needs.

Mr. Ang explained to reporters that the company would not proceed with a planned dollar bond if it managed to raise the targeted amount via this domestic issue.

Since it first disclosed its plan to diversify two years ago, San Miguel has been acquiring nonfood businesses, including 27% of Manila Electric Co. for P30 billion in October last year.

It is also in the process of buying majority of Petron Corp. for P32.2 billion, and is planning a local venture with Qatar Telecom on wireless broadband and mobile communications.

San Miguel, through San Miguel Bulk Water Co., Inc. is also seeking to partner with the government for the development of the Laiban dam project in Tanay, Rizal, estimated at P48 billion.

In his presentation to Ms. Arroyo yesterday, Mr. Ang outlined immediate thrusts of its diversifying interests as: to provide efficient, cost-effective electricity services; to provide broadband and high-speed Internet services via existing power lines; to provide reliable water supply in the greater Manila area; and to provide affordable petroleum products.

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