URC Q2 profit falls amid challenges in PHL, Vietnam

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UNIVERSAL ROBINA Corp. (URC) on Monday reported a 23% drop in net income attributable to the parent in the second quarter, amid continued challenges in its branded consumer foods business in the Philippines and Vietnam.

A regulatory filing showed the Gokongwei-led food company’s attributable net income fell to P2.88 billion in the April to June period, from P3.8 billion during the same period a year ago. This brought its first-half profit to P6.38 billion, 14% lower than the P7.4 billion a year ago.

For the second quarter, URC’s net sales rose 12% to P30.1 billion, but outpaced by the 14% increase in cost of sales to P20.7 billion.

First-half net sales jumped 10% to P60.79 billion, which URC attributed to “strong performances of branded consumer foods Thailand, farms and sugar & renewables, and the additional sales of Snack Brands Australia (SBA).” Cost of sales during the January to June period also went up 11% to P41.53 billion. due to higher input costs.

URC reported six-month sales of branded consumer foods in the Philippines, excluding packaging, was flat at P29.311 billion, “as favorable results of snackfoods and joint ventures were offset by the double-digit decline of beverages.”

Sales of snack foods, which include Piattos, Chippy, Cloud 9 and Presto, jumped 9.4% in the January to June period, while its joint venture businesses, which include Nissin and Danone, grew 22%.

However, URC’s beverage business slipped 14.6% “due to the intense competition in coffee, high first half comparables in ready-to-drink tea from the effect of election spending last year and the temporary supply issues in water.”

International sales of branded consumer foods increased 27% in the first half, driven by robust performance of Thailand and Malaysia.

URC reported a 6.3% decline in sales in Indonesia on weaker growth of the fast-moving consumer goods segment and less selling days this year due to the Lebaran holiday in June.

Its business in Vietnam plunged 48%, although URC said there are signs of recovery. “The business has already reached close to half of its average monthly sales in 2015 as a result of higher investments in advertising & promotions for beverages and in better distribution for snackfoods,” the company said.

Monthly sales in Vietnam hit a high of $20-$25 million before a recall of two beverage brands C2 and Rong Do for alleged excessive lead content sent sales plunging to a low of $2 million.

This year, URC relaunched C2 and Rong Do “under a passion for quality” brand-building exercise, with a fresh look and packaging. The company has secured certifications from independent organizations, assuring that its factories adopt the highest standards in food safety manufacturing.

On the other hand, URC’s non-branded consumer foods group recorded an 11% uptick in sales to P10.84 billion, on the back of its farms and sugar and renewables businesses.

URC’s operating income slipped 11% to P3.58 billion in the second April to June period, bringing the first-half figure to P7.61 billion, 8% lower year on year.

“(First-half) Core earnings before tax registered at P7.095 billion, also a 7.6% decrease driven by higher net finance cost as we continue to pay interests on our long-term onshore debts used for Griffin’s and SBA’s acquisitions; and higher share of equitized losses on our joint ventures as we consolidate our newest joint venture with Vitasoy and continue our heavy investments on advertising & promotions and distribution for Danone,” URC said.

Shares in URC slid 0.53% or 80 centavos to P151.50 apiece on Monday.