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Diversification to secure SMC’s future - spur economic growth

June 01, 2010

San Miguel Corporation (SMC) chairman and chief executive officer Eduardo Cojuangco Jr. expressed confidence that the company’s strategy of diversifying into non-allied industries will help secure its future and spur economic growth.

SMC, which reported 2009 net sales of P174.2 billion, up 4% from the previous year; operating income of P19.7 billion, up 33%, and net income of P57.8 billion, a 199% improvement, is transforming into a powerhouse conglomerate with interests in essential industries as power, oil, telecommunications, infrastructure, banking, and mining.

“From both a financial and portfolio standpoint, your company is stronger than at any time in its 120-year history,” Cojuangco told stockholders at their annual meeting. “Having spent the last decade or so transforming ourselves into a more efficient and profitable company, our growth plans are as aggressive as ever,” he said.

The company, he said, is also in a unique position to help the country as its new businesses will allow it to take part in economic development “in a meaningful way.”

Describing San Miguel as “virtually unrecognizable” from what it was five or six years ago, Cojuangco outlined its prospects in its new growth areas.

Power, oil, infrastructure, coal mining

“Self sufficiency in power is critical to the national economy, and we are determined to play an active role particularly now that the combination of private sector efficiencies and an open market, can bring prices down for consumers and industry in the foreseeable future.”

SMC currently has four power-generating plants in its portfolio—Limay, Sual, San Roque, and Ilijan. The first three plants generated revenues of P11.4 billion for the first three quarters alone.

Petron Corp., its fuels business and one of the dominant local players, meanwhile continues to have “excellent prospects,” Cojuangco said.

“Petron (is) a highly attractive business, with an ROE (return on equity) far outstripping that of our traditional businesses… We will be exercising our option on the remaining shares before year-end.”

Meanwhile, SMC’s infrastructure projects now include the upgrade of Caticlan airport, the construction of the North Luzon East Expressway, and the Metro Rail Transport-Line 7. All are Build-Operate-Transfer (BOT) projects that offer long-term benefits to the company.

SMC also recently gained a foothold in the coal mining industry through new acquisitions Daguma Agro Minerals Inc., Bonanza Energy Resources, Inc. and Sultan Energy Mining and Development Corp.

It is estimated that the Philippines uses more than 12 million tons of coal annually, most of which is used for energy generation. This total is expected to rise by 2014. “So this is a good business to be in,” he said.


Cojuangco also stressed that the company will be extracting synergies between its core businesses and its new acquisitions.

“Petron is in the position to give our plants access to fuel at very competitive terms. Petron’s over 1,500 service stations already carry our food and beverage products,” he said. “Related to this, we have also located booths for our property developments and WiMax service in these stations and are working on deploying Bank of Commerce ATMs to widen our network of cash machines.”

“Caticlan airport and our other infrastructure projects are also potential retail points. In our banking business, Bank of Commerce has provided credit line for buyers of our property projects and also service the financing needs of SMC’s employees, dealers, agents and wholesalers.”

SMC’s new coal mining ventures are also seen to complement its power generation businesses, particularly the Sual facility, a coal-fired power plant.