Message to Stockholders
Our business is
nation-building
Creating value, driving economic growth, and uplifting Filipinos define us as a company.
Fellow shareholders,
For nearly two decades, San Miguel has been linked to major development projects. Firm in our belief that the longterm growth we aspire for can only be achieved by aligning our strategy to nation-building, we have continuously invested in businesses critical to growing key industries and uplifting the lives of more Filipinos.
In 2023, with our businesses able to take advantage of more stable economic conditions and resurgent demand, our financial performance proved the effectiveness of our long-held growth strategy. We delivered strong full-year profits of P44.7 billion, a 67% jump from the previous year, driven by significant volume growth across most of our major businesses. Our focus on achieving operational efficiencies resulted in a 24% increase in earnings before interest, taxes, depreciation, and amortization to P205.3 billion, and a 34% increase in consolidated operating income to P144.5 billion.
We’re very proud of these results and the work done by each member of our San Miguel family, whose commitment to our vision continues to make us a better company, year after year.
For the country, our efforts have resulted in the development of numerous landmark projects that improve everyday life and boost economic growth. For our company, these have translated to an unprecedented 93% growth in revenues from P747.7 billion in 2013 to P1.4 trillion in 2023, and the more than doubling of our total assets from P1.2 trillion in 2013 to P2.5 trillion as of end-2023.
Still, we understand that in these sometimes uncertain and fastchanging times, not everyone can readily appreciate the course we’ve taken: of prioritizing nationbuilding investments that are long-gestating, capital-intensive projects, both in our traditional and newer businesses, thereby deferring immediate returns. We’ve also directed significant resources to help solve issues such as hunger, lack of opportunity, marine pollution, flooding, among others—even if these seem to have no immediate or direct impact on our bottom line.
But San Miguel has never been motivated solely by profits, nor have we ever shied away from good opportunities just because the challenges seem big, or the tasks too difficult.
Value creation, at the core of everything we do
Everything we have done up to this point, aligns with our overarching strategy of continuous, long-term value creation.
We favor projects that provide us more room for growth and expansion over the long term. We also have a bias for businesses we can grow and improve, or extract efficiencies and synergies from.
This emphasis on long-term value creation has allowed us to build our strong portfolio of businesses and projects that today allow us to take on bigger, more transformative projects trained toward the future.
These new initiatives—from our sustainability blueprint to our major investments in airports, power facilities, and integrated manufacturing complexes—will sustain our value-creation cycle, and deliver even more benefits to Filipinos.
Major strides in sustainability
Sustainability, for us, is a major area for value creation. We are leading our businesses towards more sustainable practices to maximize efficient operations, secure and protect resources we need for the long term, and open up more opportunities in sustainable projects and investments.
We’ve made a great effort to unify our diverse operations under one sustainability framework. As we worked to align each business towards our four major sustainability goals, 2023 became our most pivotal year yet in the economic, environmental, social, and governance (EESG) sphere.
In May, we became a signatory to the United Nations Global Compact, highlighting our commitment to important human rights, labor, environment, and anti-corruption principles. Shortly after, in July, our Board of Directors established the Sustainability Board Committee, to oversee and guide the company’s sustainability journey.
Members of our Board and your Management then undertook training sessions on sustainability to enhance their capability to lead our company through this period of significant culture and systems change.
We also spent time developing, together with our businesses, our SMC-wide decarbonization roadmap, which your Management approved in 2023. This roadmap firmly established sustainability’s critical role in our organization by outlining our short-, medium-, and long-term plans to achieve our net zero emissions target by 2050. Following the recasting of our San Miguel Group vision and core purpose (VCP), and the rollout of our new sustainability framework and targets in early 2023, each of our businesses underwent a similar process to draft their own VCP and sustainability statements. This reflects how our emphasis on EESG principles has been widely accepted and integrated across the San Miguel Group.
We’ve made a great effort to unify our diverse operations under one sustainability framework.
Synergies and efficiencies
We also continuously create value by improving our operations, developing business synergies, and maximizing efficiencies where possible. Vertical integration of critical processes, synergies between businesses, including the sharing of technologies, and effective supply chain management across our businesses, are major value creators.
Nowhere was this clearer than in 2023 when, despite reporting comparable revenues versus the previous year, our margins improved significantly—a direct result of cost efficiencies, economies of scale, and operational improvements made across many of our plants.
In our Beer business for example, significant improvements in logistics and investments in additional warehouses and silos, and its expanded product portfolio, have greatly increased efficiency. This helped San Miguel Brewery Inc. deliver a 16% growth in net income for the year.
We manage some of the most impactful and future-focused projects in the Philippines.
Vertical integration remains an important part of San Miguel Foods’ strategy. Last October 2023, in Hagonoy, Davao del Sur, we inaugurated the first of 12 mega-poultry facilities we plan to build nationwide. The megafarm is the largest such facility in the Philippines and completes our vertically integrated poultry production model in Mindanao.
This model aims to place dedicated port facilities, grain terminals, feed milling facilities, farms, dressing plants, and food processing facilities within short distance of one another, to optimize logistics, maximize cost efficiencies, and ensure product health, safety, and freshness.
Our Cement business is another area where we create significant value through synergies and economies of scale. In 2023, we fully integrated Eagle Cement Corporation into our Cement portfolio, which also includes Northern Cement Corporation and Southern Concrete Industries Inc. As such, we now have a solid presence in this important sector that is critical to economic and national development. Our Cement business also affords us tremendous volume benefits, especially in building and maintaining our infrastructure projects.
Nation-building secures our future
But the most recognizable value-creating projects in our portfolio today are our large-scale infrastructure developments. These create the greatest value for our company and, more importantly, our country.
Today we manage some of the most impactful and futurefocused projects in the Philippines. Last March 2023, we launched our 1,000-megawatt-hour nationwide Battery Energy Storage Systems (BESS) project in official ceremonies in Limay, Bataan.
BESS is an important part of our long-term decarbonization roadmap. As the country continues to lessen its dependence on coal, new investments in transition technologies such as natural gas and battery storage ensure that the energy transition will not negatively impact ordinary consumers, or derail the country’s economic growth. Ramping up our renewable energy capacities is also part of the plan, and BESS plays a key role in this transition.
Finally, our New Manila International Airport project in Bulacan, still a few years from completion, represents our biggest investment in the country to date. At the end of 2023, land development and ground improvement works for the project had reached 77% completion.
Key livelihood restoration programs and environmental initiatives, such as clearing clogged and polluted rivers, have been implemented. We also continued our work on the country’s first complete biodiversity offset area, creating functional habitats for migratory shorebirds, which is part of our commitment to the environment.
We’re also proud that the project has continued to meet the strict and exacting Performance Standards set by the International Finance Corporation on social and environmental impact management.
We utilize our fully developed businesses and projects to generate fresh funds for new investments and greater growth.
Recognizing its multiplier effect potential, Congress has pushed a bill to declare the municipalities surrounding the proposed airport as part of a larger Bulacan Airport City Special Economic Zone and Freeport.
This will effectively transform surrounding municipalities into economic growth centers that can attract domestic and international investors in high-growth industries.
The Ninoy Aquino International Airport (NAIA) rehabilitation, operation, and maintenance project, officially awarded to the New NAIA Infra Corp., of which we are a part of, in March 2024, is another example of a nationbuilding initiative poised to create significant value for the company and the country. Indispensable to economic growth, it is also now a vital cog to our long-term growth strategy, adding value to our infrastructure network.
Value, realized
For value creation to be sustainable, it must also turn to value realization. We realize value first and foremost through the financial performance of our businesses. Our consistently stronger performance year after year, highlighted by our highest profits yet in 2023, means we’re already realizing significant value from our investments.
We also continue to optimize our assets and our returns. We consistently review our portfolio and make sure the right investments are made in the right channels. With this, we see where value can be realized and recycled in our portfolio.
We also realize value when, at opportune times, we utilize our fully developed businesses and projects to generate fresh funds for new investments and greater growth.
One clear example is our proposed partnership with Meralco PowerGen Corporation (MGen) and Aboitiz Power Corporation (Aboitiz Power) on the Ilijan natural gas facilities—namely, the 1,278 MW Ilijan power plant, and the new 1,320 MW combined cycle power plant set to start operation by the end of 2024. This landmark agreement will launch the country’s first integrated liquified natural gas facility in Batangas. With MGen and Aboitiz Power, through Chromite Gas Holdings, Inc., jointly taking a total 67% of the Ilijan facilities and with San Miguel Global Power retaining a 33% stake, this deal allows us to unlock significant value from this vital asset while maintaining a presence in the LNG sector.
Our portfolio includes many other projects in the early and advanced stages of completion. The railway component of MRT-7, was at about 69% completion as of end of 2023. We have begun hiring and training personnel—young graduates of engineering and railway management courses, many of whom we have sent to South Korea to train with our partner, Korea Railroad Corporation.
The South Luzon Expressway Toll Road 4 (SLEX-TR4) project is progressing well. We continue to build and mobilize resources while working with the government on right-of-way acquisition.
Within the next three years, we will see the operationalization of many of our ongoing and upcoming projects, which will enable us to begin realizing value from these investments. Given this, the next few years will continue to be a period of investment for us, where execution is key, and optimization is critical.
San Miguel Corporation, a company steeped in history, is today truly ready for the future.
Culture drives success
Given the breadth and diversity of our operations and projects, we know that arriving at a common purpose and understanding of why we do what we do can be a challenge even for our employees.
In 2023, we also chalked significant wins on another equally important business front: our company culture. With the redrafting of our Group vision, core purpose, and the establishment of our sustainability framework, who we are today as a company, our goals, and the mindset that will drive how we will achieve our vision, are clearer than ever.
Our social impact projects—the opening of our Better World Smokey Mountain learning and livelihood training center, completion of our Pasig River rehabilitation project, and expansion of our river cleanup advocacy to Central and Southern Luzon—are just some of the ways we bring our vision to life. In this business report’s partner sustainability report, we go into greater detail on these projects and our larger EESG agendas.
With our sense of purpose renewed, our businesses performing at their best, and with our next-generation projects now lined up, San Miguel Corporation, a company steeped in history, is today truly ready for the future.