Higher milk consumption, lower expenses drive Alaska earnings

MANILA, Philippines - Higher sales and lower cost of raw and packaging materials bolstered Uytengsu-led Alaska Milk Corp.’s quarterly earnings. The listed milk company posted a 129.07 percent increase in net income to P197 million during the first three months from P86 million the same period last year. Wilfred Steven Uytengsu, Jr., Alaska president and chief operating officer, said first quarter is encouraging but admitted the year would be “challenging" as the full extent of the global financial crisis unfolds. “Because of the strategies from last year, we are beginning to recognize the fruits of our labor and application of our strategy. It is a considerable improvement in our bottomline," he said after the annual stockholders’ meeting in Makati. Revenues almost grew by a quarter to P2.66 billion from P2.14 billion with its core milk businesses staying ahead of the competition. “Following a strong fourth quarter performance, combined sales volume of the liquid canned milk business surged going into the seasonally strong summer season, posting high double-digit growth rates versus the same period last year," Alaska said in its quarterly update. “The pricing strategy in the second half of 2008 encouraged consumption especially among low-income household groups. Trade replenishment due to low stock levels attendant to strong shelf off-take, pushed sales volume of sweetened condensed milk/condensed creamers higher year-o-year," it added. Amid increases in production cost inputs in 2008, Alaska decided not to increase selling prodices of its products during the year since Filipino consumers were already saddled by high inflation. It even implemented a price roll-back for some of its products. “We believe in the long-run, encouraging continuous consumption of milk will be beneficial not only to the consumer but also for the milk industry where we play a major role," Uytengsu said. “The fact we did not raise prices is a strong sign of our commitment to our consumers in keeping prices affordable. The pricing strategy we have embarked last year has carried on to this year. Patronage of our products has been good," he added. Alaska’s operating income rose 64 percent during the first quarter to P243 million from P140 million as cost of sales and operating expenses decelerated to P2.4 billion from P2 billion due to easing costs of raw and packaging materials. Uytengsu said the company expects to recover this year after a 56.37 percent decline in profits in 2008 at P291 million from P667 million. But financial performance will be dependent on skimmed milk prices and foreign exchange rate. “Although our results were less than desirable, we believe that our efforts and patience will pay off in the future. While the company maintains a generally cautious position given the business environment, we are confident we will sustain our competitiveness in the industry," he told stockholders. During the first quarter, skimmed milk powder prices in the international market were firm with demand slowly picking up as buyers return to the marketplace although supply for the near term is still adequate to cover milk powder commitments. Prices are currently trading between $1,800 per metric ton and $2,200 per metric ton. Utengsu said the company will continue to invest in innovation, build new revenue streams and continuous improvement. Alaska offers a wide range of milk products beyond the traditional canned evaporated filled and sweetened condensed filled milk, powdered filled milk and plain and chocolate-flavored UHT milk in Tetra briks. In line with its strategy to broaden its revenue based through a portfolio of leading brands, Alaska also owns rights to exclusively distribute international products in the Philippines such as Kellogg's line of ready-to-eat cereals, and liquid milk products using the trade marks "Carnation" and "Milkmaid." Uytengsu said Alaska is in the process of looking at alternatives and new product development as another means to create revenue stream. “We are conducting due diligence. Our Kellogg’s business is a strategic alliance. Cereal needs milk. Milk will be our first priority but we will entertain products that will piggyback on our point distribution network," he added. - Ruby Anne M. Rubio, GMANews.TV