Tanduay incurs loss on higher expenses

REPORT FROM BUSINESSWORLD HIGHER COSTS and operating expenses weighed on Lucio Tan-led rhum manufacturer Tanduay Holdings, Inc., documents submitted to the Securities and Exchange Commission showed. In its unaudited financial statements, Tanduay Holdings said it had posted a net loss of P171.08 million for the nine months ending in September, from a P597.94-million net income in the same period last year. For the third quarter alone, the company posted a 98.01% fall in net income P9.74 million from P489.96 million. Cost of sales The company attributed its lackluster performance to higher cost of sales and operating expenses and accounting treatment of the sale of Unimark Holdings, Inc.’s nonperforming loans. Tanduay Holdings, the parent company of Tanduay Distillers, is 97.08% owned by Mr. Tan’s Tangent Holdings Corp. "Higher advertising and promotional expenses and higher communication, travel and transportation and utilities expense due to the construction of Cagayan de Oro plant also pushed net income downwards," the company said. Liquor unit Tanduay Distillers, Inc. inaugurated the plant on Friday. For the third quarter, net sales weakened by 11.71% to P1.96 billion from P2.22 billion. For the nine-month period, however, it improved slightly to P5.63 billion from P5.28 billion. "Tanduay Distillers reported a sales volume increase of 11% primarily attributable to improved farm income as the agricultural sector posted a 4.3% growth for the three quarters of the year. The national and local elections in May also contributed to higher consumer spending," Tanduay Holdings said. Gross profit fell by 13.18% during the three quarters to P1.12 billion from P1.29 billion on continuous increase of molasses and energy. For the quarter, it declined by 7.51% to P1.6 billion from P1.73 billion. Cost of goods sold for the nine-month period hit P4.5 billion, up by 12.7% from P3.99 billion, as the company factored in higher cost of molasses and energy and Unimark’s cost of sales starting Sept. 2006. For the third quarter, it slackened by 7.51% to P1.6 billion from P1.73 billion during the third quarter. Operating expenses went up on higher advertising expenditures to improve and generate sales and to endorse promotional tours and events in various parts of the country. Ginebra financials As this developed, Cojuangco-led liquor firm Ginebra San Miguel, Inc.’s robust performance in the third quarter failed to offset its difficulties in the first half. In its financial statements, Ginebra said it posted a net income of P94.41 million for the third quarter, a 274.05% increase from the P25.24 million it posted in the same period last year. For the nine months ending in September, however, income went down by 8.82% to P325.63 million from P357.14 million due to flat sales. Net sales inched up by 1.28% to P3.17 billion during the quarter from P3.13 billion. For the three quarters, net sales improved by 2.26% to P9.49 billion from P9.28 billion. The listed company said gross profit hit P1.029 billion during the third quarter, up by 58.64% from P648.63 million. For the nine-month period, it rose by 8.07% to P2.4 billion from P2.23 billion. Signs of recovery? "Along with these improvements in volumes are signs of potential recoveries in our operating cost," the company said. "Notwithstanding the absorption of the 8% increase in excise tax and the high cost of direct materials carried over from last year, the shift in sales mix from brandy to the higher contribution gin combined with cost savings from higher secondhand bottle usage resulted in a cost of sale for the period which was almost at par with the last year’s level," it added. Cost of sales declined by 14.06% during the three-month period to P2.14 billion from P2.49 billion. This was flat for the nine-month period at P7.09 billion from P7.05 billion. However, Ginebra San Miguel said efforts to increase the number of directly served outlets, intensified product penetration and availability and sponsorship of massive barangay-based activities caused selling and marketing expenses for the nine-month period to rise by 32.17% to P1.89 billion from P1.43 billion. For the quarter, it grew by 58.59% to P877 million from P553 million. Business Ginebra is primarily engaged in the manufacture and sale of alcohol and alcoholic beverages. Its flagship product is Ginebra San Miguel. Other alcoholic products include GSM Blue, Gran Matador Brandy and Vino Kulafu. The company also manufactures bottled mineral water under the brands VIVA!, First, and Aquapeak. Ginebra also acquired SMC Juice, Inc., which manufactures Magnolia Fruit Drinks, Zip, FunChum and powdered Fresh ‘N Ripe, and Metro Bottled Water Corp., the manufacturer of the Wilkins brand of distilled water. — RAMR/BusinessWorld