SMC may spend $4 billion to double sales in 5 years

business mirror

MONDAY, 07 FEBRUARY 2011 20:09 CLARISSA BATINO AND IAN SAYSON / BLOOMBERG NEWS

SAN Miguel Corp. (SMC), the country’s biggest food and drinks maker, plans to invest more than $4 billion to double its sales in five years by expanding its ventures in energy, telecommunications and transportation.

The investments include government infrastructure projects and purchases of energy assets overseas, president Ramon S. Ang said in a February 3 interview. Ang said he’s targeting P1 trillion ($23 billion) in sales by 2016, compared with the P530 billion in revenue he expects this year.

“Our priorities are to invest in government projects and buy coal mines and oil and gas fields abroad,” said Ang, 57. SMC has about $2 billion in cash and will receive at least half of the proceeds from a share sale that may raise more than P200 billion this year. “There’s a lot of cash” available and all of it may be used on investments, Ang said.

This year’s sales will more than double from about P230 billion in 2010, because of the purchase of energy assets, including a stake in oil refiner Petron Corp. The company that started making San Miguel Beer more than century ago has moved into industries that it said have triple the 7-percent return it gets from food and beverages.

“San Miguel expanded into sectors with good growth prospects and high barriers for entry but entails a lot of capital investments,” said Fitz Aclan, who helps manage about $12 billion at Banco de Oro Unibank Inc. The company will become “a key player in the sectors it has chosen,” Aclan said.

SMC shares declined 1.4 percent to P177 in midtrading yesterday, trimming its gain this year to 8 percent.

Petron, the Philippines’ largest refiner, will probably contribute about P230 billion to SMC’s sales this year, making it the single-biggest source of revenue,  Ang said. SMC in December said it owns about 68 percent of Petron.

SMC’s cash may double to more than $4 billion this year, Ang said. The company and its shareholders, including Top Frontier Investment Holdings Inc., plan to sell 1 billion shares for at least P200 each this quarter. Ang last month said the price may “hopefully” reach P250 a share.

Ang has raised more than $3 billion from asset sales since 2008, helping fund San Miguel’s acquisition binge, including a stake in Petron, the contracts for four government-owned power plants, coal mines and the operator of the airport for the island resort of Boracay. Chairman Eduardo Cojuangco has said the acquisitions will “secure” the company’s future.

SMC’s other investments include stakes in power retailer Manila Electric Co., a toll road venture, a company that has the contract to build a metro railway and 10 percent of Indophil Resources NL, which has indirect holdings in the Tampakan gold and copper mine in the southern Philippines. SMC and Petron also have plans to invest P20 billion pesos to expand a port in Manila.

SMC’s expansion and its small number of shares available for trading boosted the stock in 2010 to its biggest gain since 1993. San Miguel shares jumped 139 percent to P163.80 last year, beating a 38-percent gain in the benchmark Philippine Stock Exchange Index.