SMC sets $4 B to double sales in 5 years

Manila Bulletin 

By Clarissa Batino and Ian Sayson (Bloomberg)

February 7, 2011, 7:51pm

 MANILA, Philippines – San Miguel Corp. (SMC), the Philippines’ 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 Ang said in a Feb. 3 interview. Ang said he’s targeting 1 trillion pesos ($23 billion) in sales by 2016, compared with the 530 billion pesos 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. San Miguel has about $2 billion in cash and will receive at least half of the proceeds from a share sale that may raise more than 200 billion pesos 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 230 billion pesos in 2010, because of the purchase of energy assets, including a stake in Philippine refiner Petron Corp. The Manila-based 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 Manila-based Banco de Oro Unibank Inc. The company will become “a key player in the sectors it has chosen,” Aclan said.

San Miguel declined 1.4 percent to 177 pesos at 10:42 a.m. in Manila trading, trimming its gain this year to 8 percent.

Petron, the Philippines’ largest refiner, will probably contribute about 230 billion pesos to San Miguel’s sales this year, making it the single-biggest source of revenue, President Ang said. San Miguel in December said it owns about 68 percent of Petron.

San Miguel’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 200 pesos each this quarter. Ang last month said the price may “hopefully” reach 250 pesos 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.

San Miguel’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 in Manila and 10 percent of Indophil Resources NL, which has indirect holdings in the Tampakan gold and copper mine in the southern Philippines.

San Miguel and Petron also have plans to invest 20 billion pesos to expand a port in Manila.