 |
|
SAN MIGUEL: INTO UNCHARTERED TERRITORIES
The Philippine Star Not a single soul was caught surprised when San Miguel, Everybody knew that given San Miguel's quest for growth, something that's hard to find in the food and beverage sector right now because of stiff competition, the company would have to beef up its cash hoard to be forearmed in any ventures to the unknown. Now, let's do some math and figure out how financially ready is San Miguel for businesses that are new to them. Sold to Kirin of Japan for A$2.8 billion was Australian dairy and juice subsidiary National Foods Ltd. Meanwhile, Tasmanian brewer J. Boag & Son went to Lion Nathan of Australia for A$325 million. Prior to that, San Miguel sold its stake in Coca-Cola Bottlers for $590 million, and 42 percent in a joint venture that owns over 80 percent of fruit producer Del Monte Pacific Ltd. for $150 million. In total, the food giant would have raised between $3.5 billion to $4 billion through a series of disposal of assets that are considered precious to its overseas operations. By any decent standard, the sizeable amount would come in handy for so many things, such as a planned venture into new industries and for trimming costly debts that have built up during the time when it was on a buying spree. There are reports that while the price tag for National Foods is $2.6 billion, only $1 billion will revert to San Miguel as the rest are debts taken on by buyer A quick look at the company's liabilities also show that much of San Miguel's close to P100 billion debt are due in the next three years, and as such raises the pressure to increase the company's liquidity. Testing the waters San Miguel has said it is looking to invest in power, mining, infrastructure and utilities as part of a diversification plan. An initial $750 million or 10 percent of the group's assets is being set aside for this purpose. After announcing in July its plan to gradually diversify into heavy industries, the conglomerate or its units have since been testing the waters. The group was one of four bidders in the recent successful sale of the government's 60 percent stake in geothermal firm PNOC Energy Development, although it lost to First Gen, whom I should say is shelling out an exceptionally huge sum of money to acquire one of government's crown jewels. And then there is Transco. San Miguel is part of a consortium that has been pre-qualified to bid for the 25-year concession to operate the Philippine power transmission grid. Well, after losing its bid to acquire PNOC EDC, expect San Miguel to be feverishly preparing for the December 12 auction of Transco. If San Miguel does not win the Transco bid, it will be left bidding for much smaller assets in the power industry since the bigger ones – for instance, Masinloc and Calaca, which are both at 600 megawatts – have already been won by other parties. SMC Chairman Danding Cojuangco, during the firm's annual general meeting, told shareholders: "Despite our ambitions, which some have criticized as 'outsized," our intent has always been to act with caution." And then, he went on to say that "these new businesses we are looking into will constitute only a fraction of our total portfolio. What we are particularly excited about is the earning potential that these new businesses can bring." An "outsized" ambition that will constitute only "a fraction" of the total? Makes one wonder where San Miguel is really going, power generation, power transmission, mining, or whichever comes first? Cautious optimism Cojuangco also assured shareholders that reshaping San Miguel's portfolio to higher growth areas will be done with a disciplined approach. "There are times in business when faith is called for. But I am confident that this is not one of them," says the San Miguel chairman. Meanwhile, ratings agencies such as Moody's and Standard & Poor's are keeping a close watch on how San Miguel will reshape its future, and for them, there is reason to be cautious. Moody's for instance correctly pointed out that the recent sale of San Miguel's overseas units reduces the company's geographical diversity, with all its assets concentrated in the Another main concern is that San Miguel will be investing still a sizeable fraction of its resources in businesses that are outside of its core competencies. The Philippine power sector alone is a far more complicated industry anyone can think of, an industry where business and politics oddly mix. Moody's has warned its debt rating on San Miguel may come under pressure “should SMC's investments in non-traditional assets develop beyond the scale presently envisaged (i.e., 10 percent of total assets). A downgrade is also possible if there is deterioration in its operating performance, or if its new investments are aggressively debt-funded, such that its financial metrics weaken.” Meanwhile, S&P said it is keeping its negative outlook on the company until after a detailed review of San Miguel's business strategy, adding that San Miguel is going into businesses where it has little experience and whose risks are higher than the company's traditional business portfolio. Scholarship awards for Collegiate National Championship winners Over a million pesos worth of scholarships and athletic equipment/facilities funding are at stake as the Filoil Flying V Collegiate National Championship winds up this week at The Arena, The “Final Four” battling for top honors are: Ateneo de Manila University Blue Eagles, UST Growling Tigers, Filoil Flying V Sports, headed by Virgil Villavicencio, and part of Chito Villavicencio's group of companies, will award the following prizes to the schools represented by the winning teams: champion – P500,000 plus the Filoil Flying V cup and medals; runner-up – P200,000; 3rd place – P100,000; and 4th place – P50,000. Manuel V. Pangilinan, BAP-SBP President, has also generously offered additional prizes for outstanding team and individual performances. The “SMART Special Awards” are: a) Most Valuable Player – M. V. Pangilinan Cup plus additional scholarship/athletic support; b) members of two mythical teams – medals and scholarship funding; c) Best Defensive Team – trophy and scholarship funding for the school; d) Best Coach of the Series; and e) Best Performing Referee. The semi-finals will be held today at The Arena, Winners of the games today will meet on Wednesday, 28th November, at the same venue for the coveted title of Collegiate National Champion. Losers will play in the first game for 3rd and 4th places. All semi-final and final games will be televised live by Solar Entertainment Basketball TV over Sky Cable. Watch and enjoy the excitement and hustle of collegiate basketball. Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center,
| |||
|