San Miguel Corporation (SMC) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to the combined full year results analyst briefing. I am [ Jaco Doliante ] your moderator for today. A few reminders before we begin. [Operator Instructions] Please be reminded that this webinar is recorded. Allow me now to introduce our panelists for this afternoon. We are joined here today by Mr. Ferdinand Constantino, San Miguel Corporation, CFO and Treasurer; Mr. Albert Sarte, Petron Corporation's Deputy CFO and Treasurer; Ms. Reynabeth de Guzman, AVP at SMC, Head of Investor Relations; Mr. Noji Alindogan, San Miguel Food and Beverage, Inc. CFO. Also joining us on Zoom, we have Ms. Jessica [indiscernible] VP and Head of Corporate Financial Planning; Mr. Paul Causon, San Miguel Global Power Holdings Corporation's CFO. Would also like to acknowledge the presence of Ms. Kristina Garcia, SMFB Investor Relations Head; Mr. Erich Pe Lim, Petron Corporation's Investor Relations Head and other key executives of the group. I now turn you over to Ms. RB to discuss the SMC Group's financial and operational results.

Thank you, Jaco. So good afternoon, everyone. Welcome to the combined 2022 Full Year Performance Analyst Briefing of San Miguel Corporation, San Miguel Food and Beverage, Inc., Ginebra San Miguel Inc. and Petron Corporation. San Miguel Corporation ended 2022 beyond expectations, registering consolidated revenues of PHP 1.5 trillion, 60% up from 2021's PHP 941 billion, and reaching its 2019 pre-pandemic level of PHP 1 trillion by 48%. Consolidated income from operations rose 10% to PHP 134.5 billion, mainly driven by strong top line growth of Petron, Food and Beverages, Packaging and Infrastructure businesses that makes group-wide management and initiatives, which mitigated the continuing challenges of increasing raw material costs, inflation and ForEx movements. This was, however, tempered by the Power business, which was weighed down by the significant increase in fuel costs. Consolidated core net income amounted to PHP 43.2 billion, down 8% from last year's PHP 47 billion. With higher interest expense and mark-to-market foreign exchange losses, reported consolidated net income ended at PHP 26.8 billion. EBITDA reached PHP 165 billion, up 3% from last year. Let me now report the performance of each of our businesses. Food and Beverage, San Miguel Food and Beverage, Inc. full year consolidated revenues of PHP 358.9 billion, 16% increase over the same period last year, mainly driven by sustained volume growth and better selling prices across its beer, spirits and food divisions. SMFB's consolidated operating income grew 11% to PHP 48.7 billion and net income rose 10% to PHP 34.7 billion compared to the same period in 2021. Let me discuss in more detail the individual divisions under SMFB. Beer, San Miguel Brewery Inc. sustained its growth plan in 2022, delivering consolidated volumes of 224.5 million cases, up 10% from the previous year, primarily driven by the company's effective brand building and demand-generating programs, capitalizing on the country's positive economic growth in both domestic and international operations. Consolidated revenue amounted to PHP 136.2 billion, increasing by 17% compared to 2021. SMB's domestic volume grew by 9% from 2021 level, the result of continuous brand building and consumption generating programs in key channels, which took advantage of the reopening of on-premise outlets. This was further supported by effected volume-generating programs and marketing in traditional and modern trade channels from core brands, such as Pale Pilsen ongoing [indiscernible] campaign alongside the digital materials of [ beer coal ] and [indiscernible] Red Horse continued [ Una and Spirit Horse ] campaigns with new digital content, including the music [indiscernible] episode on Red Horse [indiscernible] channel, and [indiscernible] like ongoing bright side thematic campaign and the release of new [indiscernible] episodes and other social media marketing. With higher volumes and reflecting the full impact of the price increase implemented in October 2021, SMB's domestic revenues grew 16% to PHP 121.8 billion. Operating income reached PHP 27 billion, 7% higher than last year, on the back of cost-saving initiatives and improvements in operational efficiencies. SMB's international operations for the year 2022, meanwhile, sustained strong performance, posting double-digit volume growth of 15% compared to last year. Thailand, Indonesia and export businesses continued to register consistent volume gains while Hong Kong, South China and Vietnam, albeit posted lower volumes are showing signs of recovery. Accordingly, SMB's consolidated operating income and net income ended at PHP 29.5 billion and PHP 21.8 billion, higher by 10% and 6% from the previous year, respectively. Moving on to spirits. Ginebra San Miguel Inc. delivered another striking performance for the year 2022 with the highest ever net income of PHP 4.5 billion, exceeding last year's by 9%. Volume ratio all-time high of 44.6 million cases, surpassing 2021 by 7%. Growth was supported by effective marketing campaigns, which resonated well with consumers, such as the award-winning [indiscernible] Bagong Tapang for Ginebra San Miguel and [indiscernible] These were complemented by on-ground consumer promo [ Kosolapov ] well as Russia and expanded distribution effort. Full year 2022 sales revenues reached PHP 47.3 billion, 11% higher from a year ago on account of increase in selling prices implemented in early 2022, while income from operations of PHP 6 billion was 13% more than the year before. Food, San Miguel Foods sustained its global top line performance throughout 2022, delivering consolidated revenues of PHP 175.3 billion, 16% higher than last year. Amidst rising inflation, volumes in most segments grew, boosted by intensified distribution, aggressive promotional activities, launch of new products and utilization of additional capacity from new facilities. Faced with escalating raw material prices, most businesses implemented price increases to partly recover rising costs. The Animal Nutrition & Health segment posted revenue growth of 26% compared to a year ago, propelled by volume growth and better selling prices. Volume grew on the back of higher frac sales of broiler, layer and [indiscernible] as well as a growing demand for its [ notary chunk pet care ] and San Miguel Animal Healthcare veterinary medicine products. The protein segment comprised of the poultry and meat businesses, registered revenues 4% higher than the previous year. Poulter's revenues climbed 9%, maybe on account of better selling prices, as volumes were constrained by capacity shortages. Notwithstanding, poultry benefited from the strong recovery of food service and positive market acceptance of marinated [ Piplados ] products. Meanwhile, the decline in net revenues is reflective of deliberate moves to downsize half operations due to the African swine fever. The Prepared and Packaged Food segment revenues exceeded last year by 17%. Growth was led by flagship products, Purefoods Tender Juicy Hotdogs, Purefoods Chicken Nugget, [indiscernible] and Magnolia butter and cheese with significant contribution from newly launched products under the Purefoods native line and Magnolia salad. Significant volume growth along with the market share gains were seen across multiple categories. Revenue in the Flour segment soared 38%, mainly driven by higher prices as this business had to cover for higher wheat costs. Despite the challenges brought about by the rising commodity prices, inflation and depreciating peso, San Miguel Foods managed to grow operating income by 15% to PHP 13.3 billion on the back of optimized utilization of company-owned facilities and strategic spending on revenue, generating advertising and promotions. Net income stood at PHP 9.2 billion, a 21% increase compared to last year's level. Let's now move on to our packaging business. San Miguel Yamamura Packaging Group generated consolidated revenues of PHP 37 billion in 2022, 10% higher than the previous year's level. This was caused by the increase in domestic demand for glass, metal crowns, 2 piece aluminum cans, beverage filling and logistics services from food and beverage customers combined. International operations in China, Vietnam, Malaysia and Australia also grew [ from last year ]. Management of expenses, along with cost-saving programs implemented across all businesses, propelled operating income to increase 42% at PHP 1.6 billion compared to the same period last year. Our Power, San Miguel Global Power Holdings Corp. recorded offtake volumes of 27,402 gigawatt hours for the full year 2022, higher by 181 gigawatt hours from last year. This was driven by the increase in energy demand from distribution utilities with a recovery in economic activities. Consolidated revenues amounted to PHP 221.4 billion, up by 66% from PHP 133.7 billion in the previous year, brought about by the increase in average realization prices, reflecting higher fuel cost, increasing spot sales prices and improved power nominations. In addition, the commencement of commercial operations of 20 megawatts [indiscernible] in January '22 likewise contributed to the increase in revenue. With coal indices continuing to be at high levels, San Miguel Global Power absorbed a tremendous increase in coal prices. This, along with the increase in power purchase costs due exposure to higher western prices, particularly in the early part of 2022 and the duration of the Ilijan power plant resulting from the Malampaya gas supply restriction combined with its shutdown for inspection, repairs and maintenances since June 2022, increased cost to supply. Hence, operating income declined by 22% from PHP 36.8 billion last year to PHP 28.9 billion. With lower margins and the recognition of unrealized net foreign exchange losses resulting from the unprecedented depreciation of the peso against the U.S. dollar during the year, net income amounted to PHP 3.1 billion, 80% behind from the previous year. Without the recognized foreign exchange losses and create loss adjustments in the first quarter of 2021, net income would have been PHP 11.7 billion, but still lower by 12% from last year. Fuel and oil. Petron Corporation ended the year strong, mainly driven by the recovery in demand, specifically from the industrial and aviation sectors. Combined sales volumes from the Philippines and Malaysia operations reached 112.8 million barrels, 37% higher compared to the same period last year. The Philippine operations sold 68.5 million barrels, 43% higher than 2021's 47.9 million barrels. Demand for gasoline and diesel products remained high, with notable increases as well in the sales of fuel -- jet fuel, LPG, and particularly polypropylene products, as Petron resume production of polypropylene in 2022. Consolidated revenues rose 96% to PHP 857.6 billion, mainly driven by growth in fuel demand and higher crude prices. Dubai crude averaged at $96 per barrel in 2022, nearly 40% higher than last year's average of $69 per barrel. 2022 was characterized with high volatility with Dubai surging to as high as $113 per barrel average in June then dropping by 32% in the second half to $77 per barrel in December due to global inflationary and recession fears. Consolidated operating income ended 12% higher at PHP 19.2 billion compared to 2021's PHP 17.2 billion, despite external headwinds and lower prices in the second semester. Operating costs were contained was further supported by continued optimization of refining assets. Petron ramped up its refining product -- refinery production to take advantage of favorable refining fracs. Partly countered by more expensive crude and finished product import costs, higher working capital requirements and borrowing rates. Consolidated net income settled at PHP 6.7 billion, up 9% from last year's PHP 6.1 billion. Infrastructure, SMC Infrastructure continued its growth momentum for the year 2022 with the combined average daily traffic volumes increasing by 25% from the previous year as travel and mobility has become -- has gone back to normal with the resumption of on-site work in cases and the increase in outdoor activities. With this, consolidated revenue ended at PHP 29 billion, 47% higher than last year's level. Operating income soared to 110% to PHP 14.2 billion, mainly driven by sustained double-digit volume growth of all operating [indiscernible]. And to give you an update on our major operating ongoing infrastructure projects. One is the construction of [indiscernible] -- and the Skyway Stage 4, these are all on track. The Passive River Expressway, the Northern Access Link Expressway, Southern Access Link Expressway and South Luzon Expressway, [indiscernible] Road 5, are preparing detailed engineering designs already. As of December 2022, the new Manila International Airport site clearing activities is more than 19% complete, while land filling works and ground improvement works are almost 50% complete. We are currently working on the airport master plan along with the critical components of the airport and targeting this year to start the construction of the passenger terminal building. Now on our financial position. SMC's financial position continues to be managed well. SMC's consolidated total assets as of December 31, 2022, stood at PHP 2.4 trillion, total liabilities reached PHP 1.8 trillion, while stockholders' equity ended at PHP 639.2 billion. Consolidated cash balance ended at PHP 318.2 billion, while interest-bearing debt amounted to PHP 1.4 trillion. This translated to a net debt level of PHP 1 trillion. Current ratio as of December 31, 2022, was at 1.22x against 1.36x as of December 31, 2021. Total debt to equity was at 2.74x. Interest-bearing debt to equity was at 2.12x compared to 1.47x as of December 31, 2021. Our debt covenants based on consolidated net debt to consolidated total equity was at 1.5x and consolidated EBITDA to consolidated total interest expense at 2.74x as of December 31, 2022. As we move on to 2023, San Miguel Corporation sees that high raw material prices will be lingering pressure on cost structure. Nevertheless, our strategies, cost management and marketing initiatives will help sustain growth outlook. Also guided by our inspiration of being a part of nation building that sets uplift the lives of our country men, we have been gearing up on our sustainability goals and targets that we will show our commitment in helping protect our environment, providing care for the communities and strengthening our governance while keeping in mind our commitment on increasing shareholder value. Many thanks for listening, and we are ready for your questions.

[Operator Instructions] We have [ Eric Liu ].

Eric Liu from Nomura. I have 3 questions. I think the first question is regarding the SMC Global Power. Previously, the San Miguel Power has recently subscribed 500 million redeemable partner share in the SMC Global Power. I want to know how does this use of proceeds to deploy? And then would you mind to please also provide CapEx guidance for the 2023 and 2024 respectively?

Well, on the first question, the Global Power Group still requires a lot of funds for the expansion projects. I think we have mentioned before that there's still an ongoing power plant being built. Nevertheless, we are still completing the battery projects and, of course, the LNG projects. So they still mean a lot of funds. And I think we deemed it prudent that the parent company will provide these funds to this preferred shares to be subscribed -- not to be issued by Global Power subscribe by San Miguel. Can you repeat the second question? It was not very clear.

So the question is about the CapEx guidance for SMC Global Power in 2023 and 2024, respectively. Because as you mentioned, there are some expansion projects like the battery and the LNG projects are still going on.

Yes. You'd like to respond to that, Jessica? The expectations for Global Power.

For FX, is this -- did I hear it correctly.

CapEx, capital expenditure.

CapEx, CapEx.

CapEx, Paul, would you like to give kind of on our end, it should be roughly around -- hold on.

Global Power CapEx, Paul, Do you have that?

Sorry, sir. I was earlier having problems with my audio. But -- thank you for referring the question to me. As Mr. Constantino said, there are several greenfield projects that credit under construction. So let me go through them one by one. So with respect to the battery storage projects, the total project cost is around $1 billion. Out of that number, around 35% remains to be paid, although the project completion is close to 70% already at this point in time. And there was a competitive selection process that was conducted today and then a couple of days ago by NGCP, which effectively could contract up to half of the battery projects that we have in the pipeline of 1,000 megawatts. So that means 30% should be around $300 million with respect to the battery projects. About half of them should be paid within the year and then the other half by next year -- early next year. Then we have the 600-megawatt Mariveles power plant. At this point in time, we expect the first 2 units to be operational as early as June to September of this year. The third unit should be available by fourth quarter of this year. The other -- the last unit should will be available first quarter of next year. So with respect to that, the total project cost is around $1.2 billion. Out of that number, 50% to 60% has already been paid. And the remainder is subject to a financing arrangement that's done at the output level that allows us to defer it by a couple of years more. With respect to our LNG power plant project in Batangas, which is 1,313 megawatt power plant that is contracted with Meralco for 20 years, starting 2025. That one is 65% complete to this date. We have paid close to that as well in terms of the total project cost of $1.1 billion. The remainder of that should be paid within the next 16 to 20 months. And then we have the last project, power generation project, massive in units 4 and 5, the project cost is around $1.3 billion to $1.4 billion. We have paid close to 30% of that to this date. The project is 30% complete at this point in time. That project as well as is contracted with Meralco for 20 years, starting late 2025. And we expect the amounts to be paid within the next 3 years to spread evenly. So that means for the rest of the year, we expect for the next 16 months, we expect to have a CapEx of around $500 million, $700 million in total.

Sorry, 16 months or around $500 million, and I catch it correct?

That's correct. That's correct.

Okay. Okay. Is it possible because I understand Masinloc project, you mentioned expecting cost given the -- right now, it's just 20% paid. And you also have this R&D project is kind of paying.

65% paid, yes. Not about the Masinloc project, units 4 and 5, has a payment arrangement with the contractors that are highly favorable to us. And we were able to negotiate extended payment terms that allow us to spread the payment towards the completion of the project. In a way, giving us enough time to avoid unnecessary debt with respect to the project during the early construction phase, which reduces interest cost that was tied up specifically to construction risks.

LNG Batangas project, you mentioned to the project cost is $1 billion so far...

$1.1 billion, yes, $1.1 billion, for the...

65% completed, right.

65% completed, yes, close to 70%.

We have another hand from Zoom.

This is [ Li Zhong ] from Morgan Stanley. Just 3 questions from my side for the SMFB side of the business. The first question relates to the beer business. I realized that the fourth quarter margin has actually come down quite a bit in term at an EBIT level. Just wondering if you could provide some light into that?

Yes, sure. Thanks a lot [ Li Zhong ], You're right. The margins have come down a little bit, I think, in the fourth quarter for the beer business. If I look at this, just looking at the figures, I think this is as a result of the rise in costs for our cost inputs We have seen an increase in cost in malts and barley and as well as some other cost increases as it relates to delivery items and whatnot. So as you know, we only do price increases on a periodic basis, we don't do it too frequently. So you have seen this impact our margins in the beer business, at least temporarily. In March of this year, there was a price increase for the beer business, which will hopefully allow us to increase our margins in line with the cost pressures we are seeing on both the ingredients as well as the other fixed cost components in relation to our business, as well as the continued increase in excess taxes.

Just now you mentioned that there is an increase in malt and barley cost as well as the price increase in March. Will you give us some sense of the magnitude of the cost increase and the ASP increase as well that you have implemented?

Yes. I think the ASP increases are still fairly moderate. They are in the mid-single digits in terms of percentages. And hopefully, that will be enough to offset the decline in margins we've seen and the pressures we've seen on the cost side. We tend to manage it in such a way stages balance between managing our prices as well as still encouraging volume growth. So we arrive at a profit number, which is optimal for the group.

Got it. And with regards to the spirits and food business. Is there any outlook on the margin? Like earlier, you were mentioning that the commodity cost has been an issue in 2022. What do you foresee in 2023?

Correct. The themes are fairly similar across our food and beverage business. Ginebra adding price increase sometime in February this year. I think their price increases as of the last couple of years have been more annual in nature. So hopefully, that will also allow us to pass on some of the cost pressure we're seeing. But as you can imagine, the food business, we have had price increases that are more in line with each of the businesses that comprise our food business. So of course, some of the food businesses that are more exposed to the higher commodity prices last year, then we on had to update more aggressive increase in our prices on whether that's for [ fees ] in our broking business as well as our flour business. I think the outlook for this year has been a bit more mixed. And you've seen that translate lower oil prices, I think some soft commodities have also seen a down trend in prices as well. So hopefully, this will result in better margins for the business moving forward as we manage this period of volatility.

We have another question for Petron. How much was sales volume and refining margins in Q4 and also Q1 so far?

Also talking about Q1. Well, in terms of sales volume, I think for the first quarter, we're actually doing quite well given the improvement in what we [indiscernible] -- So -- but in terms of margins, I think there's a little bit of correction, which is actually a continuation of the production that we saw last year. But nonetheless, the refining margins for the first quarter is actually still quite healthy. So we expect somewhere what I see for the first 2 months we're doing production [indiscernible] posting a good number, at least for the first 2 months.

We have another question. At what capacity percentage, as GSMI currently running on? Can it support more demand in the future without ramping up CapEx? What is the outlook for GSMI's volume growth in 2023? And what is your opinion on the gin and hard liquor market in the PH? And a follow-up with GSMI is looking like it will have a larger dividend payout ratio this year. Will this dividend payout ratio will be kept in the foreseeable future?

Yes, thanks for all those questions. I'll try to remember. But the capacity percentage right now is about 60% to 70% for GSMI. So we do have a lot of runway to accommodate for the growth that we're forecasting for the business in the short to medium term. It's had a great run over the last 8 years, we've seen that translate to an exponential increase in the share price as well as I think it [ 150-plus ] in the top last called [indiscernible]. So I think this is a basement to the management team of Ginebra in terms of its execution. I think market share in terms of hard liquor, for now is north of 40%. So it's tracking close to the high -- the 50% plus that it had in this business not too long ago. So hopefully, we continue to make headwinds for this business where we continue to grow volumes in the short to medium term. Hopefully, in the high single digits volume growth moving forward. What has been encouraging as well is that given the leverage of the business, which is very low and the net income that it has generated, I think management has made it an exercise to really reward shareholders including all of its shareholders, that's SMFB as well as the outside shareholders by increasing the payout. I think the special is about PHP 0.75 per share now this quarter, and then that's in regular. And then the special is PHP 1.75 per quarter as well that brings us about PHP 2.50 per share for the first quarter of [ 2019 ] given the -- that's probably going to be the case in the next 4 quarters at the very least. So you're looking at a dividend payout ratio of close to, I would say, north of 50%.

We have another hand from Eric again.

I just have a follow-up question on Petron. So I understand, I think in the previous earnings call, the company mentioned that the [ wellness ] of according -- I mean, $4.6 and the first quarter is high. But given that we have only 4 months ahead of the first quarter and the U.S. dollar bond market, has been present. So any kind of color or detail about the refinancing plan of this U.S. dollar bond part would be appreciating?

[indiscernible]price.

Eric, sorry. Can you actually repeat the question?

Okay. So my question is on the USD 4.6 per debt is issued by Petron. So the first quarter is '19 July. So we have a former at this today. And right now, the primary market of the U.S. dollar has been increased. So any idea or color about financial plan [indiscernible]

Okay. Well, for that particular instrument, we will definitely be that instrument. So we're looking at using around $100 million of our cash to activity in that particular cover. And then we're actually in the process of actually securing a syndicated loan as well, amounting to $250 million, which we will use to again partly refinance the and then we're actually about to higher or launch a peso repurchase with the SEC and the Philippine Stock Exchange. So that would actually finance the balance of [indiscernible]. So this peso repurchase will probably be launched and issued sometime in June of this year. So this a refinancing plan for the...

And when you talk about this $250 million syndicated loan, is there any color about the tenor and the interest rate for the one you're trying to raise?

Well, it's -- so far, it's a 5-year loan, [indiscernible] amortization over the base period of 2 year -- so interest rate is LIBOR -- SOFR plus 170 -- on the basis points.

What were the inventory losses in 4Q for Petron?

Oh, that's huge. Actually, inventory losses per Petron amount -- for the fourth quarter alone amounted to around PHP 8 billion, which in hindsight is actually for me is a good thing that it actually happened in 2022 rather than in 2023. so far for the first 2 months of 2023, you've seen a stability in terms of good prices. so far, we haven't seen any inventory losses for the first 2 months of 2023. But given the recent volatility brought about by the banking crisis, I just hope that it doesn't affect good market moving forward. So far, there's a little bit of stability on the crude prices for [ 2022 ].

We have a question from Danny Chan. How do we look at our group debt leverage, given our gross debt has doubled in the past 10 years? Given the rising interest rates, liquidity environment is tighter, macro uncertainty. Can you also comment on the financing plan for the group and different subsidiaries in 2023?

I think Albert has covered the plan for Petron. But basically, I think you appreciate that there will be so many projects the last 10 years, the modernization of Petron, the expansion of the power plants, the infrastructure projects, and that's basically the reason why we had to borrow a lot of money to finance these projects. Now rest assured that in the next few years, all of these projects will start to bring in the cash flow. So we think we can very conveniently handle the increasing debt burden as a result of these capital projects. The parent company is, I think, is in good shape when it comes to funding, we are trying to raise more pesos basically for infrastructure and also to assist our Power business. So before you can talk about what we're doing in Power for our refinancing of some of those obligations.

Right now, we are in several discussions with counterparty banks on potential syndicated loan deals to be able to refinance expiring debt. We're also looking at the local debt capital markets to be able to raise long-tenor funding for our projects. Obviously, a lot of these projects take time to be able to generate the cash flows to be able to repay whatever debt was used to finance the construction. And we are aligning the tenor of these instruments with the -- basically with the gestation period of these projects. So -- all of these are as Mr. Constantino said, geared towards the local DCM and local banking industry to be able to also, in a way, we denominate some of our dollar-denominated debt and to be able to be in a very solid financial position in the next few years. While these projects come to fruition, most of which should start operating as early as 2025.

We have one from [ Rachael Cruise ] could you give us update on the parent cash and debt position at end of 2022?

Well, the parent has a lot of cash, about PHP 137 billion, and then we have debt of about PHP 560 million. So we are in a net debt position of PHP 423 billion. So I think that's basically it. But remember, the parent gets to have all this debt partly to support our businesses, mainly Power and Infrastructure. So we think, as Paul mentioned, many of these projects will start to bring in cash maybe 2 years from now, and we think we can have the disposition of all of this stuff. By the way, as supported by RB, the Infrastructure businesses opposed done very well last year. And we see that continuing. That will continue to happen this year, that always are being atomized because of the -- practically the end of the pandemic. And we think we will have the financing for [ DMRP ] soon. And of course, the land development of the airport project is in full swing, and I think we have also the financing for that.

We have from for [ Katherine ] for SMGP. Can you share your discussion in relation to the gas swapping. Do you think any agreement would be feasible ahead of summer months?

Thank you for that question. I think Meralco came out recently with a statement on that potential transaction. And I think they have captured it very accurately in the sense that the parties remain incongruent on certain technical and commercial items in the fuel swapping -- the contemplated fuel swapping arrangement. I think aside from that, we are also not confined to such fuel arrangement to be able to add capacity to the grid to be able to address the imminent shortage in power in the summer months. So we are working on not only on the fuel requirements of our 1,200 megawatt Ilijan power plant, but also in terms of improving the resiliency and the reliability of our existing power plants, which contribute significantly to the net reliable capacity in Luzon. So this are coming from coal plants that operate on high-efficiency and low-emission technologies. We also have hydropower plants that provide big power, which I think is very crucial considering that the profile of the energy markets in the Philippines is essentially very picky. It essentially represents residential demand. So we are working on several fronts, other than that deal. But I think it's accurate to say that such fuel swapping arrangement is temporary on hold at the moment, and we are happy to move on from that and explore other ways to be able to add power to the grid.

We are down to ask 2 questions. We have from Martin [indiscernible] a -- Are the dollars that our priorities to be refinanced for SMCGL? Has deeper petrol maturity -- maturing in 2024, 2025 and 2026, all of which have large step costs, if not a problem, Will the 3 instruments be refinanced as we reach the call days, respectively?

Sorry, the latter part of the question was a bit audio -- can you please repeat it? Sorry.

The dollar debt top priorities to be refinanced, SMCGL has 3 perpetuals maturing in 2024, 2025 and 2026, all of which have large step-ups, if not Will the 3 instruments be refinanced as we reached the call dates, respectively?

Definitely, Definitely. The #1 priority with respect to these perpetual instruments is to redeem them on time. Definitely, we will not allow the step-up provisions to kick in, even though in essence, these are, in effect, perpetual instruments in that sense. But our focus is to have the have this not only refinanced but also redenominated to Philippine pesos. And as I mentioned earlier, we are working on a combination of local debt capital market deals and syndicated loans and other financing options to be able to refinance these as they expire or as they step up.

Okay. Now we have our last question. From A.J. Sharma. Can you please update on the volume growth trends for beer, spirits and for food businesses? Also, what was the price increase for both beer and spirits?

Sure. The price increases were in the mid-single-digit for both businesses. So we're trying to keep it in such a way that it still encourages volume growth. So hopefully, that translates to continue growth for each business. That's I think it's too early to comment on the first quarters that the community look at our full year numbers for 2022, and I think sometime in May will talk about the first quarter growth of each of the business estimate.

Well, in general, this is my own opinion, having been in the beer and liquor business for a long time. I think we can grow as much as the economic growth of the country. But that means 5% to 6% per annum. Assuming that there is no major excise tax increase, then I think confidently, we can grow by at least 5% per year. Okay. Jaco, so we'll wrap up.

Yes. Sorry, PC here, I wasn't able to add on the question on leverage for the group. Just to add, just to get the bigger picture, the group's maturing powers for long-term debt as well as for -- are mostly in 2024, as expected. So where we are -- now we're probably 20 30, 20%, 25% higher to higher -- current higher exchange rate. But having said that, because of where the markets are, we're expecting where we are carried over to 2025. But beyond 2025, we still ready -- also our leverage structure, improving to where we are planning, which should be similar to where we were earning in the pandemic. We're expecting cash flows heavily with not much maturing power beyond 2025 onwards. So that's where the growth period or bringing for the group as expected as we are targeting in the next 2 years, and carried over possibly in the third year. And then on the growth year 6 on as we're expecting competitive structure. So that's where the business model is.

There are no more questions on our end. Thank you for sending questions. If you have further questions, please send us -- sent it over to SMC investor relations at sanmiguel.com. That concludes our 2022 full year performance analyst briefing of San Miguel Corporation; San Miguel Food and Beverage, Inc; Ginebra San Miguel Inc. and Petron Corporation.

Thank you. And thank you, everyone.

Thank you.