San Miguel Corporation (SMC) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. We'd like to request everybody to rise for the national anthem and to remain standing for the invocation to be led by Ms. Chesca Tenorio, Head of Investor Relations of San Miguel Corporation. [Presentation]

Invocation. Almighty father, we call upon you to guide and enlighten us today at the Annual Stockholders' Meeting of San Miguel Corporation. May you always direct our thoughts, words, decisions and actions toward the right path and help us stay on track, lead and enable each one of us to think and strategize in ways that will lead us in achieving our goals. We ask you to continue to guide us with our value so we can share our best in everything we do and help and encourage us to stand always on the side of what is ethical and right, fill us with your grace to feel joy in our daily tasks as we strive to be stewards of your divine works, inspire us in finding meaning and fulfillment in our missions of helping our nation and uplifting our fellow men with malasakit in our hearts, hold our hands and walk with us today and every day so we can be ready for tomorrow. With the protection of Saint Michael, the Archangel, may we sincerely embrace the mission you share with us in Jesus name. Amen.

Ladies and gentlemen, meeting will come to order. Were notices to the stockholders send?

Notices were sent, Mr. Chairman.

Do we have a quorum?

We have a quorum, Mr. Chairman. There are present at this meeting in person or by proxy about 51.13% of the total outstanding capital stock of the company. For the record, 80.5% of the outstanding common shares of stock of the company have been issued in favor of Mr. Ang, Ramon S. Ang, and he is voting for the election of directors and in favor of all corporate acts in the agenda submitted for approval in the meeting. We acknowledge the attendance of all our directors. We likewise acknowledge the attendance of the company's executive officers and R.G. Manabat & Company/KPMG, the external auditor of the company. We advise the stockholders that after the management report, questions and comments received by our dedicated e-mail address for the meeting shall be read and addressed. Questions not taken up during the meeting shall be referred to the Investors Relations Office and Corporate Affairs Office for the proper response.

The full agenda of this meeting is presented on the screen.

The rational and brief explanation of each agenda item can be found in the definitive information statement. We advise that voting shall be made in accordance with the procedures set forth in the information statement that has been made available in the company's website and the PSE Edge.

Next item on the agenda is the approval of the minutes of the last AGM held on June 13, 2023, a copy of which is available for your viewing in the website.

Mr. Chairman, I move the minutes of the Annual Stockholders Meeting held on June 13, 2023, be approved.

I second the motion.

Motion having been duly made and seconded is carried. Next item on the agenda is the presentation of the annual report to the stockholders. Fellow stockholders, the past year has been remarkable for our company. We delivered strong full year results in 2023 and achieved a record profit, supported by a stable economy and initiatives that continue to bear fruits. Ferdi will later share more details on the financial performance of all our operating companies. In the meantime, allow me to briefly discuss key developments that promise to shape the future of our company and hold the potential to significantly impact the future of our country. Throughout San Miguel today, there is a greater push towards sustainability. This is led by Sustainability Board Committee, which guides our strategic decision, including our goal to achieve net zero emission by 2050. We are also addressing key social issues such as poverty, energy and food security and the infrastructure gap among others to lead Filipinos and drive sustainable economic growth. Our mega poultry farm nationwide embody our approach to sustainable food production. They ensure a stable and affordable supply of chicken, ultimately contributing to food security and regional stability. Our energy project, including the nationwide battery energy storage systems and the upgraded Ilijan liquified natural gas facilities support our country's transition to cleaner energy. These initiatives align with our goal to reduce carbon emission and provide reliable and affordable power for all. In terms of infrastructure development, our MRT-7 project is now about 80% complete and is seen to significantly enhance urban mobility. Our New Manila International Airport project in Bulacan is progressing very well. And as part of the new NAIA Corporation, we are also set to take over the management of Ninoy Aquino International Airport by September 18. The next few years will be about investing and getting things done. We will build on our success by creating value through nation-building project, maximizing synergies and integrating sustainability across our businesses. Every step we take will further strengthen our company and drive positive change across the border of Philippine society. Thank you. Ferdi will now report on the financial of our operating company.

Thank you, Mr. Chairman. With economic conditions improving and even registering a 5.5% growth rate, our company delivered resilient growth in 2023. Amid continuing global inflationary pressures and the challenging market dynamics, we still saw strong volume growth across all our major businesses. We delivered revenues of PHP 1.4 trillion, driven by the strong volumes across San Miguel Brewery Inc., Ginebra San Miguel and SMC Infrastructure, combined with the full year consolidation of Eagle Cement Corporation. Petron, however, was affected by lower Dubai crude oil prices, while San Miguel Global Power registered lower revenues, tempering overall revenue growth. Consolidated operating income surged 34% to PHP 144.5 billion, again, also driven by strong volumes and partial contributions from Eagle Cement. Net income of PHP 44.7 billion or 67% higher than in the previous year, boosted by ForEx gains in contrast to ForEx losses in 2022. Consolidated EBITDA stood at PHP 205.3 billion, 24% higher, resulting in a margin improvement to 14% from 11% the previous year. Let me provide a rundown of how each of our businesses performed. San Miguel Food and Beverage delivered a strong performance with consolidated sales of PHP 379.8 billion, 6% higher than 2022. All business segments registered higher sales growth. Consolidated EBITDA was up 7% to PHP 66.8 billion, while income from operations was down slightly to PHP 48.4 billion due to higher input costs and operating expenses. Net income, however, jumped 10% to PHP 38.1 billion, the highest ever since the consolidation of SMFB in 2018. San Miguel Brewery sustained its growth and recovery in 2023, with higher sales, volumes, EBITDA, operating income and profits, again, driven by the strong performance of the domestic and international operations. Ginebra San Miguel Inc. registered another record-breaking year for the 10th consecutive year. Revenues were up due to higher volumes and better selling prices. EBITDA increased and operating income and net income likewise grew. San Miguel Foods delivered higher revenues, driven by improved pricing and aggressive marketing efforts to boost demand. All segments performed strongly, but constraints in poultry, which accounts for a large portion of the food business, affected overall performance. Still, EBITDA, operating income and profits remained higher than the prepandemic levels. San Miguel Yamamura Packaging also reported growth in 2023, driven by sustained customer demand and the continued improvement of its Australian operations. San Miguel Global Power, meanwhile, delivered flat generation volumes, again, due to the extended outage of the Ilijan Power Plant. Offtake volumes are also lower with the suspension and eventual termination of the PSAs with Meralco. San Miguel Global Power gained a favorable decision from the Court of Appeals and recently upheld by the Supreme Court on the said PSAs, which were affected by extraordinarily high global fuel prices. Consolidated revenues reached PHP 169.6 billion, down 23% as lower tariffs resulted -- resulting from the equivalent decline in coal prices, which averaged $172.79 per metric ton compared to $360 per metric ton in 2022. However, SMGP improved its gross margins by transitioning to fuel pass-through arrangements for most of its bilateral customers. And with fuel prices going lower, operating income and EBITDA less PSALM payments reached PHP 32.5 billion and PHP 22.3 billion, respectively. With improved margins and a turnaround from ForEx loss to ForEx gain, net income surged to PHP 9.9 billion. Petron consolidated revenues reached PHP 801 billion, 7% lower despite higher volumes due to continued price correction in the crude oil market. Both Philippines and Malaysia operations delivered steady growth. EBITDA of PHP 44.9 billion was 36% higher, while operating income of PHP 30.7 billion was 60% higher. As a result, net income jumped 51% to PHP 10.1 billion. SMC Infrastructure, likewise yielded solid results for the year, driven by sustained volume growth across all its operating toll roads. Revenues reached PHP 34 billion, up 17% from the previous year. Operating income surged 25% to PHP 17.7 billion, while EBITDA rose 16% to PHP 27.6 billion. Finally, our Cement business comprised of Eagle Cement, Northern Cement and Southern Concrete Industries, registered a fourfold revenue growth to PHP 37.2 billion. Operating income was also significantly higher at PHP 6 billion. EBITDA rose to PHP 9.5 billion. Let me now provide you with our first quarter figures. We are off to a strong start, with continuous robust demand for our products and services. For the first quarter, we delivered consolidated revenues of PHP 392.7 billion, 13% higher than the same period last year, driven by higher volumes across most of our businesses. Consolidated operating income increased 15% to PHP 40.5 billion, again, driven by enhanced margin and strong volumes across the board. Excluding the effects of foreign exchange movements, net income was 61% higher at PHP 14.5 billion. EBITDA reached of close to PHP 55 billion, a notable 8% increase from last year. That concludes our report, Mr. Chairman. We thank our stockholders for their continued confidence in our company and patronage of our products and services, which will enable us to pursue more value-adding initiatives. Thank you very much, sir.

Thank you, Ferdi. The Chair will now entertain questions.

We will start with the written questions submitted in advance.

Question. What is your outlook for SMC in 2024?

As you can see in the first quarter results of San Miguel Group, we are growing double-digit on revenue and operating income. So we will stick to that target of continuing to grow at least double-digit for year 2024.

Next question. When are you taking over NAIA?

So I think we are supposed to take over the operation of Ninoy Aquino International Airport on September 18.

I move to close the open forum and to approve and ratify the annual report as presented.

I second the motion.

Motion having been duly made and seconded is carried. Next item on the agenda is the ratification of all acts and proceeding of the Board of Directors and corporate officers since the last AGM held on June 13, 2023 until today.

Mr. Chairman, the acts and proceedings approved by the Board of Directors and the Board committees since the 2023 Annual Stockholders' Meeting, include those in the list attached in Annex B of the definitive information statement distributed to the stockholders. Such acts and proceedings are likewise presented on the screen.

Mr. Chairman, I move that the following resolution be approved. Resolved that all acts, resolutions and proceedings of the Board of Directors and corporate officers of the company since the annual meeting of the stockholders on June 13, 2023, as set forth in the minutes of the meetings of the Board of Directors and the Executive Committee, be approved, confirmed and ratified.

I second the motion.

Motions having been duly made and seconded is carried. Next item on the agenda is the ratification of the directors' fee for year 2023. May I call on the Corporate Secretary to report?

Mr. Chairman, after evaluation of the recommendation of management, and in accordance with the Corporate Governance manual of the company, the Corporate Governance Committee recommended the payment of the director fees for 2023 in the amount of PHP 72.39 million, and the Board of Directors approved the same.

May I request our Independent Director, Puno, Chairman of Corporate Governance Committee to please confirm?

Mr. Chairman, I confirm.

Thank you po.

Mr. Chairman, I move that the directors' fees for 2023 be approved, ratified and confirmed.

I second the motion.

Is there any objection? There being no objection, the motion, having been duly made and seconded, is carried. Next item on the agenda is the nomination for the position of external auditor of the company and the ratification of its fee. May I call on Corporate Secretary again?

Mr. Chairman, the Audit Committee, after its evaluation, is recommending the appointment of the accounting firm R.G. Manabat & Company/KPMG as external auditors for 2024 and the ratification of KPMG's fees for the preparation of the 2024 audited financial statements of the company and its subsidiaries.

May I request Independent Director, Teves, Chairman of the Audit Committee, to please confirm?

Mr. Chairman, I confirm. Thank you.

Mr. Chairman, I move that the accounting firm of R.G. Manabat & Company/KPMG be designated as external auditors for year 2024.

I second the motion.

Motion having been duly made and seconded is carried. We shall now proceed to the election of the directors. The Corporate Secretary will read the names of the nominees for the election to the Board.

Mr. Chairman, the nominees for election to the Board of Directors are Ramon S. Ang, John Paul L. Ang, Aurora T. Calderon, Joselito D. Campos, Jr., Jose C. de Venecia, Jr., Menardo R. Jimenez, Estelito P. Mendoza, Alexander J. Poblador, Ernesto M. Pernia, Ramon F. Villavicencio, Iñigo Zobel, Teresita Leonardo-De Castro, Diosdado M. Peralta, Reynato S. Puno and Margarito B. Teves. In the information statement circulated for this meeting, the 4 nominees for election as independent directors are indicated as Ms. Teresita Leonardo-De Castro, Mr. Diosdado M. Peralta, Mr. Reynato S. Puno and Mr. Margarito B. Teves. This is in accordance with the mandatory requirements for the election of independent directors mandated by the Securities and Exchange Commission.

Mr. Chairman, I move that balloting be dispense with and that all nominees be considered unanimously elected as directors of the company for the ensuing year, including independent directors, Puno and Teves, as described and contained in the information statement, until their successors are elected and qualified and that votes of the stockholders present and represented by proxies be distributed and recorded accordingly.

I second the motion.

Motion having been duly made and seconded is carried. The 15 nominees are declared duly elected members of the Board of Directors of the company. On behalf of the Board of Directors, I thank all of you for your vote of confidence. Does anyone have any matters or business to present to this assembly? If none, the Chair will entertain a motion to adjourn.

Mr. Chairman, I move that the meeting be adjourned.

I second the motion.

Meeting is adjourned. Thank you.