San Miguel Corporation (SMC) Earnings Call Transcript & Summary

Good afternoon, everyone, kindly rise for the national anthem and remain standing for the invocation to be led by Ms. Chesca Tenorio, Vice President and Head of Financial Planning and Analysis, Investor Relations and Training San Miguel Corporation. [Presentation]

In the name of the Father, and of the Son, and of the Holy Spirit. Amen. Invocation. Almighty Father, we call upon you to guide and enlighten us today at the Annual Stockholders Meeting of San Miguel Corporation. We always direct our thoughts, words, decisions and actions towards the right path. 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 Melasakat in our hearts. With the protection of St. Michael, the Archangel, may we sincerely embrace the mission you share with us in Jesus' name. Amen. In the name of the Father, and of the Son, and of the Holy Spirit.

We would like to request everyone to remain standing and join us in offering payers for our beloved former Chairman, Eduardo Cojuangco junior, today was his birthday. Thank you, ladies and gentlemen, meeting will come to order. Were notices to the stockholders duly sent?

Notices were sent, Mr. Chairman.

Do we have a quorum?

Mr. Chairman, we have a quorum. There are present at this meeting in person and by proxy. About 51.34% of the total outstanding common and preferred shares of capital stock of the company. For the record, the Chairman of the meeting, Mr. Ramon S. Ang, holds proxies for 80.61% of the outstanding common shares of stock of the company, and he is voting for the election of directors and in favor of all corporate acts in the agenda submitted for approval in this 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 for year 2025. We advise the stockholders that after the management report questions and comments received at our dedicated e-mail address for the meeting shall be read and addressed.

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

The rationale 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 meeting held on June 11, 2024 and the minutes of the special stockholders' meeting held on August 8, 2024 and March 27, 2025.

Mr. Chairman, I move that the minutes of the Annual Stockholders Meeting held on June 11, 2024, and in the minutes of the special stockholders' meetings held on August 8, 2024 and March 27, 2025 be approved.

I second the motion.

Move is seconded. Next item on the agenda is the presentation of the annual report to the stockholders. For 135 years San Miguel has been part of the country's growth, serving Filipinos and creating long-terms value. Today, we carry that same commitment with focus, discipline and strong sense of purpose. In 2024, we posted sales revenue of PHP 1.6 trillion in consolidated revenue, with solid growth across most of our businesses. But more than the numbers, we measure success by jobs we create, the access we provide and the opportunities we help build in many communities. We continue to expand our integrated food complex to strengthen our supply chain, improve food security and provide affordable food for many Filipinos family. In Power, our priority is to help ensure energy security and keep electricity affordable while steadily shifting to more renewable sources. Most of our 1,000 megawatt battery storage are now energized, helping stabilize the grid while supporting the integration of renewables, solar and wind. We will build several hydro facilities, including a 2,000-megawatt pump hydro project in San Roque, Pangasinan. To provide clean and reliable energy, we are also expanding our solar project to deliver clean power that help meet demand across many industries. Meanwhile, Petron is investing in more service stations and fuel depots while improving logistics for greater efficiency. In infrastructure, we are building better roads and transport systems to boost regional growth. South Luzon Expressway 36 kilometers has been expanded from 6 to 12 lanes. This is from Alabang to Santo Tomas, Batangas. With ongoing bridges upgrade, STAR Tollway is also being widened from 4 to 8 lanes. MRT 7 is now 80% complete, while South Luzon Expressway Tollway number 4, a 66 kilometers highway from Santo Tomas, Batangas to Lucena, Quezon is 70% workable now and 80% of the right of way already accessible for construction. We are also preparing to build South Luzon Expressway Toll road number 5, which is 420 kilometers Tollway that will stretch from Lucena, Quezon all the way to Matnog, Sorsogon. More projects are in the pipeline to further improve connectivity and support regional development. Our airport projects are also moving forward. Land development for our new Manila International Airport in Bulacan is now 85% complete. With detailed engineering underway and our Manila Ninoy Aquino International Airport just 8 months since we took over the operation we have already introduced key upgrades to improve passenger experience. Sustainability continues to guide how we operate across the group. We are working toward net zero by cutting emissions in our power plant, fuel, refinery and cement business. For our ongoing River cleanup initiative, we have removed over 8.4 million tonnes of waste from 160 kilometers of waterways. This includes Pasig River, Tullahan River, San Juan River, Pampanga River and several Bulacan Rivers as well as reverse in Laguna, Navotas, Paranaque and portion of Angat River. Waterways around NAIA, our goal is to bring this river back to life, improve water flow, reduce flooding and help revive the surrounding environment to our stockholders. We are not just building a bigger company. We are building a better one, one that helps more people, support communities and takes care of the future we all share. None of this would be possible without the hard work of our people and your continued trust and support, [Foreign Language]. Our newly appointed President of the company, John Paul will deliver the detailed report of individual companies.

Thank you, Mr. Chairman. In 2024, San Miguel Corporation achieved solid broad-based growth across its businesses. Consolidated revenues reached a record of PHP 1.6 trillion, up 9% from the previous year. This was driven by broad-based top line growth and strong volume gains from power, spirits, fuel and oil as well as contributions from beer and infrastructure. Consolidated operating income was 11% higher at PHP 160.8 billion on improved margins across power, food and beverage and Infrastructure business. Excluding the effects of foreign exchange, core net income reached PHP 52.3 billion, up 22% from 2023. We also met our full year 2024 EBITDA guidance and achieved a 10% growth to PHP 225.9 billion. Now let me provide the breakdown of how each of our businesses performed. San Miguel Food & Beverage delivered a 6% increase in consolidated revenues to PHP 400.9 billion, driven by higher volumes. Consolidated income from operations rose by 15% to PHP 55.8 billion, while consolidated net income grew 7% to PHP 41 billion. San Miguel Brewery grew in 2024 with net sales up through stable domestic volumes and strong consumer engagement. Consolidated operating income and net income are also up due to various efforts to expand its brand's presence in the domestic and international markets. Ginebra San Miguel achieved its elevated year of uninterrupted growth, surpassing its 50 million cases mark. Revenues and operating income were up as profitability was driven further by record volumes and expanding distribution. San Miguel Foods likewise sustained its growth momentum with net sales improving on strong volume growth across most segments, favorable selling prices for the prepared and packaged foods segment and the recovery of poultry prices. San Miguel Yamamura Packaging also generated higher revenues as new products were introduced in domestic and international markets. San Miguel Global Power reported a 21% increase in revenue to PHP 205.1 billion as offtake volumes rose by 45%. We attribute this growth to various factors, including the signing of new power supply agreements, new retail supply customers for the Limay Power Plant, additional revenues from our battery storage system facilities and increased generation output from newly commissioned facilities. Consolidated operating income grew by 24% to PHP 40 billion on fuel pass-through arrangements and additional margins from our best facilities. As a result, net income from our power business increased by 25% to PHP 12.4 billion. Petron Corporation also registered higher revenues based on a 10% improvement in consolidated sales volumes, reaching 140 million barrels. Consolidated revenues rose by 8% to PHP 868 billion despite volatility in the global oil market. Petron remained profitable, posting consolidated operating income of PHP 29.2 billion and net income of $8.5 billion. Meanwhile, SMC Infrastructure reported sustained volume growth at all its operating tollways, resulting in a 7% increase in consolidated revenues to PHP 37.5 billion. Consolidated operating income was also up by 12% to PHP 20.3 billion, driven by sustained volume growth and controlled costs. Our cement group reported 6% lower consolidated revenues at PHP 34.9 billion due to a significant decrease in average selling prices, mainly due to an influx of dump cement imports, which have entered the market. Current market share of dump cement is at 21% in the Philippines. Despite these challenges, operating income improved 10% as lower costs offset the decline in revenues. Overall, our momentum has carried over to the first quarter of this year. We saw a sharp increase in net income of PHP 43.4 billion on onetime gains from the partial sale of power assets as well as foreign exchange gains. Excluding these nonrecurring items, core net income still grew 31% to PHP 19 billion, driven by disciplined cost management and the solid performance of most of our core businesses. Revenues declined by 8% to PHP 360.9 billion due to weaker crude prices and lower contributions from Power, following the consolidation of the Ilijan Power Plant. Operating income rose 13% to PHP 45.6 billion, consolidated EBITDA increased 17% year-on-year to PHP 64.2 billion. This concludes our report, Mr. Chairman.

Thank you, Paul. The chair will now entertain questions.

Mr. Chairman, we will start with questions submitted in advance.

Mr. Chairman, first question from a stockholder from Lucena City. [Foreign Language]

[Foreign Language]

Mr. Chairman, second question from a stockholder from Makati City [Foreign Language].

[Foreign Language] Main focus is to finish Bulacan airport. It is a massive $15 billion airport. This project is a game-changer. [Foreign Language] Can you imagine if we can increase by 30 million more, it can create another 30 million job opportunity. [Foreign Language]

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

I second the motion.

Motion seconded. 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 11, 2024 until today.

Mr. Chairman, the acts and proceedings approved by the Board of Directors and the Board Committee since 2024 Annual Stockholders' Meeting include those in the list attached as Annex B to the definitive information statement distributed to the stockholders. Such acts and proceedings are likewise presented in 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 11, 2024. And as set forth in the minutes of the meetings of the Board of Directors be approved, confirmed and ratified.

I second the motion.

Motion seconded. Next item on the agenda is the ratification of the director's fee for year 2024. May I call on our 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 directors' fees for 2024 in the amount of PHP 72.39 million, and the Board of Directors approved the same.

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

Mr. Chairman, I confirm.

The Chair will now entertain the motion.

Mr. Chairman, I move that the directors fees for 2024 be approved, ratified and confirmed.

I second the motion.

Is there any objection? There being no objection, 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 our 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 the year 2025 and the ratification of the KPMG's fees for the preparation of the 2025 audited financial statements of the company's and its subsidiaries.

May I call on the Audit and Risk Oversight Committee to 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 2025.

I second the motion.

May I call on Independent Director, Margarito Teves, to confirm?

Yes.

Thank you. We shall now proceed to the election of the directors. The Corporate Secretary will read the names of the nominees for election of the Board.

Mr. Chairman, the nominees for election to the Board of Directors are Ramon S. Ang; John Paul L. Ang; Cecile L Ang; Aurora T. Calderon; Joselito D. Campos, Jr., Jose C. de Venecia, Jr.; Ernesto M. Pernia; Joseph N. Pineda; Alexander J. Poblador; Thomas A. Tan; Bryan U. Villanueva; Iñigo Zobel; Douglas LuYm; Felipe M. Medalla; and Margarito B. Teves. In the information statement circulated for this meeting, the 3 nominees for election as independent directors are indicated. They are Mr. Douglas L. LuYm, Felipe M. Medalla, and Margarito B. Teves. This is in accordance with the mandatory requirements of the Securities Exchange Commission for electing independent directors.

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

I second the motion.

Motion had been duly made and seconded carried. The 15 nominees are declared duly elected members of the Board of Directors of the company. I'd like to welcome the members of the Board of Directors and look forward to working with all of you in attending the businesses of the company. Does anyone have any matters of 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.