Lucio Tan-led Tanduay sees cut in profits due to fire

By Neil Jerome C. Morales, BusinessWorld

Posted at Nov 23 2010 02:14 AM | Updated as of Nov 24 2010 07:06 AM

MANILA, Philippines - Lucio C. Tan-led liquor producer Tanduay Holdings, Inc. expects a slide in net income this year due to damage caused by a fire that razed its plant in Laguna last month.

But volume sold will be higher this year given stronger consumer spending in rural areas in the Visayas and Mindanao, officials said yesterday.

“We will have a lower net income. Maybe we will maintain the net income we had in January to September,” Nestor C. Mendones, senior vice-president and chief financial officer of Tanduay Holdings, told BusinessWorld in a phone interview.

Mr. Mendones said the company incurred a P228-million loss due to a fire in its Cabuyao plant in Laguna. This will be reflected in the firm’s fourth-quarter financial report.

Tanduay Holdings relocated its operations to Cabuyao from Quiapo, Manila. It also has a production facility in Cagayan de Oro and Misamis Oriental.

Profits of Tanduay Holdings surged by almost 65% to P269.96 million in the third quarter amid robust sales. This brought net income to P536.24 million in the nine months that ended September, an increase of 18.6%.

Earnings during the 9-month period were more than 5% lower compared with the P569.33-million full-year income for 2009.

Mr. Mendones said: “We are looking at a 10% volume growth for the rest of the year.” But gains will be offset by losses due to the fire, he added.

In the nine-month period, volume increased by 7%. “We attribute that to good sugar prices in the Visayas and Mindanao. That is why people have higher disposable income,” Mr. Mendones said.

Tanduay Holdings holds about 95% of the alcohol market in the Visayas and Mindanao, which account for 47% and 38% of sales, respectively.

In a separate phone interview, Tanduay Holdings President Wilson T. Young said the company increased its selling prices by 10% this year.

Mr. Young said the company sold about 16 million cases of alcoholic beverages in January to September.

Sales will likely increase to 19 million to 20 million cases this year from 18 million cases last year, he said.

Tanduay Holdings is expecting 5% to 15% increase in total sales this year.

In the third quarter, net sales jumped by 22% to P3.18 billion.

Nine-month sales increased by 18% to P8.81 billion, the company said in its financial statement.

Tanduay Holdings is the second-largest producer of rum in the world.

Products include Cossack Blue, Cossack Vodka, Tanduay Rhum, Jamaica Lime Juice, and new offerings Tanduay T5 Lite and Tanduay Extra Strong.

Shares in Tanduay Holdings, which controls firms like Tanduay Distillers, Inc. and Tanduay Brands International, Inc., were unchanged yesterday at P3.10 each. -- Neil Jerome C. Morales