San Miguel Corp.'s (SMC) beer arm, San Miguel Brewery Inc. (SMB), has posted a 25.3 percent rise in net income to P10.04 billion last year from P8.02 billion in 2007.
In a statement over the weekend, the publicly-listed firm attributed the increase "to the operating leverage and a tighter focus on cost control, with good progress on efficiency and volume generating programs".
SMB has sold 174.5 million cases last year, up 4 percent over the previous year, thus boosting its net sales to P48.8 billion from P44.1 billion a year earlier. Its operating income, meanwhile, rose 27 percent to P15.6 billion from P12.3 billion the prior year.
"Brand expansion initiatives, tactical consumer and trade promotions enabled the company to further strengthen its market position. As a result of these efforts, San Mig Light, Red Horse and Gold Eagle all grew in terms of volumes, alongside robust volumes from flagship San Miguel Pale Pilsen," the company statement said.
SMB's profitability and market share dominance prompted Japan's Kirin Holdings Company Ltd. (Kirin) to take interest in the beer company. Kirin is in an exclusive negotiation with SMC for the potential acquisition of 43.25 percent of the issued and outstanding capital stock of SMB.
The parties expect to strike a definitive agreement by the end of February.
SMC, Southeast Asia's largest food and drinks company, currently owns 94.249 percent of SMB, consisting of about 14.524 billion shares. SMB, which became a publicly traded company in 2007, has outstanding shares of 15.410 billion.
If Kirin was to buy the 43.25 percent stake in SMB now, it would take home around 6.665 billion shares valued at about P66 billion based on SMB's Friday closing price of P9.90 per share.
The sales proceeds would boost SMC's liquidity and support its expansion into heavy industries like power, mining, infrastructure and telecommunications. It has a planned buy-in in oil giant Petron Corp.
Kirin, for its part, said the investment in SMB would significantly contribute to the growth of its alcohol business in Asia and Oceania. SMB's beer market share in the Philippines is nearly 95 percent and parent firm SMC has long been in the business in Asia, including China, Vietnam, Indonesia and Thailand.
"Through the contemplated investment, Kirin is aiming to establish the string operational base on both manufacturing and sales in the Asia and Oceania markets," it said.
SMC and Kirin have built a solid partnership over the years. Kirin is an investor in SMC, owning a stake of 19.91 percent. In late 2007, Kirin bought from SMC the Australian dairy and juice business National Foods for $2.7 billion.