Sunday, December 04, 2011

Improving Investor Relations, Long Way To Go

In The Edge I saw a snippet headlining: "Bursa Malaysia Wins Four Awards At IR Global Rankings". The awards were for Outstanding Corporate Governance in Asia-Pacific, Best Ranked Corporate Governance by Industry (Financials) and Best Online Annual Report in Asia-Pacific. Bursa Malaysia also won the bronze award for investors relations website in Asia-Pacific.



Its all fine and dandy for Bursa Malaysia to get the awards, what about the other 1,000 odd listed entities on Bursa??? They all seem to try to get away revealing the bare minimum in financials, rather than trying to really engage investors and analysts. To me, its not a matter of revealing trade secrets but rather the mindset you have as a listed entity. If you think investors are "fools" and "no need to spend so much time and resources on" and generally regard them with disdain - you will act accordingly.


Let me show you just ONE example of a listed Philippine stock, Universal Robina, a pretty good stock actually. This is their filing for quarterly results. Besides the usual Balance Sheet, Income Statement and Cash Flow ... you get a "real opinion" from management on operations:

http://www.universalrobina.com/2011/08/11/urc-sec-17q-3qfy2011/


URC POSTS STRONG TOPLINE GROWTH OF 18% TO P 50.578 BILLION FOR THE FIRST 9 MONTHS OF THE FISCAL YEAR 2011 BUT COST COMMODITY INFLATION IMPACTED PROFITABILITY RESULTING TO A 24% DECLINE IN NET INCOME TO P4.9B
URC’s consolidated net sales and services for the first nine months of fiscal year 2011 (October 2010 to June 2011) amounted to Php 50.578 billion, a 17.7% growth from Php 42.964 billion in the same period last year. The increase was driven by the outstanding performance of our international branded foods business as well as the strong growth of the commodity foods group primarily due to high prices of sugar in the first half. This was tempered by the modest growth of our domestic branded business with soft sales in beverages and a decline in our agro industrial group as it entered the down cycle.
Sales performances by business are as follows:
URC’s branded consumer foods segment, including the packaging division, increased sales of goods and services by Php 5.493 billion, or 17.1%, to Php 37.556 billion in the first three quarter of fiscal 2011 from Php 32.063 billion in the same period last year. As of the first nine months, our Philippine branded operations grew modestly by 5.0% to Php 21.849 billion from Php 20.809 billion in the same period last year. Sales of our snackfoods business in the Philippines remains buoyant as we saw double digit growth in Biscuits, Cakes and Chocolates but this was tempered with the soft sales for our powdered and ready to drink beverages categories.
Our international BCF business meanwhile continued its outstanding performance with Vietnam and Thailand leading the growth at 47.4% and 32.7% respectively. While solidifying our leadership in Biscuits in Thailand and sustaining the strong demand for our RTD Tea – C2 product in Vietnam, we continue to successfully build our product portfolio across the ASEAN region. We grew sales by 35.3% from Php 10.651 billion to Php 14.413billion. In USD terms, sales already reached US$331 million for the first three quarters which is a 43.3% increase versus same period last year.
URC’s commodity foods group amounted to Php 7.927 billion in the first three quarters of fiscal 2011 or up 43.1% from Php 5.541 billion in the same period last year. Sugar business sustained sales growth of 74.2% while flour business also grew 8.5% as a result of multiple price increases to offset the high cost of wheat in the world market.
Net sales of URC’s agro-industrial group amounted to Php 5.095 billion for the nine months of fiscal 2011, a 4.9% decrease from last year. Feed business managed to increase by 22.6% to Php 2.537 billion while farm business declined by 22.2% due to low volumes and depressed selling prices for hogs.
URC’s operating income decreased by Php 772 million, or 12.4% to Php 5.454 billion for the nine months of fiscal 2011 from Php 6.226 billion reported in the same period of fiscal 2010. The global increase in commodity prices relative to last year’s prices eroded the company’s margins. Higher input costs were partly offset by selling price increases and profit improvement initiatives on the company’s products.
URC’s unaudited net income for the first nine months of fiscal year 2011 reached Php 4.940 billion, a decrease of 23.6% from Php 6.468 billion posted in the same period last year. The drop was due to the decline in market values of bond investments and lower operating income despite higher sales.
Our balance sheet remains healthy. As of the period, we are still in a net cash of position of Php 3.886 billion, with a financial gearing ratio of 0.43.


If you click through for the quarterly results, you will get a most comprehensive Management Discussion and Analysis of the Results:


Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations

Business Overview
Universal Robina Corporation (URC) is one of the largest branded food product companies in the Philippines and has a growing presence in other Asian markets. It was founded in 1954 when Mr. John Gokongwei, Jr. established Universal Corn Products, Inc., a cornstarch manufacturing plant in Pasig. The Company is involved in a wide range of food-related businesses, including the manufacture and distribution of branded consumer foods, production of hogs and day-old chicks, manufacture and distribution of branded and unbranded animal and fish feeds, glucose and veterinary compounds, flour milling, and sugar milling and refining. The Company is a dominant player with leading market shares in savory snacks, candies and chocolates, and is a significant player in biscuits, with leading positions in cookies and pretzels. URC is also the largest player in the ready to drink (RTD) tea market, and is a respectable 2nd player in the instant coffee business.

The Company operates its food business through operating divisions and wholly-owned or majority owned
subsidiaries that are organized into three business segments: branded consumer foods, agroindustrial products and commodity food products.
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The branded consumer foods (BCF) segment, including our packaging division, is the Company’s largest segment. The Company’s branded consumer foods division manufactures and distributes a diverse mix of snack, chocolate, candy, biscuit, bakery, beverage, noodles and tomato-based products. The manufacture, distribution, sales and marketing activities for the Company’s consumer food products are carried out mainly through its branded consumer foods group consisting of snack foods, beverage and grocery divisions, although the Company conducts some of its branded consumer foods operations through its wholly-owned or majority-owned subsidiaries and joint venture companies (i.e. Hunt-URC and Nissin-URC).

The Company has a strong brand portfolio created and supported through continuous product innovation, extensive marketing and experienced management. Its brands are household names in the Philippines and a growing number of consumers across Asia are purchasing the Company’s branded consumer food products. The Company’s packaging division is engaged in the manufacture of polypropylene films for packaging
companies.

The Company’s agro-industrial group (AIG) operates three divisions, which is engaged in hog and poultry farming (Robina Farms or “RF”), the manufacture and distribution of animal and fish feeds, glucose and soya products (Unversal Corn Products or “UCP”), and the production and distribution of animal health products (Robichem).

The Company’s commodity food group (CFG) engages in sugar-milling and refining through its Sugar divisions: URSUMCO, CARSUMCO, SONEDCO and PASSI; and flour-milling and pasta manufacturing and marketing through URC Flour division. The group supplies all the flour and sugar needs of the BCFG.

The Company is a core subsidiary of JG Summit Holding, Inc. (JGSHI), one of the largest conglomerates listed in the Philippine Stock Exchange based on total net sales. JGSHI has substantial interests in property development, hotel management, banking and financial services, telecommunications, petrochemicals, air transportation and business interests in other sectors, including power generation and insurance.


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Results of Operations
Nine Months Ended June 30, 2011 versus June 30, 2010
URC posted a consolidated sale of goods and services of P=50.578 billion for the nine months ended June 30, 2011, 17.7% higher than the revenues posted in the same period last year. Sale of goods and services performance by business segment follows:

Sale of goods and services in URC’s BCFG, excluding packaging division, increased by P=4.802 billion, or 15.3%, to P=36.262 billion for the nine months of fiscal 2011 from P=31.460 billion registered in the same period of last year. BCFG domestic sales increased by P=1.040 billion to P=21.849 billion from P=20.809 billion which was largely driven by the strong performance of its snack foods which grew by 13.3% on account of growth in sales volume and increase in selling prices.

BCFG International sales significantly increased by 35.3% to P=14.413 billion for the nine months of fiscal 2011 from P=10.651 billion posted in the same period last year. In US dollar amount, sales registered an increase of 43.3% from US$231 million posted for the nine months of fiscal 2010 to US$331 million recorded in the same period of this year due to increase in sales volume by 39.4%. This was supported by strong sales growth in Vietnam, Thailand, Malaysia and China.

Sale of goods and services of BCFG, excluding packaging division, accounted for 71.7% of total URC consolidated sale of goods and services for the nine months of fiscal 2011. Sales in URC’s packaging division went up to P=1.294 billion for the nine months of fiscal 2011 from P=603 million posted in the same period last year due to significant increase in sales volume coupled by increase in selling price.

Sale of goods and services in URC’s AIG amounted to P=5.095 billion for the nine months of fiscal 2011, a 4.9% decrease from P=5.360 billion recorded in the same period last year. Feed business increased by 22.6% to P=2.537 billion on the back of increases in sales volume and selling prices. Farm business declined by 22.2% due to lower sales volume and farm gate prices.

Sale of goods and services in URC’s CFG amounted to P=7.927 billion for the nine months of fiscal 2011 or up 43.1% from P=5.541 billion reported in the same period last year. This was primarily due to upsurge in net sales of sugar business by 74.2% driven by higher sales volume and prices. Flour business also grew by 8.5% as a result of price increases.

URC’s cost of sales consists primarily of raw and packaging materials costs, manufacturing costs and direct labor costs. Cost of sales increased by P=8.016 billion, or 26.6%, to P=38.096 billion for the nine months of fiscal 2011 from P=30.080 billion reported in the same period last year. Cost of sales went up due to increase in sales volume and costs of major raw materials.


URC’s gross profit for the nine months of fiscal 2011 amounted to P=12.481 billion, a decrease of P=403 million or 3.1% from P=12.884 billion posted in the same period last year. Gross margin declined by 5 percentage points versus same period last year as a result of higher input costs.

URC’s selling and distribution costs, and general and administrative expenses consist primarily of compensation and benefits, advertising and promotion costs, freight and other selling expenses, depreciation, repairs and maintenance expenses and other administrative expenses. Selling and distribution costs, and general and administrative expenses increased by P=368 million or 5.5% to P=7.027 billion for the nine months of fiscal 2011 from P=6.659 billion registered in the same period of fiscal 2010. This increase resulted primarily from the following factors:

· 8.4% or P=203 million increase in advertising and promotion costs to P=2.605 billion for the nine months of fiscal 2011 from P=2.402 billion in the same period last year to support the new SKUs launched and boost up sales of existing products in light of increasing market competitions.

· 10.5% or P=160 million increase in freight and delivery charges to P=1.683 billion for the nine months of fiscal 2011 from P=1.523 billion in same period last year due to increase in trucking and shipping costs associated with increased volume.

As a result of the above factors, operating income decreased by P=772 million, or 12.4% to P=5.454 billion for the nine months of fiscal 2011 from P=6.226 billion reported in the same period of fiscal 2010. URC’s finance revenue consists of interest income from investments in financial instruments, money market placements, savings and dollar deposits and dividend income from investment in equity securities. Finance revenue increased by P=27 million or 3.0% to P=942 million for the nine months of fiscal 2011 from P=915 million in the same period of fiscal 2010 due to increased level of financial assets during the period.

Market valuation loss on financial instruments at FVPL of P=81 million was reported for the nine months of fiscal 2011 against market valuation gain of P=903 million in the same period of fiscal 2010 mainly due to decline in market values of bond investments.

Equity in net income of a joint venture amounted to P=17 million for the nine months of fiscal 2011 against P=23 million in same period of fiscal 2010 due to lower net income of Hunt-Universal Robina Corporation.

URC’s finance costs which mainly consist of interest expense decreased to P=744 million for the nine months of fiscal 2011 from P=781 million recorded in same period of fiscal 2010.

Foreign exchange loss - net amounted to P=216 million for the nine months of fiscal 2011, 17.6% decrease from P=262 million reported in the same period last year due to lower realized foreign exchange loss on foreign currency denominated transactions.

Other income - net consists of gain on sale of fixed assets and investments, rental income, amortization of bond issue costs, and miscellaneous income and expenses. Other income - net decreased from P=103 million for the nine months of fiscal 2010 to P=60 million in the same period this year due to gain on sale last year of fixed assets and assets held for disposal.

The Company recognized provision for income tax of P=491 million for the nine months of fiscal 2011, 25.2% decrease from P=656 million reported in the same period last year due to lower taxable income and provision for deferred tax asset on unrealized foreign exchange, accrual of pension expense and reduction in deferred tax liabilities due to decline in market value of hogs.

URC's unaudited net income for the nine months of fiscal 2011 amounted to P=4.940 billion, lower by P=1.528 billion or 23.6% from P=6.468 billion posted in the same period last year, due to lower operating income and decline in market values of bond investments.
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URC’s unaudited core earnings before tax (operating profit after equity earnings, net finance revenue and other income - net) for the nine months of fiscal 2011 amounted to P=5.730 billion, a decrease of 11.7% from P=6.486 billion reported in the same period last year.

Net income attributable to equity holders of the parent decreased by P=1.537 billion or 25.0% to P=4.616 billion for the nine months of fiscal 2011 from P=6.153 billion in the same period last year as a result of the factors discussed above.

Non-controlling interest represents primarily the share in the net income attributable to minority shareholders of the following subsidiaries of URC: URC International, URC’s direct subsidiary in which it holds approximately 77.0% economic interest and Nissin- URC, URC’s 65.0%-owned subsidiary. Non-controlling interest in net income of subsidiaries increased from P=315 million for the nine months of fiscal 2010 to P=324 million for the same period this year due to higher net income reported by URC International and Nissin-URC.

URC reported an EBITDA (operating income plus depreciation and amortization) of P=7.921 billion for the nine months of fiscal 2011, 8.5% lower than P=8.655 billion recorded in the same period of fiscal 2010.

The Company is not aware of any material off-balance sheet transactions, arrangements and obligations (including contingent obligations), and other relationship of the Company with unconsolidated entities or other persons created during the reporting period that would have a significant impact on the Company’s operations and/or financial condition.

Financial Position
June 30, 2011 vs. September 30, 2010
URC’s financial position remained to be strong with a current ratio of 1.68:1 as of June 30, 2011. Financial debt to equity ratio of 0.43:1 for the period is within comfortable level. Book value per share increased to P=19.89 as at June 30, 2011 from P=19.78 as at September 30, 2010. Total outstanding common shares as of June 30, 2011 decreased by 8 million shares to 2.062 billion shares from 2.070 billion shares as at September 30, 2010.

The Company’s cash requirements have been sourced through cash flow from operations. Net cash provided by operating activities for the nine months ended June 30, 2011 was P=7.257 billion. Net cash used in investing activities for the period amounted to P=4.381 billion mainly due to acquisition
of property, plant and equipment and financial assets at FVPL. Net cash used in financing activities amounted to P=2.665 billion due to dividend payment and re-acquisition of Company shares, net of loan availments.

As of June 30, 2011, the Company is not aware of any events that will trigger direct or contingent financial obligation that is material to the Company, including any default or acceleration of an obligation.
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Material Changes in Fiscal 2011 Financial Statements
(Increase/Decrease of 5% or more versus FY 2010)
Statements of Comprehensive Income - Nine months ended June 30, 2011 versus same period in fiscal 2010

17.7% increase in sale of goods and services was due to the following:
Sale of goods and services in URC’s BCFG, excluding packaging division, increased by P=4.802 billion, or 15.3%, to P=36.262 billion for the nine months of fiscal 2011 from P=31.460 billion registered in the same period of last year. BCFG domestic sales increased by P=1.040 billion to P=21.849 billion from P=20.809 billion which was largely driven by the strong performance of its snack foods which grew by 13.3% on account of growth in sales volume and increase in selling prices.

BCFG International sales significantly increased by 35.3% to P=14.413 billion for the nine months of fiscal 2011 from P=10.651 billion posted in the same period last year. In US dollar amount, sales registered an increase of 43.3% from US$231 million posted for the nine months of fiscal 2010 to US$331 million recorded in the same period of this year due to increase in sales volume by 39.4%. This was supported by strong sales growth in Vietnam, Thailand, Malaysia and China.

Sale of goods and services of BCFG, excluding packaging division, accounted for 71.7% of total URC consolidated sale of goods and services for the nine months of fiscal 2011.

Sales in URC’s packaging division went up to P=1.294 billion for the nine months of fiscal 2011 from P=603 million posted in the same period last year due to significant increase in sales volume coupled by increase in selling price.

Sale of goods and services in URC’s AIG amounted to P=5.095 billion for the nine months of fiscal 2011, a 4.9% decrease from P=5.360 billion recorded in the same period last year. Feed business increased by 22.6% to P=2.537 billion on the back of increases in sales volume and selling prices. Farm business declined by 22.2% due to lower sales volume and farm gate prices.

Sale of goods and services in URC’s CFG amounted to P=7.927 billion for the nine months of fiscal 2011 or up 43.1% from P=5.541 billion reported in the same period last year. This was primarily due to upsurge in net sales of sugar business by 74.2% driven by higher sales volume and prices. Flour business also grew by 8.5% as a result of price increases.

26.6% increase in cost of sales was due to increase in sales volume and costs of major raw materials

8.1% increase in selling and distribution costs, Due to increase in advertising and promotions costs and freight and delivery charges

109.0% increase in market valuation loss on financial instruments at FVPL. Due to decline in market values of bond investments held

26.0% decrease in equity in net earnings. Due to decline in net income of Hunt-URC

17.6% decrease in foreign exchange loss - net. Due to lower realized foreign exchange loss on foreign currency denominated transactions
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42.1% decrease in other revenues - net. Due to gain last year on the sale of fixed assets and assets held for disposal.

25.2% decrease in provision for income tax. Due to lower taxable income and provision for deferred tax asset on unrealized foreign exchange, accrual of pension expense and reduction in deferred tax liabilities due to decline on market value of hogs.

396.1% decrease in other comprehensive income. Due to decline in value of AFS investments from unrealized gain last year to unrealized loss this year and higher unrealized loss on cumulative translation adjustments from foreign currency denominated accounts.

Statements of Financial Position – June 30, 2011 versus September 30, 2010
17.0% increase in financial assets at fair value through profit and loss. Due to acquisitions, net of decline in market values of bond and equity investments
14.5% decrease in available-for-sale investments. Due to maturity of certain bond investments and decrease in market values
34.4% increase in receivables-net. Due to increases in trade receivables, due from related parties and advances to suppliers
12.1% increase in inventories. Due to increase in finished goods, work in process and supplies and spareparts inventories
13.6% increase in biological assets. Due to increase in population of livestock, net of decline in market value of hogs
18.1% decrease in other current assets. Due to decline in input taxes
8.8% decrease in investment in a joint venture. Due to dividends declared, net of equity share in net income of Hunt-URC
96.3% decrease in net pension assets. Due to accrual of pension expense
41.2% increase in accounts payable and other accrued liabilities. Due to increase in trade payables and accrued expenses
32.2% increase in short-term debt. Due to additional loan availments
100.0% increase in trust receipts and acceptances payable. Due to availment of trust receipt facility
13.8% decrease in income tax payable. Due to lower taxable income
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9.3% decrease in deferred income tax liabilities - net. Due to recognition of deferred tax asset of the parent company on unrealized market loss on hogs valuation and foreign exchange and accrual of pension expense
26.5% decrease in other comprehensive income. Due to decrease in market values of bond and equity investments classified as available-for-sale and decrease in cumulative translation adjustments as a result of appreciation in value of Philippine peso against US dollar
15.4% increase in treasury shares. Due to reacquisition of Company shares during the period
36.2% increase in equity attributable to non-controlling interests. Due to share in net income of URC International and Nissin-URC

The Company’s key performance indicators are employed across all businesses. Comparisons are
then made against internal target and previous period’s performance.

All that from a quarterly report. When will we ever get to this stage? First, the GLCs have to take the lead, be transparent and try to engage all investors. Sooo much work-la ... yea, and the Filipinos have a lot of spare time isssit???

3 comments:

Unknown said...

try scomi engineering.

sales RM77m plus for the latest qtr. trade debts up to >RM500m. Not a word on collectibility.

what does SC do? Nothing coz its the responsibility of Scomi. And if Scomi is silent citing not a regulatory requirement, we investors are left in a lurch when the write-offs kicked in.

thats investing for you in Msia

ronnie said...

Write-offs? What are they?

Ho ho ho.

Bonescythe said...

Zhang Xin Yu.. Another killer.. :)