SMC Businesses Rebound After Steep Slump, H1 Results Reflect Full Impact Of ECQ

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San Miguel Corporation (SMC) saw its businesses rebound by the end of the second quarter of 2020 as it continues to respond nimbly to the new normal, through an agile operating model built around consumers along with the reinforcement of its culture of malasakit.

With the recent reimposition of restrictions, the company said it is prepared to execute on its plans and support government initiatives to the fullest to help the country recover.

“The first half was particularly challenging for most in the business sector but we are seeing strong indications of a recovery for SMC businesses, and we remain focused and determined to build on these gains. Government reopening the economy, and allowing businesses to operate under strict health and safety protocols, was a very good call. Given that we’re still in a pandemic, saving lives is still our priority. As such, we fully support the new Modified Enhanced Community Quarantine (MECQ) in support of our medical front liners,” SMC president and COO Ramon S. Ang said.

The full impact of the pandemic that virtually shut all economic activity in the country from mid-March to mid-May, however, limited growth and reflected on the company’s first half performance.

As a result, SMC ended the first half with a net loss of P4.0 billion. Consolidated revenues amounted to P352.8 billion, 31% lower from last year while consolidated operating income declined by 74% at P14.9 billion.

Businesses that were hit the hardest

While most of its businesses managed to weather the storm caused by COVID-19, two of its subsidiaries were particularly hit the hardest – San Miguel Brewery Inc. and Petron Corporation.

The implementation of the Enhanced Community Quarantine (ECQ) in mid-March did not help SMB’s operations which was already reeling from the effects of higher excise taxes. Consolidated revenues as a result dropped 39% to P42.8 billion. Operating income slid 61% to P7.4 billion, compared to the same period last year.

With the easing of restrictions from ECQ to General Community Quarantine (GCQ) and the gradual reopening of the economy, San Miguel Brewery’s domestic operations’ performance picked up by mid-May with significant beer volume recovery in June.

Petron, meanwhile, continued to face difficulties throughout the first six months of the year, as global crude prices remained volatile. This was compounded by the decline in demand during the 2nd quarter when the ECQ was in place. Refining margins also remained weak in the region as oil consumption declined.

While Petron suffered inventory losses of nearly P15 billion during this period, the recent stability in crude prices in July is seen to provide an estimated P3.5 billion in inventory gain for the company by the 2nd half of the year.

Petron incurred consolidated net loss of P14.2 billion for the first six months of 2020 versus its P2.6 billion net income in 2019. Consolidated revenues amounted to P152.4 billion, down 40% from P254.8 billion in the same period last year. Consolidated sales volumes from its Philippine and Malaysian operations also fell 19% to 41.9 million barrels from 51.9 million barrels a year ago, amidst a sharp decline in fuel demand due to the pandemic.

Petron continues to improve its productivity and reduce expenses to cope with COVID-19’s impact. Cash preservation initiatives have also been initiated. With crude prices stabilizing on the back of improving demand, some recovery in refining margins are expected moving forward.

“The best thing we can do is to work hard to continue providing essential goods and services to our people, while adjusting our operations to fully adhere to the quarantine. We are fortunate that during the easing of the quarantine, we were able to put in place and strengthen strategies that will help us operate better, get our products and services to more customers, support long-term growth, and help boost our economy during these challenging times” Ang said.

Among the measures the company implemented is the opening of its own COVID-19 PCR testing lab, designed to test and safely get some 70,000 employees, consultants, service providers, and partners back to work. It has a capacity of 4,000 tests per day.

The company also recently launched “The Mall”, a new online ordering platform that houses all its major consumer product segments.

These are on top of other programs to bring products closer to consumers via Petron’s service station network; rolling stores, community selling through village resellers, as well as the utilization of top e-commerce apps and websites.

San Miguel had earlier announced that all its major infrastructure projects would push through, despite the crisis, in order to boost the economy and provide jobs for more Filipinos struggling to cope with the impact of the pandemic.

“Right now, we are all in the same boat. Businesses, big and small, here in the Philippines and all over the world, are struggling. We are fortunate in San Miguel to have companies that provide essential products and services, and we have worked hard to continue operations and serve our people. Our commitment is to continue doing our part to help our country any way we can, including providing aid, pushing through with major investments to boost and strengthen our economy,” Ang said.

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