URC Financial Analysis 2013 PDF

Preview

Summary

dgrtswqetg...

Description

EXECUTIVE SUMMARY: Universal Robina Corporation (URC) 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 of animal and fish feeds, glucose and veterinary compounds, flour milling, and sugar milling and refining. URC operates its food business through operating divisions and wholly-owned or majority-owned subsidiaries that are organized into three core business segments, namely, branded consumer foods, agro-industrial products and commodity food products. The Company is also engaged in consumer product-related packaging business through its packaging division, which is included in the branded consumer food segment, and through its subsidiary, CFC Clubhouse Property, Inc. The Company sells its branded food products primarily to supermarkets, as well as directly to top wholesalers, large convenience stores, large scale trading companies and regional distributors, which in turn sell its products to other small retailers and down line markets. Moreover, the products are distributed to approximately 120,000 outlets in the Philippines and sold through URC's direct sales force and regional distributors. The attached report analyses the financial condition of the company in the years ended September 30, 2012 and 2011. During the year ended September of 2012, sales at Universal Robina were 71.20 billion Philippine FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

1

Pesos (US$1.75 billion). This is an increase of 6.0% versus 2011, when the company's sales were 67.17 billion Philippine Pesos. This was the fifth consecutive year of sales increases at Universal Robina (and since 2007, sales have increased a total of 89%). Sales of Branded saw an increase of 11.3% in 2012, from 50.56 billion Philippine Pesos to 56.26 billion Philippine Pesos. Not all segments of Universal Robina experienced an increase in sales in 2012: sales of Commodity fell 20.5% to 7.57 billion Philippine Pesos. The company improved its financial condition in 2012. Due to the product innovation the company was able to sustain its financial growth. Also its strategic expansion to the international market contributed to the healthy cash generation of the company.

FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

2

PURPOSE OF FINANCIAL ANALYSIS: The objective of financial statements is to provide information about the financial position, performance and changes in financial position of an enterprise that is useful to a wide range of users in making economic decisions. Financial statements should be understandable, relevant, reliable and comparable. Reported assets, liabilities, equity, income and expenses are directly related to an organization's financial position. Financial statements are intended to be understandable by readers who have "a reasonable knowledge of business and economic activities and accounting and who are willing to study the information diligently. Financial statements may be used by users for different purposes:



Owners and managers require financial statements to make important business

decisions

that

affect

its

continued

operations. Financial

analysis is then performed on these statements to provide management with a more detailed understanding of the figures. These statements are also used as part of management's annual report to the stockholders.



Employees

also

need

these

reports

in

making collective

bargaining agreements (CBA) with the management, in the case of labor unions or for individuals in discussing their compensation, promotion and rankings.



Prospective investors make use of financial statements to assess the viability of investing in a business. Financial analyses are often used by

FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

3

investors and are prepared by professionals (financial analysts), thus providing them with the basis for making investment decisions.



Financial institutions (banks and other lending companies) use them to decide whether to grant a company with fresh working capital or extend debt securities (such as a long-term bank loan or debentures) to finance expansion and other significant expenditures.

COMPANY PROFILE:

FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

4

COMPANY HISTORY: Universal Robina Corporation (URC) is one of the largest branded food product companies in the Philippines, with the distinction of being called the country’s first “Philippine multinational”, and has a growing presence in other Asian markets. Universal Robina Corporation (URC) traced its beginnings all the

way back to 1954. John Gokongwei, Jr. was doing very well then as a trader/importer. He had learned the trade when his father died before the war, and had worked hard through the war and postwar years to prosper. However, while he thrived, he took a long hard look at his company, and correctly predicted that trading would remain a low-margin business. On the other hand, a successful manufacturer controlling its own production and distribution would command more profitable margins. Mr. John decided to construct a corn milling plant to produce glucose and cornstarch, Universal Corn Products (UCP), the first building block of the company that would become URC. For a time, business was good. However, Mr. John was still looking ahead, working with an eye towards the future. While the business was doing very well, it was producing essentially a commodity, which a customer could easily access elsewhere. To stay ahead in the game, Mr. John had to diversify by producing and marketing his own branded consumer foods, similar to the multinational companies in the Philippines like Nestle and Procter & Gamble.

FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

5

In a sense, he wanted to put up the first ‘local’ MNC, borne out of their best practices. Thus, in 1961, Consolidated Food Corporation was born. Their first ‘home run’ product was Blend 45, the first locally-manufactured coffee blend, dubbed as the “Pinoy coffee”. This became the largest-selling coffee brand in the market, even beating market leaders Café Puro and Nescafe. After coffee came chocolates. Nips, a panned chocolate similar to M&Ms, were a staple of Filipino childhood. In 1963, Robina Farms started operations, beginning with poultry products. This was also the beginning of the vertical integration of the Gokongwei businesses, as the farms would be able to purchase feeds from UCP in the future. Later that decade, Robichem Laboratories would be put up, to cater to the veterinary needs of the farms businesses. Robina Farms expanded as it entered the hogs business in the latter part of the 70s. 1966 saw the establishment of Universal Robina Corporation, which pioneered the savory snacks industry in the Philippines through its Chiz Curls, Chippy, and Potato Chips, under the “Jack ‘n Jill” brand. Other snack products would follow over the years, as the company successfully introduced market leaders like Jack 'n Jill Pretzels (pretzels), Piattos (fabricated potato chips), and Maxx (hard candy). The coming decades saw more acquisitions and expansion. In the early 1970s, the Gokongwei family entered the commodities business through the formation of Continental Milling Corporation, for flour milling and production. FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

6

The late 1980s brought the acquisition of three sugar mills and refineries, under URC Sugar. These two businesses provided stable cash flows, and allowed for further vertical integration in the supply chain, to help URC weather any volatility in the cyclical commodities markets. In line with this strategy, the late 1990s saw the entry of URC into the plastics business, through URC Packaging. As the businesses became more diversified, the companies were slowly integrated in order to streamline operations and minimize costs. In 2005, the present structure of the group was completed. All the different companies are now organized under Universal Robina Corporation, divided into three focused groups:



the Branded Consumer Foods Group, composed of BCFG Domestic (including packaging) and URC International, for the production and sale of snacks, beverage, and grocery products,



the Agro-Industrial Group, composed of Universal Corn Products, Robina Farms, and Robichem, for the production and sale of animal feeds, day-old chicks, hogs, and veterinary medicine,



and the Commodity Foods Group, with the Sugar and Flour divisions, for the production of flour and sugar, and for sugar milling and refining services. URC is a core subsidiary of JG Summit Holdings, Inc. (JGSHI) which is

one of the largest business conglomerates listed in the Philippine Stock Exchange. FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

7

URC owned the Philippine Basketball Association franchise Great Taste Coffee Makers which played from the inaugural 1975 season to 1992 when the company sold the team to Sta. Lucia Realty. The Coffee Makers won 6 PBA championships.

BOARD OF DIRECTORS: John L. Gokongwei, Jr. founded URC in 1954 and has been the Chairman Emeritus of URC effective January 1, 2002. He had been Chairman of the Board until his retirement and resignation from this position effective December 31, 2001. He continues to be a member of URC’s Board and is the Chairman Emeritus of JG Summit and certain of its subsidiaries. He also continues to be a member of the Executive Committee of JG Summit. He is currently the Chairman of the Gokongwei Brothers Foundation, Inc., Deputy Chairman and Director of United Industrial Corporation, Ltd. and Singapore Land, Ltd., and a director of JG Summit Capital Markets Corporation, Digital Telecommunications Phils., Inc., Oriental Petroleum and Minerals Corporation, First Private Power Corporation and Bauang Private Power Corporation. He is also a non-executive director of A. Soriano Corporation and Philex Mining Corporation. Mr. Gokongwei received a Master’s degree in Business Administration from De La Salle University and attended the Advanced Management Program at Harvard Business School. James L. Go is the Chairman and Chief Executive Officer of URC. He had been President and Chief Executive Officer and was elected to his current position effective January 1, 2002 upon the resignation of Mr. John FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

8

Gokongwei, Jr. as Chairman. He is also the Chairman and Chief Executive Officer of JG Summit and as such, he heads the Executive Committee of JG Summit. He is currently the Chairman and Chief Executive Officer of Robinsons Land Corporation (“RLC”), JG Summit Petrochemical Corporation, Manila Midtown Hotels and Land Corporation, Litton Mills, Inc., CFC Corporation, Universal Robina Sugar Milling Corporation, Southern Negros Development Corporation, Robinsons, Inc., and Oriental Petroleum and Minerals Corporation (“OPMC”). He is also the President and a Trustee of the Gokongwei Brothers Foundation, Inc. and a director and Vice Chairman of Digital Telecommunications Phils., Inc. He is also a director of First Private Power Corporation, Bauang Private Power Corporation, OPMC, Cebu Air, Inc., Panay Electric Co., United Industrial Corp., Ltd., Singapore Land, Ltd., Marina Center Holdings, Inc. and JG Summit Capital Markets Corporation. He received a Bachelor of Science degree and a Master of Science degree in Chemical Engineering from the Massachusetts Institute of Technology. Mr. James L. Go joined URC in 1964. Lance Y. Gokongwei is the President and Chief Operating Officer of URC. He had been Executive Vice President and was elected President and Chief Operating Officer effective January 1, 2002. He is the President and Chief Operating Officer of JG Summit Holdings, Inc. and JG Summit Petrochemical Corporation and the Vice Chairman and Deputy Chief Executive Officer of Robinsons Land Corporation and Litton Mills, Inc. He is also the President and Chief Executive Officer of Cebu Air, Inc. and Digital Telecommunications Phils., Inc., Chairman of Robinsons Savings Bank, FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

9

President of Digital Information Technology Services, Inc., Vice Chairman of JG Summit Capital Markets Corporation, and a director of OPMC, United Industrial Corporation, Ltd., and Singapore Land, Ltd. He is also trustee, secretary and treasurer of Gokongwei Brothers Foundation, Inc. He received a Bachelor of Science degree in Economics and a Bachelor of Science degree in Applied Science from the University of Pennsylvania. Mr. Lance Y. Gokongwei joined URC in 1988. Patrick Henry C. Go is a director and Vice President of URC. He is also a director of JG Summit Holdings, Inc., RLC, CFC Corporation, JG Cement Corporation,

Robinsons

Savings

Bank

and

JG

Summit

Petrochemical

Corporation where he is also Deputy Chief Operating Officer. He is a trustee of the Gokongwei Brothers Foundation, Inc. He received a Bachelor of Science degree in Management from the Ateneo de Manila University and attended the General Manager Program at Harvard Business School. Frederick D. Go has been a director of URC since June 2001. He is the President and Chief Operating Officer of RLC. He is an alternate director of United Industrial Corporation and Singapore Land Limited. He also serves as a director of RLC, Big R Stores, Inc., Robinsons Convenience Stores, Inc., Robinsons Recreation Corporation, JG Summit Petrochemical Corporation, Robinsons Savings Bank, CFC Corporation, Robinsons Handyman, Inc., Robinsons Venture Corporation, Robinsons-Abenson Appliances Corporation, Cebu Light Industrial Park, Philippine Hotels Federation and Philippine Retailers Association. He received a Bachelor of Science degree in Management Engineering from the Ateneo de Manila University. FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

10

Johnson Robert G. Go, Jr. was elected director of the Company on May 5, 2005. He is the President and Chief Operating Officer of Litton Mills, Inc. effective August 28, 2006, the textile manufacturing business of JG Summit. He is also a director of Robinsons Land Corporation, Robinsons Savings Bank and CFC Corporation. He is also the President of Robinsons Convenience Stores, Inc. He was elected director of JG Summit on August 18, 2005 and was elected trustee of the Gokongwei Brothers Foundation, Inc. on September 1, 2005. He received a Bachelor of Arts degree in Interdisciplinary Studies (Liberal Arts) from the Ateneo de Manila University. Robert G. Coyiuto, Jr. - director of URC. He is also an independent director of RLC. He is Chairman of Prudential Guarantee & Assurance, Inc., PGA Cars, Inc., and Nissan North Edsa, and Vice-Chairman of First Guarantee Life Assurance Company, Inc. He is also President and Chief Operating Officer of Oriental Petroleum and Minerals Corporation and President of PGA Sompo Japan Insurance, Inc. He is Chairman of Pioneer Tours Corporation and a director of Canon Marketing (Philippines) Inc. and Destiny Financial Plans.

Independent Directors: Wilfrido E. Sanchez has been an independent director of URC since 1995. He is also an independent director of EEI Corporation, Kawasaki Motor Corp.,

NYK-TDG

Maritime

Academy

and

Rizal

Commercial

Banking

Corporation. Mr. Sanchez is a director of Transnational Plans, Inc., Dolphin Ship Management, Inc., Adventure International Tours, Inc., Transnational Diversified Group, Inc., Transnational Diversified Corporation, Magellan FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

11

Capital Holdings Corporation, Center for Leadership & Change, Inc., House of Investment, Inc., Omico Corporation, Amon Trading Corporation, Grepalife Asset Management Corporation, Grepalife Fixed Income Corporation, and JVR Foundation. Pascual Guerzon was elected as an independent director of URC on September 20, 2007. He is currently the Principal of Dean Guerzon & Associates (Business Development). He is the Founding Dean of De La Salle Graduate School of Business. He was also the former President of the Management Association of the Philippines Agribusiness and Countryside Development Foundation and the Management Association of the Philippines Foundation, MBA Director of the Ateneo de Manila Graduate School of Business, Director of Leverage International Consultants, Dep. Director of Asean Chambers of Commerce and Industry and Section Chief of the Board of Investments. Mr. Guerzon is a holder of an MBA in Finance from the University of the Philippines and a Ph.D. (N.D.) in Management from the University of Santo Tomas.

Senior Officers: Cornelio S. Mapa – Executive Vice President, URC BCFG Philippines Patrick O. Ng – Executive Vice President, URC International Eugenie M.L. Villena – Senior Vice President – Chief Financial Officer BJ M. Sebastian – Senior Vice President – Chief Strategist Constante T. Santos – Senior Vice President – Corporate Controller Nicasio L. Lim – Senior Vice President – Corporate Human Resources FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

12

Geraldo N. Florencio – First Vice President - Controller Ester T. Ang – Vice President - Treasurer Rosalinda F. Rivera – Corporate Secretary

DIVISIONS UNDER URC:

FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

13

Universal Robina Corporation has three main business lines:



The Branded Consumer Foods Group is the largest business and the key driver of growth and profitability. It is composed of the Philippine, international and packaging businesses. In the Philippine BCFG, our main divisions are Snack Foods, Beverages, Grocery (which include the joint ventures

Nissin-URC

and

Hunts

URC),

Exports,

and

Packaging.

Our

international investments are in Thailand, Indonesia, Malaysia/Singapore, China/HK, and Vietnam. 

The Agro-Industrial Group is composed of hog and poultry farms, branded feeds, and animal health products.



The Commodity Foods Group has both flour and sugar.

FINANCIAL ANALYSIS ON UNIVERSAL ROBINA CORPORATION :

14

The latter two groups provide URC with consistent cashflows and, in the case of commodities, consistent supply of raw materials for the Branded Consumer Foods Group. U RC VI S IO N To be the best Philippine food and beverage conglomerate with a powerful presence throughout the ASEAN region and China, carrying a wide portfolio of strong brands, equipped with efficient systems and high-quality people. TO TA L U R C VALUE S 1.

Passion to Win

2.

Dynamism

3.

Integrity

4.

Courage

Passion to Win We build organizational capability by being entrepreneurial and proactive, driven by a sense of urgency and purpose. We continuously challenge ourselves to deliver world-class brands and consistently rally our people to strive for excellence. 

Drive for Results: Effectively and speedily executes plans and...