Geneva: Headwind hurts profitability

Ginebra San Miguel Inc. (GSMI), the liquor arm of conglomerate San Miguel Corp., said the problems it faced last year are still there today, which will put pressure on margins.

Emmanuel B. Macalalag, senior vice president and general manager of the company, said the company continues to grapple with the aftermath of the war in Ukraine, rising energy prices, higher year-over-year inflation and an excise tax increase earlier this year.

“In order to protect and improve margins, we raised prices earlier this year, which led to a slight drop in volumes. The earlier adjustment in the timing of price increases meant that this year’s selling period using all prices was 15 days shorter than last year,” Macalalaga said at the company’s annual shareholder meeting.

As a result, sales for the first two months of 2023 were 11 percent below last year’s levels, he said. However, last March the company ran several consumer promotions, which allowed the company to cut the deficit to 5 percent at the end of the first quarter. During this period, 11.5 million cases were sold in Geneva.

“At higher prices, first-quarter sales were 12.9 billion pesos, up 3% from the same period last year.”

Last year, the company’s sales reached a new record of 44.6 million cases.

For the first quarter of the year, the company’s net income rose 81 percent to 2.51 billion pesos from 1.33 billion pesos the previous year, but this was due to the transfer of Ginebra’s rights to Don Papa rum to Diageo Philippines Inc.

However, operating income fell 9% to 1.6 billion pesos due to lower volumes and higher costs in the first two months of the year, reflecting the temporary impact of the February price increase. This, however, was limited to marketing initiatives in March.

“Despite the various challenges that the industry has faced over the past couple of years, GSMI has remained resilient and consistently delivered excellent results. We are off to a good start this year and look forward to delivering programs that will delight our markets and boost our annual productivity,” said Ginebra President and CEO Ramon S. Ang.

The Board of Directors of the company earlier this month approved the declaration and payment of a regular cash dividend of 0.75 pesos and a special cash dividend of 1.75 pesos on common shares to all registered shareholders as of May 24.