LT Group Income Seen to Recover by End-2015

Source from:  Business Mirror 06/24/2015

LT Group Inc. (LTA), the holding firm of most of tycoon Lucio Tan's businesses, said its income may grow this year, but, due to the recovery of some of its units, problems in its tobacco business may persist.

Michael Tan, LTG president, said the company's capital expenditures may reach P10 billion this year, up from last year's P7.4 billion. He said most of the capital expenditure this year will be more for the property venture, Eton Properties Philippines Inc., at about P7.7 billion, which Tan said will concentrate more on the recurring-income side, such as more buildings for business-process outsourcing firms, offices and new commercial developments.

Tan said the company's fast-moving consumer goods may grow at a low double-digit rate because of the campaign for the May 2016 national elections.

Hopefully, our tobacco business will improve [this year]. It has been a drag among all five companies under the LT Group. We've seen positive developments. Hopefully, we can turn into positive results,” Tan told reporters after the company's annual stockholders' meeting.

"The problems of tobacco business have not been resolved, but recent developments point toward a more positive outlook that will hopefully lead toward a level playing field, and enable us to improve earnings."

Tan said its tobacco business, being operated by PMFTC Inc., continues to be affected by illicit trade, since the new "sin" tax law was implemented in 2013.

As a result, its market share dropped to about 70 percent, from more than 90 percent before the sin-tax law was implemented. The company said the drop was due to the availability of cheaper cigarettes priced at below cost.

Based on the figure the company said was based on customer offtake, 25 percent of the market is now controlled by Mighty Corp., which produces the cigarette brand of the same name, while the rest are shared by other players, such as Japan Tobacco Inc. and British American Tobacco.

PMFTC is the combined company of Philip Morris and Fortune Tobacco.

Tan said the company may retain its current market share for the months to come, as it was able to capture most market segments. It is innovating its brand based on market demand.

Competition in the distilled-spirits business continues to be intense, aggravated by higher raw-material costs.

"But a more focused marketing strategy, backed by intensified selling activities, will help grow volumes and boost the profitability of Tanduay Distillers Inc.," he said.

In the beverage segment, even tougher competition is expected with the entry of more foreign brands. The company said that Asia Brewery Inc. will continue to capitalize on the growing young-adult population and the higher purchasing power in specific segments to meet the changes in consumer preferences through product innovation, while continuing its program toward cost improvement. For the Philippine National Bank, the country's fifth-largest lender, Tan said the company wanted it to become one of the top 3 biggest banks, but it can only do that by acquiring new banks.

The company said its attributable income last year was cut by more than half to P4.2 billion, from the previous year's P8.7 billion.

The company said that its in income the tobacco business, through PMFTC, amounted to only P99 million last year, a sharp drop from the P3.9 billion income in 2013. Enditem