Like a snake swallowing an elephant.
That is the metaphor used by San Miguel Corp. vice chairman, president and COO Ramon S. Ang in describing the possibility of the Philippines’ largest conglomerate in sales and assets growing double or triple its size today in the next five years, if not sooner.
Speaking to newsmen after the annual stockholders’ meeting of SMC subsidiary Petron on Thursday, May 21, Ang, the petroleum refining company’s president and CEO, talked of bringing the parent company San Miguel’s consolidated revenues to the P1 trillion level, by 2016, if possible.
“With full consolidation of other SMC businesses, we will hit P1 trillion sales ($22.47 billion) sales in 2016,” Ang reckons. However, “it will be much easier to hit P1 trillion if we could acquire another large company.”
“I am looking at one company which I am near to convincing (to join us). I would be able to double the size of San Miguel all of a sudden,” Ang disclosed. “It will be like a merger with another company which is a little bit bigger or equal the size of San Miguel,” he elaborated.
Asked if the company were Malaysian, Ang deadpanned, “I don’t remember if it is Malaysian.” The company’s profits “are huge, about $3 billion,” Ang figured out.
What gives the deal immediacy and air of finality is “it was the other company which approached me,” he said, and not San Miguel. As the figures are being checked, he said, he cannot disclose details yet, “because they would be able to work out the numbers.”
The elephant Ramon Ang is referring to could possibly come from either of two countries – Japan or Malaysia. Plus, of course, the Philippines.
In Japan, there is Kirin Holdings, Inc. which owns 48 percent of San Miguel’s San Miguel Brewery, Inc.. Kirin and SMC make for a nice fit. They are in the same businesses – beer and food, though Kirin is also into pharmaceuticals. In 2014, Kirin had sales of $18 billion, EBITDA of $2.25 billion, and assets of $24.35 billion. Average three-year return on equity: 9.9 percent.
In 2014, SMC had sales of $17.54 billion, operating profits of $1.25 billion, and assets of $27.29 billion. Average three-year ROE: 10.92 percent.
In Malaysia, Ang has been known to be on the lookout for acquisitions, particularly in the oil and gas business. In March 2012, SMC bought ExxonMobil refinery and some 550 gas stations in Malaysia for $577.3 million or P24.79 billion. Ten more gas stations were added in 2014. Another 20 areplanned.
In the Philippines, Ang declared on May 23, San Miguel was interested in the Malampaya Deep water Gas-to-Power project. “It (the Malampaya operation) should be the biggest PPP (public-private partnership) project the government should bid out,” said the SMC chief operating officer. He called Malampaya “the deal of the century” because the pipeline, which returns to the government, is highly valuable. He aims to add length to pipeline by connecting it to Palawan, and not just to Batangas alone.
Ang is no stranger to acquiring companies equal to or bigger the size of San Miguel. He acquired 32.8 percent of Meralco in 2008 with a view to increasing SMC equity to majority control.
In 2009, Meralco had bigger revenues, P184 billion, 6 percent more than SMC’s P174 billion. In 2010, he bought 68 percent of Petron. That year, Petron’s revenues, P267.67 billion, were 9 percent bigger than SMC’s P246.1 billion.
Had Ang succeeded in buying control of Meralco, he would have achieved his P1-trillion sales target for SMC back in 2013 when SMC had sales of P748.24 billion and Meralco reported sales of P298.63 billion, a total of P1.046 trillion.
As a rule, when buying a company, Ang explains, “you have to look at its future. If its future is bright, then be prepared to risk bigger sums.” Now, he cautions, “if you are just after making a gain after buying it, you don’t need to be a very serious buyer. You just shock (your rivals) with outrageous offers so that when they bite, they are the ones who get squeezed.”
In 2013, Ang sold SMC’s minority stake in Meralco at three times his acquisition price, to the group of Manuel Pangilinan and John Gokongwei Jr. The net gain of about P40 billion was then hedged against foreign currency losses, wiping out SMC’s P15 billion forex losses in 2013.
In the past six years, SMC’s revenues have grown 3.5 times, from P174.2 billion in 2009 to a new high of P782.4 billion in 2014. That’s an increase of 350 percent in six years or an average rise of a whopping 58.34 percent per year. No other local company has grown so big and so fast in such a short time.
The most spectacular growth was in 2011 when revenues more than doubled (or increased 118 percent) to a new record of P535.5 billion, up P289.3 billion from P246.2 billion in 2010.
“We made strategic acquisitions and built up our position in fast-growing and high-potential industries.” Ang says of the heady two years of 2010 and 2011. “We have moved beyond consumer products, and are participating in businesses that make a measurable difference in people’s lives — providing them with essential services that meet genuine, basic human needs,” he said.
In 2009, SMC had only three major revenue generators – beverages (beer) 46 percent, food 43 percent, and packaging 11 percent. In contribution to EBITDA (earnings before interest, taxes and depreciation), beer (beverages) was still the biggest profit maker, with 67.1 percent, followed by food 21.1 percent, and packaging 11.8 percent.
In 2010, the revenue generators swelled to five – Petron 47 percent, beverages 18 percent, food 16 percent, power 14, and packaging 5 percent.
By 2014, Petron had a commanding 60 percent share of revenues. Food proved to be a stable sales generator, with a 13 percent share. A close third was beer (beverages) with 12 percent, followed by power 11 percent, packaging was a poor fifth with 3 percent, and others, 1 percent.
In 2014, power had become the biggest profit maker, with 32 percent, followed strongly as second by beer, 28 percent. Petron was third with 20 percent, food 10 percent, others 6 percent, and packaging 4 percent.
biznewsasia@gmail.com