LT Group Inc. of airline and tobacco tycoon Lucio Tan is spending P10 billion this year amid a better but challenging business environment for consumer-related businesses due to higher taxes and rising inflation rate.
LT Group president Michael Tan said during the annual stockholders’ meeting he expected tobacco to sustain a recovery this year while its liquor and beverage businesses could be affected by higher taxes.
“We are not operating in level playing field which enables us to pass on additional taxes and no longer price products at economically unsustainable levels. But there may be a further drop in volumes due to higher prices,” Tan said.
For the beverage business under Asia Brewery Inc., Tan expects tax on sugary drinks to negatively affect the sales volume of Cobra, one of the company’s top selling products.
Tan, however, expects sales of bottled water to remain strong and the rollout of other products like soy milk and yogurt to boost sales.
Tan said the additional tax in liquor products under package 2 of the Duterte administration’s tax Reform for Acceleration and Inclusion, meanwhile, would also affect sales of Tanduay Distillers Inc.
But demand for liquor products may remain stable with the robust economy and new jobs to be generated from the Build Build Build infrastructure program of the government, especially in Visayas and Mindanao.
Tan said the increase in inflation rate as well as the depreciation of the peso against the dollar and the higher fuel cost could result to higher production costs this year.
He said Philippine National Bank’s transition to a united IT system would enable it to offer more services and products through mobile phones and over the web.
The bank’s joint venture with Allianz for life insurance was on track and bancassurance fees should contribute more in the coming years, Tan added.
The conglomerate’s property unit Eton Properties Philippines Inc. will focus on expanding its leasing business.
“Demand should continue for the buildings being constructed. The generally lower labor costs and leasing rates in the Philippines will keep it viable alternative to other countries,” Tan said.