San Miguel’s game changer

posted December 26, 2018 at 12:50 am
by  Tony Lopez

"The airport will have four runways with plans for another two later, to serve 100-million passengers, scalable to 200 million."

 

One major business event of 2018 has been the rise of San Miguel Corp. into a trillion-peso company in sales with profits of no less than P50 billion.

Reaching P1,000 billion pesos in sales has been a dream of Ramon S. Ang, SMC’s visionary vice chairman, president and chief operating officer, since five years ago.  A P1-trillion revenue level reinforces San Miguel’s claim that it is the Philippines’ largest company.  It is already the most profitable and the most diversified Philippine conglomerate.

The bragging right is significant given that the Friday before Christmas, President Duterte’s cabinet acting as the board of the top policy making body National Economic and Development Authority approved San Miguel’s P750-billion new airport in Bulacan, just 17 minutes by SMC’s Skyway north of the present NAIA. 

The NEDA approval is double-bladed.  It carries no guarantees, which means San Miguel’s ambitious airport will not be guaranteed revenue, profitability, passenger volume, use by airlines, right of way rights, and other benefits usually given such a premium infrastructure project.  It also appears to me the SMC airport will not be compensated for damages in case a succeeding government makes a crazy decision adverse to the airport’s profitability—like ordering that the facility stops charging passenger fees for its use.  

Such a loss could be massive.  Imagine you are charging P500 per passenger as terminal fee and you have 100 million passengers a year.   Instantly, you lose P50 billion, a year, if a crazy administration says no more passenger fee.  So instead of recovering your P800 billion cost in 16 years (P800 billion divided by 50), you may never recover it.  

Such a deal is so unlike the deal given by the unlamented Aquino administration to Megawide with its  contract to build and manage Cebu airport.  Aquino’s Finance chief, Cesar Purisima, agreed to pay P20 billion to Megawide in the event the government decides to put up another airport near Cebu—a very likely event given the tourism boom.

Still, RSA seems happy with the decision.  “I can make it the most beautiful airport that will bring in millions of tourists and provide so many business opportunities to everyone, in addition to easing vehicular traffic with a highway and a train loop from Bulacan to Manila and back,” he vows.

A brand-new airport like San Miguel will contribute up to 9 percent of total economic production or GDP.  Current GDP is P17 trillion and 9 percent is P1.53 trillion.  In three years or less, thus, the Bulacan airport pays for itself in terms of tremendous economic benefits.

The Philippines is losing the tourism race in the region largely because Manila continues to operate the NAIA, an airport that it should have discarded five years ago, or converted its  space into an entirely new business district.   The Philippines attracts only seven-million visitors, half of whom are Filipinos, meaning not tourists.  With 110-million population, the Philippines should be able to attract 100-million visitors easily.  Singapore, an island you can sink in the middle of Laguna Lake with 24,000 hectares more to spare, has five-million people.  It gets 25-million tourists.

With one attraction, Angkor Wat, Cambodia also gets seven-million visitors.   The world has one billion tourists.  China alone sends out 100-million tourists a year.  Manila captures only one million of them and half of them are gamblers.

In the last 10 years, RSA has redefined San Miguel’s business.  It is not beer, it is not hotdogs, it is not chicken, it is not carton boxes, it is not gasoline stations.  It is development.

San Miguel Corp.’s strategy is to help people enjoy and make progress in their lives through the many products and services San Miguel offers.

San Miguel aims to make the world better. “We are enabling people by investing in industries that will make the biggest difference in their lives,” says its website.

With 100 factories nationwide, San Miguel is more than a manufacturing behemoth.  It is an even bigger infrastructure company. Its infra portfolio is the largest in the country.

SMC is completing its 89.2-km Tarlac-Pangasinan-La Union Expressway is nearly complete. It plans to extend TPLEX to be near Baguio.

Its 14.82-km Skyway Stage 3 (from Makati to Balintawak, connecting the South and North Expressways), 22-km MRT-7(from Quezon City to San Jose del Monte, Bulacan), Boracay Airport expansion, and Bulacan Bulk Water Supply projects, are all on track. 

Its newest infrastructure projects—the 58.09-kmSouth East Metro Manila Expressway, or Skyway 4 (from FTI to San Jose del Monte, Bulacan); and the 56.86-km SLEX-TR4 (from Sto. Tomas, Batangas to Lucena) are in the early stages of development. 

San Miguel is also modernizing the 52-ha. Manila North Harbor.

An absolute game changer is San Miguel’s plan to build a $15-billion brand new airport on 2,500 hectares in Bulacan, 17 minutes by skyway from Manila.  It will have four runways with plans for another two later, to serve 100 million passengers, scalable to 200 million. It will also have a modern air cargo complex plus a seaside port nearby and an industrial and business complex.  It is called an aerotroplis—a city built around an airport.

With NEDA board approval, San Miguel’s airport has secured all the regulatory approvals at the highest levels. It is awaiting a Swiss challenge before an order to proceed is issued.

Can Ramon Ang deliver the San Miguel airport despite the constraints?  RSA has seven simple principles of business.  They are:

1.     Be a man of your word;

2.     Know how to keep a secret;

3.     Work harder than anybody else;

4.    Be decisive;

5.    Be a risk-taker;

6.    Remember that nothing is impossible; and

7.    Believe in a bigger purpose.

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Topics: San Miguel Corp , Ramon Ang , Cesar Purisima , Rodrigo Duterte
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