San Miguel Corporation

SAN MIGUEL CORPORATION

Members: Michelle E. Delaguna Pamela Jane B. Contreras Alyssa Mae. A. Ratio Milca Avita A. Ligan Dominique D. Villaverde BS-HRM IIIA Submitted to: Mrs. Flor Villaverde

HISTORY Established in 1890 as a brewery, San Miguel Corporation (PSE: SMC) is Southeast Asia's largest publicly listed food, beverage and packaging company with over 17,000 employees in over 100 major facilities throughout the Asia-Pacific region. Its flagship product, San Miguel Beer, is one of the largest selling beers and among the top ten selling beer brands in the world. San Miguel's manufacturing operations extend beyond its home market to Hong Kong, China, Indonesia, Vietnam, Thailand, Malaysia and Australia; and its products are exported to 60 markets around the world. Since 2008, SMC has ventured beyond its core businesses, becoming involved in fuel & oil (Petron Corporation), power generation and infrastructure. It was briefly involved in Philippine Airlines from April 2012 to September 2014.

OUR COMPANY San Miguel Corporation is one of the Philippines’ most diversified conglomerates, generating about 6.5% of the country’s gross domestic product through its highly integrated operations in beverages, food, packaging, fuel and oil, power, mining and infrastructure. San Miguel is one of the nation’s largest employers, with a direct workforce of about 18,000 employees. For each job created within the San Miguel system, many additional jobs are created through suppliers, distributors, retailers and other business partners. Established in 1890, La Fabrica de Cerveza de San Miguel, Southeast Asia's first brewery produced and bottled what would eventually become one of the best-selling beers in the region. Today, San Miguel Beer—the company's flagship product—is one of the largest selling beers and among the top beer brands in the world. San Miguel Corporation has since diversified to produce a wide range of popular beverage, food and packaging products, which have—for over a century—catered to generations of consumers' ever changing tastes.

San Miguel is now a majority owner of Petron Corporation, which is the market leader in the Philippines in terms of sales volume in the retail, industrial and LPG market segments, which runs the largest integrated oil refinery in the Philippines with a vast network of depots, and retail service stations. San Miguel has also built a power company with a full spectrum of three Independent Power Producer Agreement contracts with a total capacity of 2,545 MW, accounting for 16% of the national grid. San Miguel recently concluded acquisition of Exxon Mobil downstream business in Malaysia and a minority stakes in Philippine Airlines, Asia’s first airline and Air Philippines, now known as PAL Express. The company's manufacturing and trading operations extend beyond the Philippines to Hong Kong, China, Indonesia, Vietnam, Thailand, Malaysia and Australia. Through strategic partnerships it has forged with major international companies, San Miguel has gained access to managerial expertise, international practices and advanced technology, thereby enhancing its performance and establishing itself as a world-class company. San Miguel’s partners are world leaders in their respective businesses. Kirin Brewery Co., Ltd. is a major shareholder of San Miguel Brewery. The Company also has successful joint venture relationships with US-based Hormel Foods Corporation, Nihon Yamamura Glass and QTel, a telecommunications company in Qatar. San Miguel follows five key corporate strategies aimed at creating value for its shareholders:    

Enhance the value of core businesses Diversify into industries that underpin the growth of the Philippine economy Identify and pursue synergies within and among businesses To invest in and develop businesses in which the company can be a significant player

OUR BUSINESSES San Miguel Brewery Inc. San Miguel Brewery Inc. (SMB) is the largest producer of beer in the Philippines, with nine out of ten beer drinkers preferring its brands. San Miguel Beer was first produced by La Fabrica de Cerveza de San Miguel, an upstart brewery in the heart of Manila that began its operations in 1890.

Ginebra San Miguel Inc. Ginebra San Miguel, Inc. is the world’s largest gin producer by volume as well as the market leader in the domestic hard liquor market, with core products such as Ginebra San Miguel Gin, GSM Blue Gin and Gran Matador Brandy.

San Miguel Pure Foods Company, Inc.

San Miguel Pure Foods Company, Inc. offers a diverse array of food products spanning across the entire value chain ranging from B-Meg feeds and San Miguel Mills flour to Purefoods hotdogs, Magnolia chicken or Monterey ready-to-eat meat dishes.

Petron Corp. Petron Corporation is the largest oil refining and marketing company in the Philippines. Supplying nearly 40% of the country’s oil requirements, the company’s worldclass products and quality services fuel the lives of millions of Filipinos. Petron’s vision is to be the leading provider of total customer solutions in the energy sector and its derivative businesses.

Infrastructure San Miguel Holdings Corp. TPLEX The 88.5 kilometer, two-lane, TarlacPangasinan-La Union Expressway, the company’s infrastructure investment in the north, was inaugurated in December 2013 by President Benigno S. Aquino III. As administrator of the toll project, SMC through the Private Infra Development Corporation (PIDC), the TPLEX concessionaire, will provide management services, toll collection, traffic safety and security management, toll road maintenance and other related services.

Skyway Stage 3 Another major infrastructure initiative, which broke ground in January 2014, is the Skyway Stage 3 project—a 14.8-kilometer, six-lane elevated expressway from Buendia to Balintawak that will link SLEX to NLEX. The project aims to decongest major thoroughfares, while at the same time creating new transport routes, giving more travel options to commuters and stretching the capacity of existing transport systems.

NAIAEX In April 2013, the company won the concession to build and operate the Ninoy Aquino International Airport Expressway. An important component of the company’s infrastructure portfolio, NAIEX will connect the Skyway system to all three NAIA airport terminals and the Entertainment City of the Philippine Amusement and Gaming Corporation.

MRT-7 In October 2010, SMC finalized a deal to acquire 51% interest in Universal LRT Corp. Ltd., the company in charge of developing the Metro Rail Transit Line 7 (MRT7), a planned 22-kilometer-long rail line, starting from San Jose del Monte in Bulacan and ending in North Avenue in Quezon City.

TransAire Development Holdings Corporation (TADHC) San Miguel Corp. also owns the Caticlan Airport concession-holder TransAire Development Holdings Corporation, which is currently overseeing the modernization of the airport. Long-term expansion projects involve the construction of a bigger airport passenger terminal, extension of the existing runway from 950 meters to 2,100 meters, improvement of the road network and upgrading of airport facilities and air traffic control aids. Construction of the expanded facility is currently ongoing.

San Miguel Yamamura Packaging Corp. The San Miguel Yamamura Packaging Corporation provides a wide range of packaging solutions to various industries including food, pharmaceutical, chemical, beverages, and personal care across Asia-Pacific, Middle East, Africa and the United States. It is a major player in the domestic packaging industry with market leadership in most of its product formats.

San Miguel Properties Inc.

Although initially established to be San Miguel Corporation’s corporate real estate arm, San Miguel Properties later diversified into commercial property development in market opportunities. Its current portfolio of projects includes mixed-use developments with economy to middle-income housing as its core products. Among its real estate development projects: Bel Aldea, Maravilla, and Muralla in Cavite and Wedgewoods in Sta. Rosa, Laguna.

Power and energy In a relatively short period, San Miguel has built a vertically integrated power company with a full spectrum of power businesses comprising of IPPA contracts (through holding company SMC Global Power Holdings), mining assets, which supply raw materials to power plants, and a distribution (through Meralco) which distributes and sells electricity through a vast network in Luzon island. Being a vertically integrated power company gives SMC the opportunity to compete and maximize value in key segments of the value chain by driving and capitalizing on synergies among fuel sourcing, power generation and power distribution.

Aviation

PAL in a nutshell Flag carrier Philippine Airlines is a major player in the global aviation industry and the one of Asia’s most dynamic carriers today, having unveiled a road map that seeks to transform “Asia’s first

airline” into Asia’s airline of choice. More than 70 years after PAL first took to the sky, the story of PAL continues to evolve. Under a new management that has a track record for successfully growing businesses and run a highly diversified conglomerate that includes some of the country’s strongest brands in virtually every growth sector of the Philippines, PAL is taking a tried-and-tested concept and applying the discipline of a three-pronged business strategy that’s simple yet bold: fleet modernization, network expansion and service innovation.

Other businesses           

Anchor Insurance Brokerage Corp. ARCHEN Technologies Bank of Commerce Bell Telecommunications Philippines, Inc. Eastern Telecommunications Philippines, Inc. Liberty Telecommunications Holdings, Inc. San Miguel Energy Corp. San Miguel Shipping & Lighterage Corp. SMC Retirement Funds Office SMC Stock Transfer Corp. SMITS, Inc.

Latest News SMC net income grows 210% to P53.6 billion, less unrealized forex losses. San Miguel Corporation delivered strong financial results in 2013, with both core and new businesses bringing stable margins and a healthy cash flow. Consolidated revenues rose 7% to P748 billion, with new businesses accounting for 70% of total revenues, improving 9% over the previous year. The core beverage, food, and packaging businesses posted moderate growth at 2%. Consolidated operating income grew 7%, reaching almost P55.1 billion, on the back of strong margins from the beer and power businesses and the sustained performance of Petron and San Miguel Pure Foods Company, Inc. Consolidated recurring EBITDA, meanwhile, improved 1% to P77.3 billion. Consolidated net income attributable to equity holders of the parent company grew 42%, reaching P38.1 billion, as the sale of San Miguel’s entire stake in Meralco yielded a P40 billion gain. These earnings completely offset unrealized foreign exchange losses amounting to about P15.6 billion, brought about by the strengthening of the US dollar in the second half of 2013. Without unrealized forex losses, net income improved 210% to P53.6 billion.

Financial Position As of June 30, 2014

Total Assets: P1,174B Current Ratio: 1.58x Cash: P200B

Debt-to-Equity: 2.04x Interest-Bearing Debt: P443B Interest-Bearing-Debt-to-Equity: P1.15x Net-Debt-to-EBITDA: 2.78x

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