January 28, 2010
RFM Corporation to raise more than US$20 million in shares to boost Q1 capacity
Philippine food and beverage conglomerate RFM Corporation aims to raise up to PHP1 billion (US$22.32 million) through a private placement or follow-on offering of shares possibly in the first quarter this year to beef up capacity of its production facilities as it strengthens its financial and strategic position for further growth.
RFM vice-president Ramon M. Lopez said the offering involves not more than 450 million new shares to be sold at a price yet to be decided upon by the company and financial advisor ATR Kim Eng Capital Partners Inc.
Lopez said the fund-raising programme will be implemented in two stages comprising the offer and sale by existing shareholders and the subscription by selling shareholders of the same number of shares to be sold in the private placement tranche.
He said this transaction would boost the company's public float to 25-30 percent from the existing 20 percent.
RFM shares have been on an uptrend since last year on its turnaround story, gaining 207 percent. The stock hit an intra-day high of PHP1.82 (US$0.04) on January 27 prior to closing at PHP1.70 (US$0.03).
RFM chief operating officer Felicisimo Nacino Jr. said PHP380 million (US$8.62 million) of the expected net proceeds from the offering would be used to double the capacity of its pasta plant and PHP170 million (US$3.85 million) to expand its bun production line by 50 percent. About PHP220 million (US$4.98 million) will be used for additional investment in its ready-to-drink business.
Another PHP230 million (US$5.21 million) would be channelled to working capital requirements, he added.
Jose A. Concepcion III, president and chief executive officer of RFM, said the company is looking to sustain its strong positive operating performance this year through new product launches.
RFM posted a net income of PHP625 million (US$14.18 million) in 2010, up 71 percent from the year earlier figure of PHP365 million (US$8.28 million) and 39 percent higher than the original target of PHP450 million (US$10.21 million).
Net sales rose six percent to PHP8.8 billion (US$199.77 million), due to the steady robust growth of core products and enhanced by a continuing stream of product innovations in their branded businesses, backed by aggressive marketing campaigns especially in Fiesta pasta and Selecta milk.
Selecta ice cream, a joint venture with Unilever, chalked in an over 48 percent increase in sales, further shoring up its dominant market position to 66 percent. Its rivals, on the other hand, registered a drop in their market shares as of November 2010.
The company's flour-based businesses led by White King Fiesta continued to deliver increasing cashflows, while deepening its market leadership position in respective categories.
Nacino said the company is eyeing a 20 percent growth in net profit this year as sales are seen to hit over PHP10 billion (US$227.14 million).
While RFM is optimistic about the country's political landscape and economic front, Concepcion said rising prices of commodities pose a challenge to the company, which sources some of its raw materials overseas.
He said the company might need to hike prices in the second quarter to mitigate the costs.
RFM's continuous launch of new products contributed to investors' confidence in the stock as evidenced by the recent successful issuance of PHP1.5 billion (US$34.05 million) corporate notes, participated in by six of the largest financial institutions in the country.
The company's board of directors likewise approved the declaration of 69.62 million convertible preferred shares of RFM in Swift Foods Inc. out of the 139.24 million convertible preferred shares of RFM as proper dividend. The dividends will be in the form of one convertible preferred share of Swift at a value per share of P6.01 for every 45 shares held by RFM shareholder.
