August 10, 2011

RFM Q2 profits down 56% on commodity price spikes


Higher commodity prices and slower economic growth cut profits of Philippine food conglomerate RFM Corporation by more than half to PHP113 million (US$2.65 million) in the second quarter amid higher sales.


In a financial report filed yesterday, the decline, steeper than that seen in the first quarter, should ease in the second half as costs of raw materials stabilize and thus allow profits to hit more than PHP400 million (US$9.40 million) this year, an executive said.

Revenues jumped by 13% to PHP2.6 billion (US$61.14 million), amid sales growth, strong brand equity and effective marketing campaigns, it claimed.

The latest figures resulted caused first half net income to fall by 46% to PHP213 million (US$5.00 million) from year-ago levels. RFM said that this was due to rising commodity prices like wheat, sugar, milk as well as power and utilities cost which significantly affected margins.

RFM said selling prices were not adjusted as fast as increases in input costs amid to keep from losing consumers.

Felicisimo M. Nacino, Jr., executive vice-president and chief operating officer of RFM, said that the first half of 2010 was extremely favourable in the sense that commodity prices were down and economic growth is high.

But performance should pick up in the second half of 2011, he said.

Commodity prices have started to come down because of what is happening in the US and Europe, Nacino added.

RFM expects profits to decline from 2010 levels as projections of higher sales will be offset by high commodity costs.

If 2010 was a normal year that should have been only PHP400 million, Nacino said, adding that they are will be able to do more this year.

Last year, earnings of RFM surged by 71% to a record PHP625 million (US$14.69 million) from PHP365 million (US$8.58 million) in the previous year while net sales rose by 6% to PHP8.8 billion (US$188.14 million).

RFM is the manufacturer of Fiesta pasta, Swift hotdogs and Selecta ice cream, which is a joint venture with Anglo-Dutch consumer goods giant Unilever.

Video >

Follow Us