Universal Robina Corporation

“2019 was an important pivot year and this sets a solid base in our glide path back to sustainable growth and profitability. We are happy that we have accelerated the growth of our Philippine market and have brought our core branded foods business back on track. Our transformation journey continues in full throttle as we take on the new challenges in 2020 and beyond.”

- Irwin C. Lee,

President and Chief Executive Officer

Universal Robina Corporation (URC) is one of the largest branded consumer food and beverage companies in the Philippines, and has a significant presence in the ASEAN and Oceania markets. The company is also into food ingredients and allied agro-industrial products locally. URC is among the Philippines’ pioneers in the industry, and has been in operations for over 60 years since John Gokongwei, Jr. established a cornstarch manufacturing plant in Pasig in 1954.

2019 Financial Performance and Key Developments

₱ 134.2 billion, + 5%

Net Sales

URC posted strong results for the full year of 2019 with net sales amounting to Php134.2 billion, a growth of 5% versus same period last year (SPLY).

₱ 15.0 billion, + 12%

Operating Income

Operating income (including hogs market valuation) grew faster at 12% to Php15 billion, improving overall margins by 72 basis points year-on-year (YoY).

Key performances of our business units are as follows:

₱ 62.4 billion, + 8%

BCF Philippines

BCF Philippines: Domestic revenues excluding packaging division rose 8% to Php62.4 billion, while operating income pivoted back to growth of 12% versus SPLY. This was driven by the successful turnaround of Great Taste coffee, acceleration of Jack n’ Jill snacks and noodles, recovery of C2 ready-to-drink tea, and contributions from our joint venture businesses with Danone and Vitasoy. These were supported by better execution of our key transformation programs in distribution and supply chain.

₱ 42.2 billion, - 2%

BCF International

BCF International: Revenues fell 2% in peso terms to Php42.2 billion as it was held back by foreign exchange translation. On a constant currency basis, underlying sales were up 2% as growth in Oceania and Vietnam was tempered by Thailand. Despite topline challenges, operating income increased by 8% to Php4.0 billion driven by better price-cost mix from key markets.

₱ 28.3 billion, + 12%

Agro-Industrial & Commodities

Agro-Industrial & Commodities (AIC): Sales amounted to Php28.3 billion, a 12% increase versus SPLY while operating margins were flat YoY. The strong growth in Animal Nutrition & Health (animal feeds and pet food) lifted Agro-Industrial Group’s sales by 12%. The Commodities Foods Group’s revenues also rose at the same pace.

₱ 10.1 billion, + 7%

URC Net Income

Net income amounted to Php10.1 billion, 7% higher versus SPLY, driven by the growth in operating income and moderated by finance costs, other expenses, and adverse foreign exchange impacts.

“URC’s financial position remains strong with cash of Php20.5 billion and gearing ratio of 0.45 as at year-end 2019.”

Meanwhile, URC’s financial position remains strong with cash of Php20.5 billion and gearing ratio of 0.45 as at year-end 2019. The Php22 billion net debt mainly pertains to the remaining debt at URC Oceania.

In terms of commercial developments in 2019, we were able to fix the challenges in coffee through our relaunch. Our distribution and trade executions, supported by active campaigns, resulted in growth across all regions and channels. On our salty snacks category, we have begun expanding beyond the mainstream segment by launching Piattos Party Pack, which is in the affordable premium segment, and a 3-peso Mr. Chips, which is our participation in the value segment.

We are now looking into nurturing our wellness portfolio with Nice & Natural, one of our brands in Griffin’s in New Zealand. In beverage, we reintroduced Refresh as we participate more deliberately in the water category, which is among the fastest-growing Ready-to- Drink segments. With a new modern look and angle into sustainability, we aim to attract the younger demographics, particularly the Gen Zs, who support brands that have a social purpose.

Lastly, we sold 40% of our consolidated businesses in Oceania to the Europe- based Intersnack Group. Leveraging on URC and Intersnack’s know-how will yield best practices in manufacturing, supply chain and sustainability, setting the groundwork for an even larger and more efficient Oceania operations.

5-Year OGSM

“Our ambition is to be the leading food & beverage sustainable enterprise from the Philippines.”

After adopting the OGSM framework when Mr. Irwin Lee became the company’s CEO in 2018, we have revisited and refined URC’s 5-year OGSM in 2019. Our ambition is to be the leading food & beverage sustainable enterprise from the Philippines.

We use the term “sustainable” intentionally in a couple of dimensions. First, our strategies should drive “sustainable, profitable growth.” While businesses
will have ups and downs, our where-to-play and how-to-win choices must enable stable profit and cash flow growth, ultimately improving shareholder value creation. Second, our strategies should support “sustainable consumption and development.” This means embracing business practices that protect and enhance our natural and people resources. This will ensure that our business, our people, our consumer base, and the communities in which we live and operate will continue to thrive in a sustainable future.

To achieve our long-term ambition, we have made strategic choices on where we shall play in the succeeding years. We have classified these as Grow the Core and Expand for More, and these will be our guiding platforms to continuously re-excite the trade and consumers. On Grow the Core, our focus is protecting our categories consistently through reinvestments and continuous consumer in-sighting. We will continue to revisit our proposition, communication, and our products to make sure they remain relevant and competitive amidst changing consumer trends. The Expand for More is our thrust to develop adjacencies in snacks and beverages to provide value to new consumers and address growing trends in wellness, indulgence, functionality, convenience, and other consumer demands in the near future.

These where-to-play choices are further supported by the following four strategic areas on how-to-win in the coming years.

People and Planet Friendly Culture

We have a strong foundation of good people and a positive, supportive culture. We will enhance this with talent development, digitalization, and simplification initiatives to further empower our people, expand collaboration, and build next-generation leadership. This people development pillar, together with natural resources management and product portfolio improvement, comprise the three materiality focus areas in our sustainability program. We have recently completed our baselining exercise and set targets aligned with the 2030 United Nations Sustainable Development Goals.

Products and Brands People Love

URC has a proud history of game-changing technology-driven innovations. We will complement this with a more consumer-centric focus to increase product initiative success rate and brand building investments. We are rolling out an Innovation Process Management system, where robust customer-centric discovery and in-sighting processes drive new product development and renovations of existing brands without compromising entrepreneurial speed and agility.

Product Supply Chain Transformation

We have significant opportunities to drive productivity, cost efficiencies and service responsiveness in our end-to-end product supply chain. We will adopt best practices to eliminate waste and optimize conversion and logistics costs. This transformation will entail leveraging our scale better in sales and operations planning, lean manufacturing excellence and supply network optimization.

Preferred Partner of Choice

Given the scale, scope, and strength of our brand portfolio, we should aim to consistently be the partner of choice to our customers and suppliers. We will achieve this by systematically engaging our trade partners in joint business planning, growth expansion, digital innovation, and capability building.

Future Business Outlook

For 2020, we will continue to reinvest in brand building through innovation and enhance our distribution further as we anticipate a stronger fightback from the competition. We are expecting URC to sustain topline growth while moderately improving operating margins. Having seen good growth in our domestic operations in 2019, we set our focus to our international business as we continue recovering Vietnam while addressing key challenges in Thailand. Commercially, we are excited with our portfolio line-up this year as we continue to strengthen our core while expanding into new adjacencies across markets where we operate.

Lastly, our transformation programs will continue as we further scale LEAN manufacturing across our facilities in the Philippines, start executing our Supply Network Design, launch big bets across the region, and continue to widen our direct distribution.

Visit URC’s 2019 digital annual report for more information.

“For 2020, we will continue to reinvest in brand building through innovation and enhance our distribution further as we anticipate a stronger fightback from the competition.”