Victorias Milling Company, Inc.
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First Pacific gets P2.16B from sale of stake in VMC

Hong Kong-based First Pacific Co. Ltd. has raised a total of P2.16 billion from the sale of a 14.8-percent stake in sugar miller and refiner Victorias Milling Co.

Notwithstanding the asset disposal, First Pacific said it remained committed to the Philippine sugar industry through its investment in Roxas Holdings Inc., a leading sugar and ethanol producer also listed on the Philippine Stock Exchange.

“We are focusing our investment in the Philippine sugar industry on RHI and preparing for its rights issue announced earlier,” First Pacific managing director Manuel Pangilinan said in a press statement on Thursday.

RHI’s board earlier approved a rights offering of common shares to all shareholders. The offer size, entitlement ratio and offer price have not been set.

In its statement, First Pacific said it had sold out of VMC in two blocks, the first of which consisted of 300 million shares bought back by VMC itself at P5 each or for a total price tag of P1.5 billion.

The Lucio Tan group, through a subsidiary, also acquired another 131.9 million shares also at P5 a share.

The Lucio Tan and First Pacific groups both scrambled for additional shares in VMC in previous years. While the Lucio Tan group was the controlling shareholder for many years through shares held by Tanduay Holdings and Philippine National Bank, Pangilinan’s group gained interest in recent years, seen in line with First Pacific’s thrust to invest in agribusiness.

VMC was one of the first companies to seek debt relief during the Asian currency crisis but it was able to turn around using a creditor-driven rehabilitation framework. Its shares resumed trading on the PSE in May 2012, ending the lack of liquidity and attracting new investors.

In the last three years, VMC embarked on a program to pay ahead of maturity all loan obligations under the rehabilitation plan approved by the Securities and Exchange Commission. On May 31, 2013, VMC fully paid in advance its restructured loans amounting to P4.4 billion. VMC has also fully redeemed the convertible notes in the hands of its original noteholders

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VMC posts lower profit in Sept-Nov
By Louise Maureen Simeon (The Philippine Star) | Updated January 18, 2017 - 12:00am

MANILA, Philippines - Listed sugar miller Victorias Milling Co. Inc. (VMC) saw its net income for the first quarter of crop year ending November 2017 drop by nearly 60 percent due to lower cane productivity.

In a regulatory filing, VMC said net earnings fell to P119 million in September to November 2016 from the P292 million recorded the previous year.

Total canes hauled decreased by 283,810 tons or 28 percent due to the late startup of this crop year and aggressive cane supply sourcing by other mills.

VMC said the decrease in sale of goods was a result of the drop in raw sugar sales coupled by higher costs.

Raw sugar production fell to 1.23 million 50-kilogram bags from 1.89 million LKG in 2015 due to lower volume of canes hauled and lower quality of canes milled.

Milling recovery rate was also down at 1.89 50-kilogram bags per ton cane (LKG/TC) milled compared with 1.71 50-LKG/TC milled last season.

Alcohol produced also decreased by 34 percent to 1.4 million liters.

For refinery, total gross sugar manufactured reached almost 970,000, up more than 60 percent year on year.

Meanwhile, the company’s co-generation power project has started its first phase and has produced 44.45 million kilowatt hour for the first quarter of the current crop year.

Once the project is completed, its ownership will be transferred as additional investment to Victorias Green Energy Corp.

VMC is engaged in integrated raw and refined sugar manufacturing with plant facilities in Negros Occidental. It operates mill and refinery facilities for sugar and allied products, and engineering services.
By Janina C. Lim, Reporter

Victorias Milling sees lower earnings

Posted on January 24, 2017

VICTORIAS CITY, NEGROS OCCIDENTAL -- Victorias Milling Company (VMC) Inc. expects profit falling by an annual 12% this year, as sugar prices continue to remain low.

VMC Chief Finance Officer Teresita V. Ilagan said the sugar miller’s net income may go down to P700 million from the P798 million it posted in 2016. The listed company’s fiscal year ends in August.

“The original outlook was about P1 billion but we will go somewhere (around) P700 million this year,” she said in a press briefing here on Monday. VMC posted a net income of P1 billion in 2015.

For its first quarter ending November, VMC earned P119.08 million, 59% lower than the P292.19 million in the comparable period in 2015 due to late start-up this crop year.

Ms. Ilagan attributed the low sugar prices mainly to the massive importation of high fructose corn syrup (HFCS), an alternative sweetener used by some industrial manufacturers for beverages, cookies and juices.

The Sugar Regulatory Administration (SRA) earlier said that from January to November last year, local industry players imported around 285,000 metric tons (MT) of HFCS, 44.67% higher than the 197,000 MT of HFCS shipped to the country in the same period in the prior year.

As of Jan. 8, mill site sugar prices have gone down to P1,538.03 per 50-kilo bag from P1,784.92 at the start of the September milling season, according to the SRA price watch.

VMC President and Chief Operating Officer Eduardo V. Concepcion said sugar production for this year may be flat as it continues to feel the effects of the severe El Niño last year.

“Overall picture now is total production will be more or less the same last year. Tonnage is high but sweetness is not as high in the previous year,” he told reporters at the same briefing.

Mr. Concepcion added that the company’s initial target was to achieve milling 3.2 million tons of cane for the current year. This was revised downward to a “more realistic” 3 to 3.1 million level.

“Malaki talaga impact ng El Niño kasi na-stunt yung growth ng mga canes eh (El Niño’s impact was really big because it stunted the growth of the sugarcanes),” Linley A. Retirado, VMC chief manufacturing officer, said in an interview.

However, Mr. Retirado noted the firm’s milling target for the current year is still considerably on the high side. VMC recorded its highest tonnage of 3.3 million tons of cane in only two financial years from 2003, he added.
By Janina C. Lim, Reporter
Victorias Milling biomass power plant to be completed this year

Posted on January 25, 2017

VICTORIAS CITY, NEGROS OCCIDENTAL -- Victorias Milling Co., Inc. expects to complete this year a P2-billion cogeneration biomass power plant with a 40-megawatt (MW) capacity, which will be partly used by its sugar mills.

VMC President and Chief Operating Officer Eduardo V. Concepcion said the plant, which will run mainly on bagasse -- a byproduct of sugarcane, is on track to start operations in September. Construction of the plant started last year. “We will be able to export to the grid about 25 MW, while the remaining 15 MW will be for own use. We are also applying this under FIT (feed-in tariff),” he said during a briefing on Monday.

Should the project qualify under the FIT scheme, the power plant will get priority dispatch in the spot market with a fixed price of power at P6.63 per kilowatt hour for at least 20 years.

VMC also bared plans to begin the second phase of its biomass power plant with equal capacity, but reducing the power that will be exported to the grid to only 20 MW.

“[P]art of the power from phase 2 will electrify the turbines to convert them to use electric power. So steam from the sugar mill will be concentrated on the power plant to maximize power that we will use to run the mill,” Mr. Concepcion added.

The official noted that other sugar millers planning to build their own biomass power plants in the region are talking to VMC for a supply agreement for bagasse. However, he said this may not be a viable.

“The set-up could be somehow difficult since gathering sugar cane trash in the field is challenging... It will be difficult during the rainy season especially in bringing in needed equipment,” Mr. Concepcion said, mentioning that the Zabaleta group is one of those interested in putting up such a biomass plant in the region.

To recall, the Zabaleta-led Bronzeoak Philippines, Inc. announced the International Finance Corp. (IFC) already approved a funding of up to $141 million for three biomass plants namely in San Carlos, South Negros and North Negros.

Mr. Concepcion also said that they already signed an agreement with the local arm of China-based Wuxi Huaguang Electric Power Engineering Co., Ltd. to supply the boiler for its biomass projects.

At the same time, VMC will also upgrade its distillery to be able to produce bioethanol, aside from potable alcohol. This, on the back of huge local demand for bioethanol.

“Under the law, bioethanol needs to be sourced from local produce so the demand and the price is high compared to potable alcohol that could be imported,” VMC Chief Manufacturing Officer Linley A. Retirado said during Monday’s briefing.

The official was referring to the Biofuels Act of 2006 which mandated a 10% bioethanol blend in gasoline, a requirement that industry players still find difficult to fulfill due to a deficiency in local production for bioethanol.

As such, the government still enforces 2% bioethanol blend due to supply issues.

In 2015, local bioethanol output reached 168 million liters or 28.72% of the total consumption which reached 479 million liters, while the deficiency was filled by imports, according to the annual Global Agricultural Report Network of the United States Department of Agriculture Foreign Agricultural Service. Moreover, Mr. Concepcion said the installation of a dehydrator, the machine needed to convert potable alcohol to bioethanol may cost between P50 million and P80 million and boost the millers’ current capacity to produce potable alcohol to 50,000 liters from 30,000 liters a day.

This translates to a projected annual production of bioethanol to reach up to 8.3 million liters.

VMC will be using molasses as its feedstock, which is also a by-product of sugar cane milling.
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VMC profit falls as sugar prices decline

VICTORIA’S MILLING Company, Inc. (VMC) recorded a double-digit drop in earnings for the September to November 2017 period, dragged by declining sugar prices accompanied by rising costs in production.

In a regulatory filing on Wednesday, the listed firm posted a net income attributable to the parent of P46.75 million in the three months ending November 2017, 60% lower than the P119.63 million it generated in the same period in 2016.

This comes amid a 38% increase in revenues for the period to P1.84 billion, compared to the P1.33 billion realized in the same period a year ago. Revenues from sugar milling operations accounted for the bulk of the total.

For the refined sugar component, VMC said it tripled its volume, selling 704,000 50-kilogram (LKG) bags during the quarter, from a net production of 1.18 million LKG. One LKG is equal to one 50-kilogram bag of sugar. This generated P694-million revenues for the company, even as average refined sugar prices slipped by 18%.

VMC noted there was no alcohol production for the period due to the ongoing expansion of its facilities. Demand for the product declined for the period, resulting to a 64% drop in revenue contributions or P92 million. 

The raw sugar segment, meanwhile, accounted for P71 million of revenues, amid a 22% hike in raw sugar prices recorded in the industry. Raw sugar milled in the first quarter was recorded at 1.82 LKG per ton cane, indicating a 40% increase in total raw sugar production.

Molasses produced also increased to 39,000 metric tons, 44% higher than the 28,000 metric tons produced in the same period a year ago.

Higher volumes sold, however, failed to offset the average increase in sugar prices, the company said.

“Management’s course of action is to continue implementing cost control measures in this challenging condition but remains optimistic about the future prospects of the business due to stable demand and possible recovery of prices in succeeding quarters,” the company said. 

Incorporated in 1919, VMC’s core business is the operation of mill and refinery facilities for sugar production, as well as engineering services. Its subsidiaries include Victorias Food Corp., Victorias Agricultural Land Corp., Canetown Development Corp., Victorias Green Energy Corp., and Victorias Gold and Country Club, Inc. 

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Low sugar prices weigh on Victorias H1 profit  

LISTED Victorias Milling Corp. (VMC), one of the country’s leading sugar companies, posted a net income of P237 million for the first six months ending February 2018, down 53 percent from P504 million a year ago, due mainly to a big drop in sugar prices and higher costs.

In a disclosure to the Philippine Stock Exchange on Monday, the sugar producer said net income for the six months to February fell by more than half from a year ago as lower sugar prices and an increase in costs outweighed higher refined sugar sales.

It said that despite the decline in sugar prices, the group generated a 3-percent increase in revenue compared to the same period last year.

This was mainly driven by a 45-percent increase in refined sugar sales volume of 1.8 million LKG (50-kilo bags) as compared to 1.2 million LKG sold in the same period last year.

Refined sugar sales, which comprise 71 percent of total revenue, amounted to P3 billion in the first half.

Raw sugar sales and tolling volume declined by 30 percent and 52 percent, respectively, and together with depressed raw sugar prices, resulted in total revenue of only P927 million.

Total cost of goods sold as a percentage of revenue increased from 73 percent to 87 percent due to higher cost of canes and other raw materials and higher cost of off-season repairs incurred last quarter.

“Over-all, the significant decline in sugar prices and increase in costs in the first half of CY 2017-2018 contributed to the decline in the Group’s gross profit as compared to the same period last year,” VMC said.

The sugar company, however, remains optimistic about its prospects amid strong demand for its products.

“Management’s course of action is to continue implementing cost control measures in this challenging condition but remains optimistic about the future prospects of the business due to stable demand and possible recovery of prices in succeeding quarters,” VMC said.


Recovering Victorias Milling agrees to pay subsidiary’s loans

Leading sugar producer Victorias Milling Corp. (VMC) seeks to amend its rehabilitation plan to include about P1.19 billion worth of contingent liabilities currently the subject of ongoing litigation cases with creditor-banks.

VMC recently filed with the Securities and Exchange Commission (SEC) a motion to alter the rehab plan, specifically to address its unresolved and contingent liabilities consisting of refined sugar delivery orders (RSDO) and refined sugar quedans (RSQ). These were purportedly issued by VMC and used by its 51-percent subsidiary North Negros Marketing Co. Inc. (Nonemarco) to secure the latter’s loan with certain banks.

The sugar firm has not honored these as legitimate loans since it’s Nonemarco who contracted them. The parent company also denied liability, arguing that these claims “lacked any factual or legal basis and that the officers who issued them acted fraudulently.”

Several creditor banks have filed collection cases against Nonemarco summing up to P1.19 billion.

This issue had not been settled in VMC’s creditor-driven rehab program. These are deemed by the company as contingent liabilities subject to final judicial resolution.

VMC now seeks to address these liabilities by altering the rehab plan and extending the liabilities to 10 years.

“VMC is offering to pay the banks over 10 years to avoid further litigation and put a closure to this and hopefully to make the rehabilitation successful,” said a source privy to the discussions.

This means that instead of waiting for a final judgment to pay the claims, VMC now agrees to restructuring these liabilities.

In 2015, the SEC special hearing panel ordered VMC to settle the claim of one of the claimant-banks. An appeal filed by VMC was denied by the SEC en banc in 2016. In the same year, the SEC panel also ordered VMC to settle the claim of another bank, an order that was upheld by the en banc.

VMC, in turn, sought the Court of Appeals’ help in 2017 to review both cases.

The appellate court consolidated the cases, and on October 13, 2017, it promulgated a decision granting VMC’s petitions for review, and accordingly, set aside the SEC en banc decisions.


9 of 12 sugar refineries stop operations, says SRA

Nine of the country’s 12 sugar refineries have stopped operations earlier than usual this crop year due to the 15 percent drop in cane production.

Sugar Regulatory Administration (SRA) chief Hermenegildo Serafica said that as of this week, only three refineries have remained operational – Central Azucarera Don Pedro, Inc. in Luzon, Busco Sugar Milling Company Inc. in the Visayas and Lopez Sugar Corp. in Mindanao.

Usually, sugar refineries suspend operations by July or August when the crop season ends. But with the decline in cane output to 2.064 million metric tons (MT) from 2.437 million MT last year, companies had been forced to close earlier.

Firms that stopped operations are URC-Carsumco, Luisita Sugar Refinery, Biscom Inc., First Farmers Holding Corp., URC-Ursumco, URC-Sonedco, Victorias Milling Co., Hideco Sugar Milling Co., Davao Sugar Central Co Inc.

Due to lower output, sugar prices have risen.

The wholesale price of raw sugar surged by 42 percent to P2,148 per 50-kilogram bag (LKg) last week from P1,507.71 per LKg at the start of the year, while retail prices have risen by 10.48 percent to P52.72 a kilo from P47.56 a kilo.


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