Can They Reverse Their Losses After TRAIN Law’s Impact?
A market capitalization of Php 5B at last close of 1.5.
TLDR Version:
- ) PIP has significant prominent brands.
- ) PIP has lost money due to the TRAIN law on sugar taxes and it needs to manage their price-increases with sales volumes.
- ) PIP paid significant 666M pesos in taxes on sugar which made their net income completely dry turning into an 81M loss.
- ) PIP and other sweetened beverages have definitely suffered but the light at the end of the tunnel is the government recently allowed importing of sugar which can lower costs. Note that sugar is taxed at 6 peso per liter versus 12 peso per liter for high fructose syrup. This should help address the declining profits who were directly hit by the tax imposed on sugar-sweetened beverages (SSB) under the Tax Reform for Acceleration and Inclusion (TRAIN) law.
— > Changing the raw materials would lower taxes. Another potential good thing about importing sugar is that it is at 8 year lows which can benefit the company.
Technicals — Unusual Volume and Unusual Buying Activity
A very strong volume at the break of 1.42, the highest volume that can be found since the last few years. Since PIP was listed: the low was 0.62, the peak was 6.88.
The company lost money last year. In its 9M18 filing, it has lost 81 Mil versus previously earning 655 Mil. During 9M17 however they’ve earned money such that they’ve declared cash dividends of 4.4 cents last May 25, 2018.
The company has seen net income slow down. 2016 income used to be 853 Mil and this was almost halved during year 2017 to 541 Mil. Decline in business can be seen as it used to pay 6.9 cents during June 2017. Furthermore, 2015–2016 annual incomes used to be steady at 800M a year. The company has been increasing sales over the years but expenses has also been ballooning. Sugar taxes remain a culprit for 2018 and going forward.
PCPPI is among the food and beverage companies directly hit by the passage of TRAIN law, which imposed taxes on sugar-sweetened beverages (SSBs). The law enacted last January placed an excise rate of P6 per liter on drinks containing caloric or non-caloric sweetener and P12 per liter on drinks containing high fructose corn syrup (HFCS).
In January alone, the company paid P666 million in taxes due to TRAIN.
On a nine-month basis, PIP booked a net loss of P81.19 million, even as revenues went up by 5% to P28.07 billion. This translates to losses per share of two centavos.
“The effect of the TRAIN law on volume and cost continue to adversely impact the company’s profitability with net loss at P81 million year-to-date,” PCPPI said.
PCPPI said it will continue to invest for future growth despite the decline in volumes. It spent a total of P1.7 billion in capital expenditures during the January to September period.
Incorporated in 1989, PCPPI is the license bottler of PepsiCo, Inc. and Pepsi Lipton International Limited in the country. Beverage brands under its portfolio include Pepsi-Cola, 7Up, Mountain Dew, Mirinda, Mug, and Gatorade, among others.
Further Reading: https://www.minimeinsights.com/2018/06/17/sales-volume-of-beverages-in-the-philippines-fell-following-sugar-tax/
