Revenue for the quarter also down 8.9% on year at 14.6 billion pesos

 

PHILIPPINE liquor giant Emperador&rsquo s net profit for the third quarter ended September fell 52.2 per cent to 981 million pesos (S$22.4 million), from 2.1 billion pesos in the previous corresponding period.

 

Revenue for Q3 was down 8.9 per cent on the year at 14.6 billion pesos, from 16 billion pesos.

 

This brings net profit for the nine-month period to 4.8 billion pesos, down 29.4 per cent from 6.8 billion pesos in the previous corresponding period. This translates to an earnings per share of 0.31 peso for the nine months, down from 0.43 peso in the same period last year.

 

Revenue in the first nine months also slipped 8.3 per cent year on year to 43.2 billion pesos.

 

The declines come as Emperador&rsquo s global spirits sector and global beverage alcohol markets face lower demand, as the cost of living rose amid rising inflation, said the group on Thursday (Nov 14).

 

Brandy revenue for the nine-month period fell 10 per cent on the year to 25 billion pesos, while whisky revenue posted a 5.7 per cent year-on-year decline to 18.2 billion pesos.

 

Emperador noted that there was weakness in most global markets, including Spain, Mexico and the Philippines, as consumers shifted to affordable alternatives.

 

Industry slowdown in the Scotch whisky segment also continued across multiple markets worldwide, said the company, which is dual-listed on the Philippine Stock Exchange and the Singapore Exchange.

 

&ldquo The tough trading situation in China and in the US impacted the Scotch whisky industry sales in the Asia-Pacific and North American regions,&rdquo it added.

 

 

Brandy and whisky group, Emperador, which has a secondary listing on the Singapore Exchange S68 -0.41% (SGX), has reported earnings of 3.81 billion Philippine pesos ($87.6 million) for the 1HFY2024 ended June 30, 19.6% lower y-o-y. The group' s primary listing is on the First Board of the Philippine Stock Exchange.

 

For the 2QFY2024, the group&rsquo s earnings stood at 2.07 billion pesos, 14.3% lower y-o-y.

 

1HFY2024 revenue fell by 7.9% y-o-y to 28.64 billion pesos as both brandy and whisky revenues fell on a y-o-y basis.

 

Profit before tax fell by 17.6% y-o-y to 4.6 billion pesos.

 

&ldquo While global beverage alcohol markets stayed subdued during the first half of the current year, as households remain generally under considerable financial pressure due to rising prices, the group remains resilient due to its diversified product portfolio, which covers numerous price points, and its wide distribution reach in over 100 global markets,&rdquo says the group in its Aug 7 financial results statement.

 

&ldquo While gross profit margins were easily swayed by product-sales mix, the group&rsquo s gross profit ratio stayed within 33% of sales for 2QFY2024 and 1HFY2024 this year,&rdquo it adds.

 

In a press release dated Aug 6, Winston Co, president of Emperador, stated that the company' s fundamentals are " intact" and that its long-term trajectory is still " on track" . 

 

" Once global economies improve and consumer demand for premium and luxury products returns, our performance will see new heights. The company continues to strategically invest in the business for the future," he adds.

 

PHILIPPINE liquor giant Emperador : EMI 0% recorded net income attributable to owners of 2.3 billion pesos (S$55 million) for the first quarter of 2023, up 10 per cent from the year before.

 

This came as revenue rose 26 per cent year on year to 15.6 billion pesos, the company said on Monday (May 15).

 

Emperador, which is listed on both the Philippine Stock Exchange and the Singapore Exchange (SGX), had continued growth in Greater China and North America during the quarter, as well as a rise in its travel retail business on account of increased air travel, said Emperador&rsquo s president Winston Co.

 

The spirits conglomerate owns a brandy portfolio which includes Emperador Brandy and whisky producer Whyte and Mackay. 

 

PHILIPPINE liquor giant Emperador : EMI 0% posted 11 per cent year-on-year revenue growth to 42.6 billion pesos (about S$1 billion) for the first nine months of 2022, driven by growth across the group&rsquo s whisky and brandy segments. 

 

On Thursday (Nov 10), the dual-listed company said its whisky segment revenue grew 16 per cent over the nine-month period mainly due to higher sales of single malts across almost all regions around the world, and the return of travel retail. 

 

Revenue from the brandy segment grew 8 per cent, sustaining year-on-year topline growth in its key markets in the Philippines, Spain, Mexico and North America. 

 

Despite the higher group revenue, net profit was marginally lower at 7.2 billion pesos compared with the previous year&rsquo s 9M earnings of 7.3 billion pesos.  

 

Emperador attributed this to rising inflation which impacted both its whisky and brandy segments to result in higher input and logistics costs, as well as advertising and promotional expenses which were recorded with increased on-trade activities.

 

These factors have a greater impact on the operating margins of the brandy segment where prices are more accessible compared to that of whisky, said the company. 

 

Emperador president Winston Co noted that the company&rsquo s earnings performance for 9M 2022 was limited by rising inflation despite its global business remaining robust. 

 

&ldquo There is so much volatility in the global market. We are glad to deliver sustained earnings through our wide portfolio of brands,&rdquo he said. 

 

UOB Kay Hian (UOBKH) has initiated coverage on Emperador : EMI 0% with a &ldquo hold&rdquo call and a target price of S$0.53, saying it likes the international spirits company&rsquo s strong brand portfolio as well as its ability to address shifting consumer preferences.

 

Emperador is the world&rsquo s top brandy producer by volume and the largest liquor producer in the Philippines. It is primary-listed on the Philippine Stock Exchange and secondary-listed on the Singapore Exchange, having recently replaced transport company ComfortDelGro on the Straits Times Index.

 

UOBKH&rsquo s target price on the stock implies a potential upside of 10.4 per cent from its Oct 10 closing price of S$0.48. It is based on a 30 times multiple of the stock&rsquo s 2023 price-to-earnings (PE) estimates, pegged to a 10 per cent premium to industry peers&rsquo 2023 average PE. 

 

In a Tuesday (Oct 11) report, analyst Llelleythan Tan said he views the higher PE multiple for Emperador as justified due to the high pricing power commanded by the company&rsquo s premium alcohol, the demand for which is price inelastic.

 

He notes that the stock is currently trading at 26.9 times its 2023 PE, in line with its peers. 

 

&ldquo We think that Emperador is fairly valued at current price levels, and a key rerating catalyst would be the successful penetration of its key premium products into China and new growing markets,&rdquo said Tan.

 

The analyst is projecting Emperador&rsquo s 2021-24 overall revenue at a CAGR (compound annual growth rate) of 5.7 per cent, with gross margins to improve to 35 per cent in 2024 from 32.8 per cent in 2022. 

 

He also expects gross profit to grow at a CAGR of 7.2 per cent from 2021 to 2024. 

 

&ldquo Similar to gross margin, net margin is expected to increase from 17.9 per cent in 2021 to 18.8 per cent in 2024 and a net profit CAGR growth of 7.0 per cent from 2021-24, driven by greater expected sales of premium alcohol,&rdquo said Tan.

 

Tan highlights Emperador&rsquo s premiumisation strategy as a key advantage for the company, as it capitalises on existing market trends which indicate that consumers are increasingly willing to pay higher prices for premium liquor. He noted that the company has priced its premium single malt whiskies 10 to 15 times higher than accessible Scotch whisky brands.

 

The analyst also believes the company is well-positioned to capitalise on growth opportunities in China, where Scotch whisky is the most popular type of whisky. 

 

Therefore, the research house regards Emperador as well-poised for robust future growth. 

SHARES of mainboard-listed Emperador : EMI +3.03%rose Friday (Sep 2) morning on heavy volumes after news that the stock will be replacing ComfortDelGro as a constituent on the Straits Times Index on Sep 19. 

 

As at 9.03 am, the counter was trading up S$0.025 or 5.1 per cent at S$0.52 after some 584,000 securities changed hands. It later closed at 51 cents with 11.43 million shares transacted. 

 

No married deals took place in early trade, said ShareInvestor.

 

Emperador, which is primary-listed on the Philippine Stock Exchange and is a subsidiary of Filipino billionaire Andrew Tan&rsquo s Alliance Global Group, debuted on the SGX mainboard with its secondary listing in July.

 

It is the largest liquor company in the Philippines, and its portfolio includes whiskey brands such as The Dalmore and Jura, as well as brandy under the Fundador and its eponymous Emperador brands.

 

Analyst Brian Freitas of Periscope Analytics, who publishes on Smartkarma, said in an Aug 24 note that Philippine-based Emperador was in the &ldquo outright inclusion zone&rdquo for the STI based on closing prices on Aug 22, as its market capitalisation of S$8.3 billion put it in the 20th spot among eligible counters.

 

Meanwhile, shares in ComfortDelGro dropped to an intraday low of S$1.36 before finally closing at S$1.38 on Friday, shedding 2 cents or nearly 1.5 per cent, as some 18.32 million shares changed hands.

 

However, DBS and CGS-CIMB remained upbeat on the stock, advising investors to pick up the counter on share price weakness.

 

DBS, which has a target price of S$1.95, noted unchanged fundamentals, an improving outlook, and the upside from easing pandemic-linked restrictions. &ldquo We also highlight a possibility to bottom-fish near or around Sep 19, when the constituent change takes effect,&rdquo DBS said in a note.

 

CGS-CIMB analysts reiterated their &ldquo buy&rdquo call on the counter, pointing out that ComfortDelGro is well-placed to benefit from a boost in rail ridership and taxi earnings. CGS-CIMB has a target price of S$1.75.

 

&ldquo We expect further earnings recovery in coming quarters, driven by improved monetisation of its Singapore taxi business, higher rail ridership, and increased charter activities as tourism recovers,&rdquo they wrote. &ldquo ComfortDelGro also offers an attractive dividend yield of 5.9 per cent.&rdquo