Quasi-reorganization: What is this all about?

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Emeterio Sd. Perez

VITARICH Corp., according to the company’s general information sheet (GIS) of 2017, has an authorized capital stock of 3.5 billion common shares, of which 2.786 billion are outstanding. The common shares have a par value of P1 each.

Of Vitarich’s 4,223 stockholders, 4,205 are Filipinos, who own 2.515 billion common shares, or 90.241 percent, while 18 are foreigners, who hold 271.937 million common shares, or 9.759 percent.

As of Dec. 31, 2016, Vitarich and its subsidiaries had “823 employees, composed of supervisors, managers, executives and rank-and-file employees. Of the total, 441 were regular and 382 were contractual.

The rank-and-file workers of Vitarich, according to the GIS, are unionized under the Vitarich Corporation Employees/Workers Union Chapter of the Federation of Free Workers. The company’s collective bargaining agreement with the union took effect on Aug. 1, 2015 and will end on July 31, 2020.

As of June 30, 2017, Vitarich reported in a quarterly filing a deficit of P2.32 billion, down from P2.417 billion as of Dec. 31, 2016. It more than doubled its net profit to P93.302 million from P40.838 million from the corresponding six-month period in 2016.

Executive compensation

Vitarich’s top five highly compensated executives are Ricardo Manuel M. Sarmiento, president and chief executive officer; Stephanie Nicole S. Garcia, executive vice president, corporate service management director and treasurer; Joven P. Dy, senior vice president for poultry and foods operations; Guillermo B. Mirallles, vice president for national feeds sales and production; and Reynaldo D. Ortega, vice president and general manager for poultry and foods division.

The company said in a definitive information statement (DIS) it paid the top five executives as a group P5.4 million in 2015 and P10.9 million in 2016. It estimated the group’s compensation for 2017 at P14.5 million.

“All other officers and directors as a group unnamed” at Vitarich were paid P1.1 million in 2015 and P0.8 million in 2016. This year, they are expected to receive the same amount of pays and perks of P1.1 million which they got in 2015.

In an audited financial filing, Vitarich said it paid its 823 employees P112.81 million in 2016; P132.321 million in 2015; and P75.131 million in 2014.

Treasury shares

As of Sept. 30, 2017, Aboitiz Equity Ventures Inc. (AEV) reported 5.695 billion issued common shares, of which 60,807,064 are treasury shares, leaving the company with 5,633,792,557 outstanding common shares.

In a financial filing, Aboitiz Equity reported P521.132 million as “treasury stock at cost,” which would translate to an acquisition price of P8.57 per share.

At AEV common shares’ closing price of P72.10 per share, the 60.807 million treasury shares of Aboitiz Equity had paper value of P4.384 billion. This would translate to a paper gain of P63.53 per share (P72.10 minus P8.57 = P63.53) and a total paper gain of P3.863 billion from treasury shares.

SOLID Group Inc. (SGI) said it had 209.433 million treasury shares as of Sept. 30, 2017, out of the company’s 2.031 billion issued shares. The treasury shares were equivalent to 11.495 percent of 1.822 billion outstanding SGI common shares.

The company reported in a financial filing “treasury shares at cost” of P115.614 million, or P0.552 per share.
At SGI’s closing price of P1.46 on Nov. 13, the company scored a paper gain of P1.048 per share, or a total of P219.486 million from 209.433 million treasury shares.

Due Diligencer’s take

Vitarich has readied a quasi-reorganization strategy that is intended to wipe out its deficit, which, as of Dec. 31, 2016, amounted to P2.417 billion. It has yet to detail how it would erase these accumulated losses over the years.

The company, which is based in Marilao, Bulacan, produces animal feeds and also sells dressed chicken, among a number of products.

Apparently, the Sarmiento-controlled Vitarich finds its net profit too small to cover its multi-billion-peso deficit.
Given the lack of details about Vitarich’s quasi-reorganization plan, Due Diligencer is making some guesses.

Since Vitarich’s equity is in positive territory—P870.012 million—it needs P1.547 billion more to get rid of its deficit of P2.417 billion as of Dec. 31, 2016. To do this, it plans to reduce the par value of its capital stock. It has 2.786 billion outstanding common shares.

Vitarich should not make the public stockholders sacrifice so much of their money. The reduction to P0.70 per share from P1 par value of Vitarich’s outstanding common shares should be more than enough to erase the deficit. At this suggested par value, the company’s 2.786 billion outstanding common shares would be equivalent to P1.951 billion.

By adding to that the reported additional paid-in capital of P224.547 million and other comprehensive income of P276.012 million, the sum of P2.451 billion would even leave Vitarich with reduction surplus of P34.062 million.
How about the managers and executives of Vitarich? What could they be cooking inside the boardroom? Just asking.

esdperez@gmail.com

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