• Should Pepsi-Cola disclose fund sources for ‘food’ ventures?

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    Emeterio Sd. Perez

    Emeterio Sd. Perez

    HAS Pepsi-Cola in the Philippines been incorporated with “products” in its corporate identity that it would not need amending Pepsi-Cola Products Philippines Inc. when it diversifies into “solid” from ‘liquid”?

    There is no need to define “liquid” as bottled by Pepsi-Cola. But “solid” as used here refers to “food.”

    Pepsi-Cola has amended its corporate charter by including “food and food products, snacks” in the primary purpose of its Articles of Incorporation. The question, though, is why specify “snacks” when these would also fall under “food” category. Would “snacks” mean something “solid” plus something “liquid” to complete the meal?

    Okay. All is set for Peps-Cola’s food ventures. It has already amended its charter as passed by the board and the amendments ratified by the company’s stockholders during their annual meeting on May 30.

    But if the public stockholders present during said meeting were to look at the change in Peps-Cola’s major thrusts, then they would have asked only one question: where would their company get the money to finance the “solid” expansion”? Will it borrow more when it had piled up liabilities to the tune of P9.764 billion of which P2.991 billion is long-term debt and P700 million short-term debt?

    Unfortunately, nobody asked as if the public wouldn’t be interested in knowing the budget for such an ambitious corporate move. Perhaps, the individual stockholders outside of the majority were only anticipating that Pepsi-Cola executives did not have the numbers, as if they would have programmed an expansion without considering the money matters.

    Of course, company insiders would know at least the initial outlay and the maximum allocation needed for the “solid” expansion. But they were not ready yet on May 30 to disclose the information. Are they afraid of prematurely disclosing material facts when they—meaning the members of the board—have yet to finalize them?

    There are and would be a series of questions to satisfy the public. Which would cost more to process and sell, “liquid” as Pepsi-Cola Philippines’s main products or “solid” when this could need a billion pesos or more to make it a more profitable venture?

    Finally, will food and snacks business generate more revenues in the near future that would result in much improved profitability?

    The numbers posted on the website of the Philippine Stock Exchange suggest Pepsi-Cola needs to be more aggressive to successfully operate in what has often been described as a “competitive environment” as if there were a unique product that had no competition at all.

    In the first quarter of 2014, Pepsi-Cola reported gross sales of P6.447 billion, down 8.408 percent from P5.947 billion in the same period in 2013. Its percentage of returns slightly went up to 14.877 percent from P14.330 percent in the same period in 2013.

    As a result, Pepsi-Cola’s comprehensive net profit fell 49.803 percent to P136.045 million in the first three months of 2014 from P270.214 million. These profits translate to earnings per share of P0.04 andP0.07 during the comparative quarters.

    Don’t misinterpret the EPS, which is intended to measure profitability. It does not mean Pepsi-Cola is ready to declare a P0.04 dividend either in cash or in stock. If ever the company does become generous, it could consider the distribution of dividend because it has too much to keep as retained earnings which amounted to P5.826 billion as of March 31, 2014.

    More money matters: Pepsi-Cola paid R.G. Manabat & Co. audit fees of P3.83 million for 2011; P3.95 million for 2012; and P4.07 million for 2013. Will it pay more the audit firm this year considering the company’s “solid” expansion? . . . A footnote to Pepsi-Cola’s compensation filing has this to say about the foreigners in the board: “The seven directors representing Lotte Beverage Chilsung Beverage Co. Ltd. and Quaker Global Investments B.V. have waived their per diem allowance as well as directors fee.” Due Diligencer assures these foreigners Filipinos would not do what they did. They would even insist on their “right” to avail themselves of a company’s employees stock options.

    esdperez@gmail.com

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