VICTORIAS Milling Co. (VMC) must be on its way to recovery, because as its shares’ price soared from an average of P1.297 in 2012 to P4.14 on February 25, 2014 for a huge increase of P2.834 per share, it has been rewarding more of its executives. In 2012, when it had only top four highest paid executives, it paid them as a group salary of P16.46 million and bonus of P2.63 million, for a total of P19.08 million.
Perhaps, VMC’s top executives were only availing themselves of hefty benefits by anticipating the company’s financial recovery, which happened partly because of the conversion of debt to equity. Creditors had no option but to become stockholders, because they could never recover their exposures unless VMC has cleansed its books of heavy debt burden.
But as stockholders, these lenders have to wait a little longer for VMC to pile up retained earnings or surplus that could be distributed to them and other stockholders as dividends either in cash or in stock.
It is only very unfortunate that based on filings posted on the website of the Philippine Stock Exchange, VMC’s executives are taking the initiative of reaping the fruits of the debt-to-equity conversion ahead of creditors turned stockholders and the public.
In 2011, the four executives received P14.82 million in salary, and P3.35 million in bonus, for total compensation of P18.17 million. Translated, this means in 2012, VMC increased by 5.047 percent the pays and perks of its top four executives.
But you, as public investors and small stockholders of VMC should be ready for a shocker: In 2013, VMC’s top five managers—not top four anymore—got P22.39 million in salary and P9.41 million in bonus for total compensation of P31.80 million, for a huge increase of P12.71 million, or 66.597 percent.
If you want something more disappointing, divide P12.71 million among the five executives and you will arrive at a quotient of P2.542, which was how much more each of them got in 2013 for additional pay.
Yes, VMC’s rehabilitation must be succeeding if based only on how its managers, made up of course of the top five or four, have been generous to themselves. And this is only a presumption, because Due Diligencer could not explain to a The Manila Times reader who identified himself/herself only as “whistle–blower” on why VMC shares have been active again “since January this year.”
“What’s happening?”, whistleblower asked.
Frankly, Due Diligencer does not have the answer. Perhaps, businessman Lucio Tan and his think-tank would know.
But then, don’t wait for VMC’s significant or even major stockholders to provide the filing that would explain VMC’s soaring market price. Instead, why not take a closer look at the numbers pertaining to VMC’s financials? More important among the corporate events that had taken place was the reduction of VMC long-term debts to P2.55 billion as of August 2013 from P5.0 billion in 2011.
Due Diligencer is not saying that with reduced debts, VMC would be looking at brighter days ahead because the question is: Will the company not resort to heavy borrowing again to finance its operations?
The best news so far that should, however, be closely monitored by the Securities and Exchange Commission is VMC’s unaudited quarterly report showing the company’s in the black again. As of November 30, 2013, the sugar central had retained earnings of P15.49 million against deficit of P212.07 million as of August 31, 2013. VMC’s financials were much worse in previous years when its deficit amounted to P968.37 million as of August 31, 2012; P1.58 billion as of 2011; and P2.03 billion as of 2010.
The “paper recovery,” could be the result of, among a number of factors, quasi-reorganization and conversion of loans into equity that lifted VMC’s market price, because the price per share in a debt-to-equity swap should at least be the par value. That is, if VMC has par value of P1 and its shares were trading below it, the conversion into equity should be at least be at P1.
To illustrate: VMC’s filings showed the conversion of P1.1 billion debt to unsecured creditors in 2002 “at a ratio of P1 of debt to P1 of common shares with par value of P1.” As VMC stock’s price, the former creditors who were forced to convert their loans into shares should be happy. At P4 per share, they are already ahead by P3 but only in paper, because they could not sell now or in the near future.
Meanwhile, Due Diligencer received the following email from Crescencio C. Bendijo, first vice president of Philplans, who wrote: “Please find out what happened to the golf course they were supposed to build in Cebu. I made partial payments for it and I wonder what happened to it now.”
The writer was reacting to the Due Diligencer piece “Ever-Gotesco active again but insiders don’t know why.” Will the company make some filing so that Bendijo and other investors in Ever-Gotesco know the truth behind the market numbers?