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Security Bank’s ratings affirmed

SECURITY BANK Corp.’s debt ratings were affirmed by Moody’s Investors Service.

MOODY’S INVESTORS Service has affirmed its investment-grade rating for Security Bank Corp., also maintaining its “stable” outlook.
In a statement on Monday, the global debt watcher said it has maintained Security Bank’s long-term local and foreign currency deposit and issuer ratings of Baa2, a notch above the minimum investment grade.
Moody’s likewise maintained its short-term local and foreign currency deposit and issuer ratings at P-2, while baseline credit assessment (BCA) stood at baa3.
Counterparty risk assessments were also affirmed at Baa2(cr)/P-2(cr).
Moody’s said its ratings are based “on its assessment that “the bank will receive moderate support from the [g]overnment of the Philippines (Baa2 stable) in times of need.”
The credit rater added the baa3 BCA rating of Security Bank was underpinned by its “above-industry-average asset quality and strong capital buffers,” boosted by a capital infusion made by its partner MUFG Bank, Ltd.
In April 2016, Security Bank received an additional capital of P36.9 billion from the Japanese lender. In turn, the local bank issued the foreign lender 150.7 million common shares and 200 million preferred shares, representing MUFG Bank’s 20% ownership of the bank.
“BCA takes into account Moody’s expectation that following the capital infusion, the bank’s asset quality and capital profile will moderate over time because of its higher-than-industry growth plans,” the debt watcher noted.
The baa3 BCA grade also took into account Security Bank’s modest funding, owing to its small deposit franchise and branch network in the Philippines as well as its higher reliance of on market funds.
Moody’s said it is unlikely to raise Security Bank’s deposit rating ahead of the Philippines’ rating, “given the high correlation of risks between the bank and the sovereign.”
For Security Bank’s BCA to be raised, Moody’s said the lender must have the ability to maintain low levels of non-performing assets, evidence that it can increase the contribution of its core commercial banking business to overall profitability as well as higher loss-absorption capacity.
Last month, Security Bank President and Chief Executive Officer Alfonso L. Salcedo, Jr. said the bank will grow its digital presence this year, which will take precedence over setting up branches.
It is also considering putting up more branch-lite units to expand its network to untapped and unbanked areas and to complement its existing full-service branches.
Currently, the bank has 171 branches in metro Manila and another 130 in the provinces.
Security Bank’s net profit was P2.35 billion in the first quarter, down 16.6%, due to lower trading gains.
Security Bank shares declined 40 centavos or 0.20% to close at P198.60 apiece on Monday. — K.A.N. Vidal

How RCBC Plaza secured LEED Gold certification

RCBC Plaza
By Mark Ferrolino
Special Features Writer
THE RCBC PLAZA in Makati City has received a Leadership in Energy and Environmental Design (LEED) Gold certification, making it the first multi-tenanted building in the Philippines to achieve such kind of green building certification.
LEED is a certification program designed by the US Green Building Council (USGBC) and has become the most widely used green building rating system to assess environmental compliance in terms of sustainability, energy conservation, water reduction, air quality and materials, and resources.
The RCBC Plaza, owned by the RCBC Realty Corp., secured the LEED certification under the classification of Existing Building Operations and Maintenance (EB:OM) last May 26.
It is the 5,406th building in the world to be LEED EB:OM certified and the 2,323rd building to earn LEED EB:OM Gold.
According to Evar Medina, RCBC Plaza’s property manager, changes were applied to the entire building to meet the green standards set by the USGBC.
“We changed all our lights to LED. We installed energy-saving mechanisms in the elevators so that when they were not in use, they did not use up electricity. Our central cooling system has been upgraded and most of our chillers that produce the cold air, that blow cold air all throughout the building are new. We installed water meters in all the toilets and even in the areas where the plants were,” Mr. Medina said.
Other changes included the use of plants that did not require a lot of watering, and a switch to non-toxic, chemical-free cleaning agents and pest-control substances.
RCBC Plaza also implemented hardscape management, pest control management, solid waste management, and green cleaning plans and programs.
To notify tenants of the changes and their environmental implications, the building administration conducted door-to-door campaigns and fora.
There are many benefits of going green that allow companies to maximize the return of investment on buildings and their spaces, Mr. Medina said.
“For instance, a green building secures major savings on occupancy costs because of its energy efficiency, reduced water usage and lower electricity consumption. The carbon footprint the building leaves is markedly smaller, and this is very important for the environment. As for the tenants and employees, they enjoy the daily privileges and health benefits of working in a building that maintains excellent environmental standards,” Mr. Medina said.
Since these changes were implemented, RCBC Plaza saw a 40% decrease in water use, a drop in electricity consumption, and cost savings. The plaza also secured proof of compliance with the ASHRAE Standard of Ventilation for Acceptable Indoor Air Quality.
Buildings are the biggest producer of carbon dioxide, a greenhouse gas that contributes to climate change, Barone International President Dean Barone, the RCBC Plaza LEED consultant, said.
He said that by observing simple measures, such as turning off the lights and unplugging the computers, a building operator can save more than 10% in energy and lower energy costs.
Aside from cutting business expenses, he said that being LEED certified is good for business as it can attract tenants and potential investors.

COL Financial posts flat income in second quarter

COL FINANCIAL GROUP, Inc. registered flat earnings in the second quarter of 2018, amid rising commissions from clients at a time of volatility for the local market.
In a regulatory filing, the listed firm said net income reached P114.37 million in the April to June period, almost unchanged from the P114.23 million it delivered in the same period last year. Revenues were also flat at P249.6 million.
On a six-month basis, the brokerage firm generated a net income of P322.2 million, 50% higher than the P214.6 million it booked in the same period a year ago, on the back of a 33.7% increase in revenues to P615.3 million.
COL Financial attributed the positive performance for the first half to a 25.5% increase in commissions, after it ramped up efforts to guide clients through “challenging market conditions.” It noted that total client equity from Philippine operations climbed to P70.5 billion, up by 3.2% despite the 15.3% drop in the Philippine Stock Exchange (PSE) index in the same period.
The company’s clients were seen adding more money to their accounts, almost doubling net flows in the country to P4.7 billion.
“We’re pleased to see that our clients continue to add to their portfolios to build wealth over the long term, notwithstanding the current market environment. I believe that this also signifies their confidence in our company, as they entrust more of their assets to us,” COL Financial President and Chief Executive Officer Conrado F. Bate said in a statement.
At the same time, COL Financial’s client base grew to more than 273,000 at the end of June, higher than the 225,000 it had in the same period a year ago.
The company’s average daily turnover at the PSE also reached P1.2 billion during the first half, making it the top stock broker in the local stock market.
Shares in COL Financial slipped by 0.24% or four centavos to close at P16.38 each at the stock exchange on Monday. — Arra B. Francia

Veloso steps down as president of HSBC Philippines

HSBC (Philippines), Ltd. said its president has resigned.

HSBC (Philippines), Ltd. said its president and chief executive officer Jose Arnulfo “Wick” A. Veloso has stepped down from his position.
“Wick Veloso has resigned from his role as President and CEO of HSBC Philippines,” the lender said in a statement of Monday.
It added that the successor will “be announced in due course.”
The bank refused to comment further when sought for a statement regarding the reason behind Mr. Veloso’s resignation.
Mr. Veloso has been the chief executive of HSBC Philippines since December 2012 and was the first Filipino to hold this position. Prior to this, he served as the head of HSBC’s global and markets operations, according to Bloomberg.
He is also vice chair of the Open Market Committee of the Bankers Association of the Philippines.
Meanwhile, in another development, Philippine National Bank (PNB) yesterday denied reports of the retirement of its president Reynaldo A. Maclang.
“We wish to advise the exchange that to date, the PNB board of directors has not approved any such retirement of PNB President, Reynaldo A. Maclang,” the Lucio C. Tan-owned bank said in a disclosure on Monday. — KANV

Crazy Rich Asians sparkles at N. America box office

LOS ANGELES — Highly anticipated rom-com Crazy Rich Asians — the first Hollywood film with an mainly Asian cast in a generation — dazzled the North American box office in its debut weekend, claiming the top spot, industry estimates showed Sunday.
The Warner Bros. adaptation of Kevin Kwan’s best-selling novel of the same name raked in $34 million since hitting theaters on Wednesday, box office tracker Exhibitor Relations said. Of the total, the film took in $25.2 million at the weekend.
Starring veteran actress Michelle Yeoh, British-Malaysian former BBC host Henry Golding and American sitcom star Constance Wu, the film tells the story of a American economics professor who meets her super-wealthy boyfriend’s family in Singapore — and all the drama that ensues.
It is the first Tinseltown film with a predominantly Asian cast since The Joy Luck Club in 1993.
Shark thriller The Meg tumbled to second place in its second week, taking in $21.2 million. It stars action movie regular Jason Statham as a rescue diver who tries to save scientists in a submarine from an attack by a huge, prehistoric shark.
Mile 22 — a new spy thriller-action flick starring Mark Wahlberg — opened in third place at $13.6 million. Mile 22 is the fourth collaboration between Wahlberg and director Peter Berg. The hope is that the action thriller will spawn a franchise, but that remains to be seen given the film’s estimated budget is between $30 million and $50 million.
Another debut film, prehistoric adventure tale Alpha, shared fourth place at $10.5 million with summer blockbuster Mission: Impossible — Fallout.
The latest installment in the M:I franchise has now taken in $180.7 million overall. Overseas, it pocketed another $20.5 million for an international total of $320 million.
Rounding out the weekend’s top 10 were: Christopher Robin ($8.9 million); BlacKkKlansman ($7 million); Slender Man ($5 million); Hotel Transylvania 3: Summer Vacation ($3.7 million); and, Mamma Mia! Here We Go Again ($3.4 million). — AFP/Reuters

Benettons go from preachers to pariahs after bridge disaster

FOR HALF a century, Italy’s Benetton family has preached compassion through eye-popping ads for its eponymous clothing line that have included photos of a dying AIDS patient, a black woman breast-feeding a white baby, and most recently, African immigrants being rescued at sea.
But now the Benettons themselves are the focus of public outrage over the deadly collapse on Tuesday of Genoa’s Morandi Bridge, threatening part of the family’s other, much more profitable business running airports, turnpikes, and roadside diners from Santiago to Rome.
Leading members of Italy’s new populist coalition government have begun the process of revoking the lucrative toll license held by Atlantia SpA, the family-controlled company that operated the bridge, and want its chief dismissed. The threats triggered a sell-off that, at its depth, wiped 6 billion euros ($6.8 billion) off Atlantia’s market value and fueled a backlash on social media, where scores of posts accuse the Benettons of pursuing profit over safety.
The Benettons didn’t comment until Thursday, when they issued a statement via holding company Edizione Srl. expressing “deep sympathy” for the victims of the disaster and vowing to work with authorities to determine the cause, while emphasizing that Atlantia and its Autostrade subsidiary have invested more than 10 billion euros in Italy’s roads over the past decade.
FUNDING PLAN
Atlantia Chief Executive Officer Giovanni Castellucci followed up Saturday with a pledge to rebuild the bridge within eight months and provide an initial 500 million euros to alleviate the suffering of victims, not including possible direct compensation payments. That’s about half of what the company returned to the Benettons and other shareholders last year.
For Enrico Valdani, a professor of marketing at Bocconi University in Milan, the actions may not be enough to ease tensions with the government or win back the trust of the populace, much like United Colors of Benetton initially balked at taking responsibility for a cave-in at a Bangladeshi garment factory, where it sourced shirts, that killed more than 1,100 in 2013.
“They made a mistake by not promptly clarifying their alleged role in the fatal bridge collapse,” Mr. Valdani said by phone. “What the family now urgently needs is a straight plan of communication and crisis management. They need to demonstrate the company acted in good faith or admit any possible fault.”
A statement from the Benettons on Saturday, a day of mourning, said their thoughts were with the loved ones of the deceased. At the same time, Chairman Fabio Cerchiai said he personally hoped Mr. Castellucci, 59, will remain in the job, adding that the CEO has the support of the board and investors.
Representatives met with executives and lawyers on Friday to prepare the initial funding package, and there’ll be meetings in Rome this week to discuss the causes of the tragedy, according to people familiar with the situation.
GLOBAL FORCE
Long-celebrated in their native Treviso, a northeastern city of 85,000, for their rags-to-riches story, the Benettons last month suffered the loss of the youngest of four siblings who founded the apparel company in 1965, Carlo, who died of cancer at 74. He’s survived by Luciano, 83, Giuliana, 81, and Gilberto, 77, all of whom remain active stewards of the family’s various investments.
Luciano founded the company by selling sweaters out of small store in Treviso that were knitted by his sister Giuliana. Within two decades the offspring of a bicycle shop owner had become a global force in fashion, both for their vibrant clothing and provocative ads that occasionally riled the Catholic Church. The Vatican once took legal action to halt a campaign that featured a doctored photo of the pope kissing a Muslim leader.
Gilberto, who runs the clan’s finances, started to diversify in the 1990s, making purchases in a wave of privatizations that produced the bulk of its current fortune. The family now holds about 12 billion euros of assets, including a 30 percent stake in Atlantia, which became the world biggest toll-road operator this year with the acquisition of Spanish rival Abertis.
The strategy proved prudent. Their clothing chain has struggled to compete with upstarts like Inditex SA’s Zara brand and lost 180 million euros last year. In 2015, the family sold its stake in another major retailer, World Duty Free SpA, to Basel, Switzerland-based Dufry AG.
Last year, the siblings hired former Telecom Italia SpA Chief Executive Officer Marco Patuano to revamp their investments, reduce their dependence on Italy’s sluggish economy and pursue a more global strategy.
EUROTUNNEL STAKE
About 45 percent of the group’s revenue came from abroad last year and that share is even greater now with Atlantia’s purchase of Abertis, which operates in South America and France as well as Spain. The Benettons also became the biggest owner of Spanish mobile-phone tower operator Cellnex.
Separately, Atlantia bought a billion-euro stake in Eurotunnel — now Getlink SE — the operator of the underwater link between the U.K. and France, and won the right to manage Nice’s main airport. The company is also considering spinning off Autogrill’s North American division, which accounted for more than half of the international restaurant chain’s 4.6 billion euros of sales last year.
The Benettons have done well pivoting away from their flagging brand and will likely weather the current storm over the Morandi Bridge disaster, according to Ugo Arrigo, a professor of public finance at Bicocca University. He said he doubts the government will make good on threats by some officials to pull the toll-road license held by Atlantia, which operates half of Italy’s motorways.
“The government has been very generous in granting the family lucrative motorway tariffs over the past two decades,” Mr. Arrigo said from Milan.
Indeed, Atlantia gained back some of its stock losses Friday after La Repubblica reported that the company is in informal talks with the government over potential fines and other measures that would stop short of seizing the license held by its Autostrade unit.
The tragedy could accelerate the family’s plan to have more financial investments and fewer industrial businesses to manage. Gilberto Benetton has indicated that in the future the holding company should operate more in the manner of a sovereign wealth fund. — Bloomberg

Palay output data underscore agriculture’s bumpy situation

Palay output data underscore agriculture’s bumpy situation

How PSEi member stocks performed — August 20, 2018

Here’s a quick glance at how PSEi stocks fared on Monday, August 20, 2018.

 
Philippine Stock Exchange’s most active stocks by value turnover — August 20, 2018

Boracay may reopen with as little as 30% of firms compliant

THE government hopes up to 50% of businesses will be operational by the time the resort island of Boracay reopens as scheduled on Oct. 26, but may have to settle for 30%.
Department of Interior and Local Government Undersecretary for Operations Epimaco V. Densing said on Monday that 50% represents the high end of the target.
“The target is between 30% to 50% based on the DENR’s (Department of Environment and Natural Resources) study on the island’s carrying capacity study. Around 30 to 50% (establishments) may be opened,” he said at a Senate hearing on the Boracay environmental cleanup.
Four months into the island’s closure, Mr. Densing said some establishments remain noncompliant in terms of obtaining permits from local and national governments as well as the directive to connect to the sewer lines of water concessionaires or to install their own sewage treatment plants (STPs).
According to DILG’s count, there were about 2,384 establishments on Boracay at the time of closure in April. Mr. Densing said only 71 out of 440 hotels, inns, and restaurants have complete business requirements as of Monday. Meanwhile, only 21 out of 162 establishments have sewage treatment plants based on DENR data presented during the hearing.
In an interview with reporters, Mr. Densing clarified that the government prefers 100% compliance but may have to settle for as little as 30% to ensure the improvement in water quality is sustained.
“If you are not connected with the sewer line, if you don’t have an STP, you are not allowed to operate. If you don’t have a mayor’s permit or a building permit, you are not allowed to operate,” he said.
“If 30% (of establishments) are connected to the sewer line or only 30% have STPs, then we’ll have to open it at 30%… It is not in the interest of everybody to keep Boracay closed. But if you are not following the law to make sure that the water quality that comes out of the island is (class) SB level, then we’ll have to do with the 30%,” he added.
Wastewater management issues remained the most contentious in the rehabilitation efforts with water concessionaires saying that several establishments continue to refuse to connect with their sewer lines.
Officials from the Boracay Foundation, Inc., the largest business group on the island, said its members are put off by high wastewater treatment fees.
Senator Cynthia A. Villar, chair of the Senate committee on environment and natural resources, urged the government to provide discounts or incentives that would help establishments comply with DENR standards.
She also disagreed with the 30% target for the reopening, saying she prefers 50%.
“I don’t think it’s is a very good target, it’s too low… Maybe it’s a good target that 50% will open on Oct. 26,” she told reporters after the hearing. — Camille A. Aguinaldo

PCC warns of review if 3rd-player criteria stand

THE Philippine Competition Commission will ask the Department of Information and Communications Technology (DICT) to incorporate the commission’s recommendations in the selection criteria for the telecom industry’s third entrant, the so-called third player.
Arsenio M. Balisacan, who chairs the PCC, said the recommendations may save the third player from undergoing the PCC’s 90-day review.
“If the PCC’s recommendations are adequately accommodated in the Terms of Reference (ToR), then we may not even need to review post-award,” Mr. Balisacan told reporters last week.
“If these are implemented, then they could no longer have to be subjected to an extensive review that we are carrying out in other mergers and acquisition cases. Otherwise, telco deals are complicated, we might need to conduct a Phase 2 review,” he added.
The PCC’s recommendations include, among others, ensuring the third player has no existing relationships with the incumbents.
In an Aug. 18 draft proposal presented by the PCC, as posted by the DICT on its website, the Commission noted the need to make explicit the definition of a “Related Party”; a prohibition on mergers, combinations or becoming a related party to an incumbent telco; the return of frequencies should it become a related party; the monitoring and evaluation of compliance with the terms; and the clawback of spectrum in case of non-use.
The PCC also sought automatic notification from the third player in the event that it merges or enters a joint venture with an incumbent, or otherwise acquires, directly or indirectly, or in stages, at least 20% of the shares of stock of a related party to any incumbent.
In addition, the PCC wants to make the return of frequencies to the government, should it be ordered, to be “mandatory” instead of the ToR’s “voluntary” process.
Also, should the third player fail to use any radio frequency spectrum awarded to it as stipulated in its roll-out plan, the frequency automatically reverts to the government.
“The PCC has recommended the foregoing inputs to address the competition concerns in the terms of reference for the selection of the (third player). With these, notification and review of the transaction could be dispensed with, in accordance with PCC’s power to exempt entities from review under Sec. 19(c) of the PCA [Philippine Competition Act of 2015],” it said in the draft, referring to its notification thresholds.
“However, in the absence of the foregoing inputs in the terms of reference, PCC would be constrained to pursue a regular review of the transaction, in accordance with its mandate under Sec. 17 of the PCA,” it added.
Under Section 17 of the said law, parties to the merger or acquisition agreement are mandated to notify the PCC of the said deal if value of the transaction exceeds P2 billion. — Janina C. Lim

Rooftop solar could help reduce diesel, coal imports — report

ROOFTOP solar systems have the potential to lower electricity costs to P2.50 per kilowatt-hour (kWh) by displacing imported energy sources and bringing new investment of around P1.5 trillion by 2030, a research firm said.
Institute for Energy Economics and Financial Analytics (IEEFA) in a report on Monday said a “modernized” policy could drive the uptake of solar through programs that will ensure power supply at lower prices.
“The government is in a position to change the longstanding status quo, which disproportionately puts fuel-price and foreign-exchange risk on consumers, while utilities and power generators remain insulated from market changes,” said Sara Jane Ahmed, IEEFA energy finance analyst and author of the report.
“As a result, power suppliers have no incentive to transition away from coal and diesel or to hedge against price-change and currency risks,” she added.
The report, “Unlocking Rooftop Solar in the Philippines,” notes the country has one of the most expensive electricity rates in Southeast Asia, but it can start following global trends toward power sector modernization.
It said a modernized policy has been gaining momentum amid declining costs and technological advances in renewable energy, energy efficiency and distributed storage.
Ms. Ahmed said every kilowatt of installed rooftop solar means a reduction in the need for imported coal and diesel. The shift is estimated to save the Philippines up to $2.2 billion annually as well as $200 million per year in diesel subsidies.
The report said the Board of Investments had approved eight solar projects through Solar Philippines Commercial Rooftop Projects Inc. worth P85.96 billion, or $1.65 billion.
A conservative estimate of 8 gigawatts (GW) of solar installation by 2030 includes 35% of that coming from rooftop solar, translating into an investment value of $ 2.8 billion, it added. It said the billion-dollar market can easily grow with the right policies.
“These trends present an enormous opportunity to replace imported-coal and imported-diesel models with indigenous alternatives,” Ms. Ahmed said. “Solar, wind, run-of-river hydro, geothermal, biogas, and storage are competitive, viable domestic options that can be combined to create a cheaper, more diverse and secure energy system.”
The report cited as examples of renewable energy deflation the offer received by Manila Electric Co. (Meralco) in March of the country’s record lowest wind electricity generation bid on a new 150-megawatt (MW) wind turbine project in the Rizal province, for P3.50 per kilowatt-hour (kWh). It also pointed to an offer to Meralco for solar power at P2.99-per kWh for a 50-MW capacity plant.
These offers compare with coal-fired power generation at costs ranging from P3.8 to P5.5 per kWh. The true cost of imported diesel-fired power ranges from P15 to P28 per kWh.
The report said rooftop solar costs P2.50 per kWh, without financing expenses, to P5.3 per kWh, with financing expenses. Utility-scale solar power can cost as little as P2.99 per kWh, with wind power costing P3.5 per kWh, geothermal P3.5 to P4.5 per kWh, and run-of-river hydro P3 to 6.2 per kWh.
“Development of all of these more affordable options is still hampered by costly and unnecessary red tape. The Philippine government can help break this logjam by adopting policies that inject more diversity — and more energy security — into the electricity system while helping lower consumer costs by enabling the uptake of cheaper, cleaner options such as rooftop solar,” Ms. Ahmed said.
“More importantly, fossil fuel subsidies and electricity-sector losses are a growing drag on economic growth in the Philippines. Current plans for fossil fuel generation would instill a long-term dependence on fossil fuel imports, which would lead to more national debt, devaluation of the currency and an increase in inflation, all of which would destabilize the Philippine economy,” she added. — Victor V. Saulon

FEMSA exit triggers scramble to liberalize sugar imports, DTI says

THE GOVERNMENT is rushing to liberalize the importation of sugar to address supply issues after a major Mexican bottler gave up its rights to make and sell Coca-Cola products in the Philippines.
“It has been a concern in terms of access to and cost of sugar. So we shall review the system of sugar importation to make it more accessible at competitive cost with ample protection to sugar producers,” Trade Secretary Ramon M. Lopez said in a mobile phone message yesterday when asked for his comment on Coca-Cola FEMSA Philippines, Inc.’s sale of its Philippine franchise back to the Coca-Cola Co..
Mr. Lopez noted that the measures being contemplated do not include lowering tariffs for sugar imports.
He said the desired outcome will still have “appropriate tariff protection for local producers.” It will however involve “opening up to more importers, and industrial users and not a select few. And no other fees. So tariff revenues go to the government, which can support sugar farmers in their modernization programs,” he added.
Mr. Lopez has said that the DTI is drafting a plan that will facilitate direct sugar imports by removing middlemen and effectively reducing the retail price of sugar.
Socioeconomic Planning Secretary Ernesto M. Pernia said in a separate mobile phone message yesterday that “sugar imports should be liberalized.”
“Imports will increase supply, supplementing domestic production. Intermediation cost should be minimized if not eliminated,” he said.
In a statement on Friday, Coca-Cola FEMSA Philippines Inc.’s Mexican parent, Coca-Cola FEMSA S.A.B. de C.V. approved the sale of its 51% stake in the Philippine unit to the Coca-Cola Co.
Asked for comment, Sugar Regulatory Administration (SRA) Administrator Hermenegildo R. Serafica said that FEMSA’s Philippine unit did not obtain sufficient sugar before the new sugar-sweetened beverage excise tax under the Tax Reform for Acceleration and Inclusion (TRAIN) law was imposed in January.
“My personal opinion is that Coca-cola was scrambling for sugar supply since they weren’t buying as much sugar in the past. So when TRAIN kicked in, most domestic sugar traders had committed their volume to their other long-standing and previously contracted buyers,” he said.
“These traders would only be able to accommodate Coca-Cola if they had sugar in excess of the demand of their long-standing buyers but unfortunately for Coca-Cola, production was lower this year so there was no excess supply to fill Coca-Cola’s demand,” he added.
Presented as a health measure, the TRAIN law imposed a P12 per liter tax on drinks with high fructose corn syrup sweeteners, and a P6 levy on caloric sweeteners such as sugar.
Coca-Cola FEMSA Philippines has reduced the distribution of its products to store and has laid off some workers.
Mr. Serafica said he “welcomes” the entry of the Coca-Cola Co. unit taking over the FEMSA investment, which is known as the Bottling Investments Group (BIG), “especially since it expressed its intention to work with the Philippine sugarcane industry in increasing productivity and ensuring a stable supply of sugar for Coke.”
Mr. Serafica said sugar output in the latest crop season fell 16.9% year-on-year.
SRA data as of Aug. 14 indicate that the average retail price for sugar rose to P55.83 per kilo from P47.56 in September 2017, the start of the crop year. The average retail price of washed and refined sugar rose to P58.94 and P66.25 per kilo, respectively, from P50.27 and P54.92 in September.
The SRA addressed the supply issues by reallocating to the domestic market sugar intended for export, and asked the Bureau of Customs to auction off smuggled sugar imports. — Elijah Joseph C. Tubayan

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