Firms feel pinch of higher inflation

Published by rudy Date posted on April 14, 2011

HIGHER fuel prices have begun nibbling at corporate incomes, with the operator of the main toll way leading north from the Philippine capital reporting a slowdown in traffic volume ahead of the summer season, and the country’s biggest fast-food chain warning of weaker sales in the first half of the year.

In a briefing, Ramon Fernandez, president and chief executive of Metro Pacific Tollways Corp. (MPTC) told reporters that vehicle traffic volume in first quarter of this year inched up by one to two percent at the North Luzon Expressway (NLEX).

This was weaker than the five percent growth seen in the same three-month period in 2010.

The company’s average traffic volume, as measured by vehicle entries, stood at 160,000 per day so far this year.

Fernandez blamed the slowdown on costlier fuel and higher toll rates, both discouraging motorists from using the NLEX.

“The traffic is still growing, but the growth is tempered. Normally, we expect higher volume traffic in the second quarter because of the summer season,” the executive said.

“We’re confident that the traffic volume will grow this year despite the higher oil prices and toll rates,” he said.

Despite the weaker growth, MPTC unit Tollways Management Corp. said traffic along the NLEX would still go up at a rate of 15 to 20 percent from the daily average of vehicles during Holy Week.

MPTC earlier said it expects revenues to climb to P7.8 billion this year from P5.9 billion last year. In 2010, the company posted a core net income of P1.47 billion compared with the previous year’s P1.22 billion.
The company’s shares were last traded at P7 apiece on April 6.

The price of benchmark Dubai crude oil has risen to levels last seen in September 2008, when the price of fuel hit a record high. Costlier oil has pushed up the price of other commodities.

Cost increases more significant
In a regulatory filing, Jollibee Foods Corp. (JFC) said it expects slower growth in the first six months as it feels the pinch of rising raw materials prices and costlier operations.

Ysmael Baysa, JFC chief financial officer, said the cost increases seen last year have become more significant this year in the markets where the Jollibee group conducts businesses, putting pressure on its profit margins and on consumers’ purchasing ability.

“Our profit growth in the first half of 2011 will not likely be strong due to more appreciable rise in raw material and operating costs coupled with increasing interest expense as the company borrows more money to fund its capital expenditure and acquisition,” Baysa said.

JFC reported an audited net income of P3.2 billion last year, a 20-percent increase from the P2.67 billion in 2009.

On Tuesday, JFC announced it entered into agreements with two banking institutions to borrow P3.9 billion to fund its capital expenditure and acquisitions.

The company recently announced the closure of its budget eatery chain, Manong Pepe. This came months after JFC acquired Mang Inasal.

JFC is the largest food service network in the Philippines, operating under the brands Jollibee, Chowking, Red Ribbon, Manong Pepe Karinderia, Caffe Ti-Amo and Mang Inasal. It also operates Yonghe King and Hong Zhuang Yuan in China.

As of February 28, it had 1,932 stores in the country and 405 stores abroad for a total of 2,337 stores worldwide.

Its shares fell to P93.75 on Wednesday from P95 on Tuesday. –By Darwin G. Amojelar Senior Reporter and Krista Angela M. Montealegre, Reporter, Manila Times

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