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MANILA - (UPDATED 6:00 p.m.) Alliance Global Group Inc. on Tuesday said its profit this year may increase by a fifth, with the government's sin tax reform seen boosting sales of the company's liquor unit.
During the company's stockholders meeting, Kingson Sian, AGI president and chief operating officer, said core earnings of the holding firm will climb from P8.5 billion in 2011 to "a little over P10 billion" this year.
"AGI is positioned for continued growth and looking across our businesses, we have maintained our number one position in most of them with the exception of McDonald's, which we are a strong number two. We should maintain this position moving forward," said Sian.
"Our focus is on high-growth sectors which align ourselves with the strength of the Philippine economy," he added.
Property arm Megaworld Corp. is poised to earn P7 billion, while Global-Estates Resorts Inc., AGI’s vehicle for tourism projects outside Metro Manila, will likely earn P600-650 million.
Golden Arches Development Corp., which holds the Philippine master franchise for McDonald's, will turn in P250 million, while Travellers International Hotel Group Inc., AGI’s joint venture with the Genting Group, may recover in the second half, usually a stronger period for the business, after suffering a decline in the first semester.
"We're looking to grow Travellers by double digits this year. Our performance will be better than last year," Sian said.
He said liquor unit Emperador Distillers Inc., which was AGI's main growth driver in the first six months of this year, will generate P4 billion in profits.
In the first half of 2012, the liquor maker’s net profit more than doubling year-on-year to P2.35 billion, surpassing its income of P2.30 billion for the full year 2011, on the back of a 54-percent growth in revenues to P11.51 billion and improved gross margin.
Winston Co, EDI president, said the company's earnings would get a lift from a 5-8 percent increase in product prices after Congress passes a bill revising the country's excise taxes on liquor and other sin products.
Citing price elasticity studies the liquor-maker conducted, Co said the price hike is "not significant, " and will not hurt demand for EDI's products.
"The inflation of the product is 5 percent on the average and if the economy grows by around 6 percent, it should negate each other especially it's an election year. We have done some studies and we think 'kaya naman,'" he said.
The liquor-maker produces Emperador, Generoso and Emperador Light brandies and a line of flavored alcoholic beverages called The Bar.
"We will always be competitive because even the new law will basically level the playing field. The existing law keeps preference to certain brands, but the new law will treat all brands the same except that the tax will be based on the retail price. We should be in a very good position to compete in the market," said Andrew Tan, AGI chairman.
"The new law, I think, will [apply] multi-tiered taxation based on the purchasing power of consumers. Those who can afford more expensive liquor, then they have to pay higher taxes. Those who can afford lower-priced liquor will pay lower taxes," he added.
The House earlier passed HB 5727 or An Act Restructuring the Excise Tax on Alcohol and Tobacco Products. The bill is pending before the Senate.
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