Ultra bilyonaryo Lance Gokongwei is raising prices and cutting costs in Universal Robina Corp. to keep the food giant’s margins safe from rising food commodity prices due to Russia’s invasion of Ukraine.
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URC management recently told stock analysts that it would have to increase prices by seven percent to fully cover the surge in input costs – palm oil, flour and skimmed milk powder.
In its latest report, COL Financial said URC suffered P6 billion in cost increments in 2021 and a price increase softened the squeeze on margins to only 140 basis points instead of 500 basis points.
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COL said URC was targeting to generate between P1 billion and P1.5 billion in annual savings over the next five years to offset the impact of ballooning costs on profit margins.
URC hopes to achieve this through cutbacks in manufacturing cost coming from usage variances, better yields, lower wastes, and direct labor variances.
“The company is still preparing for additional price hikes and improved cost-saving initiatives to combat the continued rise in commodity prices. URC is also involved in some cost hedging initiatives with 90 percent of its cost in the first quarter of 2022 already contracting. For second quarter 2022, around 40 percent of its raw material needs are locked in as well,” said COL.
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Both BPI and JG Summit (RBank’s parent) did not issue a disclosure on their plan to join forces.