POSITIVE GOVERNANCE - SAN MIGUEL CORPORATION

Overview and CSR Initiatives

San Miguel Corporation (SMC) is one of the most diversified conglomerates in the
Philippines, known for its food, beer, packaging, infrastructure, and energy businesses.
Founded in 1890 as a brewery, SMC has grown into a multinational company with
operations across Southeast Asia. During 2020, many businesses faced operational and
financial difficulties as a CoVid-19 hit hard to almost the whole nation, SMC not being an
exception. SMC’s profit plummeted to 1.09 billion pesos in the first quarter of 2020,
following the net loss of 4 billion pesos in the first half of the same year.

However, SMC is optimistic its business will recover despite the poor results in the first half
of the year as a result of CoVid-19 pandemic. Ramon Ang, the SMC President and COO that
time, said that recovery would even be faster, especially if there is a vaccine developed
soon against the virus. Additionally, the company is primed to help boost the economy,
with strategies in place to adapt to the new business environment. Through these
commitments, SMC made CSR initiatives that will help the people and the economy to
recover from the effects of the CoVid-19 pandemic.

Financial Analysis

During the first half of 2020, the CSR initiatives made by SMC have reached 13.1 billion
pesos, which suggests that these initiatives contributed to the reported loss in the same
period. However, the company did not see these initiatives as burdens, in fact, they still
continued creating programs that aim to help people, as well as its employees, and the
environment. By the end of the year, the company’s net income escalated to 21 billion
pesos in the end of the year from the loss of 4 billion pesos in the first semester thereof.
Attached below is the income statement and earnings per share (EPS) of the company:
The reported profit of 21 billion pesos from 48 billion pesos, indicating a significant 50%
decline in income. However, this figure also reflects strong recovery, given that SMC
reported a loss of 4 billion in the first half of the 2020. This loss is mainly due to the lower
reported sales, resulting from government safety regulations, and high costs incurred for
CSR initiatives. Additionally, the loss per share suggests that the net income is insufficient
to cover the dividends for preference shares, resulting in shareholder losses.

Despite this, 2021 delivered a strong performance, doubling the income from 2020. This
suggests that the CSR initiatives made by SMC from the previous year made a positive
impact to the company’s financial performance. By promoting employee and social
welfare, the company strengthened its image, reinforcing good governance, and
highlighting the importance of balancing stakeholder interests while enhancing
shareholder value.

Impact of CSR Initiatives on Financial Statements

As indicated in the article, SMC set aside P150M worth of poultry products from
their own inventory to be given as help to the communities in which they operate, as well as
an aggregate of about P511.1M for their overall food donations. In their comparative
financial statements for 2019 and 2020, we can see in their notes to financial statements
that their inventory did decrease from P565,273M in 2019 to P367,125M in 2020.
From Bilyonaryo: RSA stimulus fund: San Miguel outspends corporate rivals with P13B
COVID response - Bilyonaryo Business News

From the article, it was reported that SMC has given P3.09B as compensation for
employees and third-party suppliers. Looking at their notes to financial statements in 2019
and 2020, they disclosed that their salaries and wages for personnel have increased from
P22,222M in 2019 to P22,334M in 2020.

They also gave P6.2M worth of free fuel in support of the government’s Libreng Sakay
programs for medical workers as well as waiving P30.7M worth of toll fees for medical
workers. From this, we can see that the sales of both Fuel and Oil and Infrastructure
subsidiaries of SMC decreased a considerable amount as disclosed in the notes to their
financial statements, starting from 2018 to 2019 and 2020.

CSR Initiatives After 2020

Even as our country started to slowly recover from the pandemic, SMC didn’t stop
their implementation of their CSR initiatives, further proving their commitment to not only
serving the community as a business but also as a helping hand in times of crises. Here are
some of the CSR initiatives they implemented after the year 2020.

SMC extends free toll to medical frontliners on Skyway Stage 3, toll fees waived to date
reach P156M | San Miguel Corporation
Pandemic food aid drive continues: SMC nutribun distribution to poor hits 70,000 pieces |
San Miguel Corporation

SMC expands ECQ food relief beyond Metro Manila, donations to poor communities now at
P11 million | San Miguel Corporation - Your World Made Better
SMC officially starts P1-billion nationwide vaccination program for employees, opens pilot
site at LSGH in Mandaluyong | San Miguel Corporation
From PhilStar: SMC, inuna ang pagtulong sa kapwa kaysa kita! – Ang | Pang-Masa
From BusinessWorld: San Miguel spends P14B for pandemic relief, plans Bulacan
medical facility - BusinessWorld Online

Conclusion and Recommendations