Urc PDF
Urc PDF
Urc PDF
2 Financial Highlights
3 Message of the Chairman and
President & Chief Executive Officer
11 Our Company
16 Branded Consumer Foods Group Philippines
28 Branded Consumer Foods Group International
34 Agro-Industrial Group
37 Commodity Foods Group
40 Sustainability
45 Corporate Governance
51 Board of Directors
61 Directory
63 Financial Statements
1
Financial Highlights
IN MILLION PESOS, EXCEPT PER SHARE DATA
Per Share
Earnings 5.68 5.30 4.60 0.38 7.17%
AIG
8% AIG
CFG
8% 6%
CFG
17%
BCFG BCFG
84% 77%
2
Message from
the Chairman
and the President
and Chief Executive
Officer
James L. Go Lance Y. Gokongwei
Chairman President and Chief Executive Officer
In the ASEAN region, economic conditions softened as a result of the slowdown in China, which
crippled exports from commodity driven economies such as Indonesia and Malaysia. Given ballooning
current account and fiscal deficits, governments tried to curb on subsidies and this has further
created inflationary pressures. Overall, this situation is pushing growth in ASEAN to the lowest
level in six years and driving some of the regions currencies to fall to multi-year lows against the US
dollar which resulted to a slower GDP growth this year. The weaker macro conditions resulted to a
general slowdown in consumption with consumer sentiment being weak outside our home market.
MESSAGE TO SHAREHOLDERS 4
Zooming in further to the economies of our most URC: ANOTHER STRONG FISCAL YEAR
important markets, certain macro and political WITH RECORD SALES AND MARGINS
themes have persisted and this has directly or
indirectly affected our performance. Amidst the economic turbulence in 2015, we
managed to have another strong fiscal year
Thailands economy was constrained by falling as URC posted record high sales, EBIT and
farm incomes with weak agricultural prices, EBIT margins. Sales hit Php 109.1 billion, a
lower exports and increased household debt. growth of 18.1% over the previous year driven
Softer dynamics can be seen in Malaysia as by Branded Foods, Sugar and Feeds. Full year
households continue to adjust to the GST margins expanded by 65bps with absolute
implementation in April. Deceleration in operating income reaching Php 17.4 billion, a
fixed investment, weak exports and Rupiah 23.0% growth versus same period last year.
devaluation in Indonesia have dampened We have registered core earnings of Php 16.3
economic growth this year while Vietnams billion, 15.0% higher than last year while net
economy has started recovering buoyed up finance cost was at Php 1.0 billion, majority are
by the increase in foreign direct investments interest payments for the long term debt used
and strong exports. Vietnams domestic to finance the Griffins acquisition. We have
consumption has also started to peak up with also booked equitized losses from the two new
inflation trending downwards. Unlike many joint ventures as these businesses just started
of its Asian peers, Southeast Asias fifth- commercial launch and operations in January
largest economy, the Philippines, has remained and February and we are still spending heavily
resilient in the face of sputtering global to build the brands and scale up distribution.
demand. The economy was supported by
strong domestic consumption, which continued We are now in a net debt position of Php 8.6
to be underpinned by higher employment, billion from a net cash position of Php 1.8 billion
low inflation, stable flow of remittances, and at the end of FY2014 as we booked a Php 21.9
increased private investment. The Business billion long term debt for the Griffins acquisition.
Process Outsourcing (BPO) sector contribution EBITDA reached Php 22.1 billion, a 22.7%
increased to 17% versus last year which fuelled increase from last year. Major cash outflows
consumer spending while continuing pressure include capital expenditures, which amounted
such as the El Nio dry weather phenomenon to Php 6.5 billion and dividends payment of Php
has posed a major downside risk for agriculture 6.5 billion. Majority of our capital expenditures
as well as weaker exports. In New Zealand, in FY2015 were earmarked to build additional
economic acceleration was mainly driven by capacities and capabilities. This includes site
significant improvements in manufacturing and development and building construction for new
services industries of the country partly offset facilities and warehouses in Central Vietnam,
by the record low prices for dairy because Myanmar, Indonesia and Thailand; installation
of oversupply while Australia experienced of additional capacities for snackfoods and
economic challenges with very volatile beverages manufacturing; potato chips line for
international commodity prices that resulted Calbee JV and retrofitting of PET lines for our
in a sharp contraction of exports derived from Danone JV. We also finished off projects for our
mining and the devaluation of its currency. renewables business, notably the Phase II of
our biomass cogeneration facility.
5 MESSAGE TO SHAREHOLDERS
BRANDED CONSUMER FOODS GROUP: where we are still the clear market leader at
Growth Translated to Record Income and 84.1% value share. Snackfoods business also
Margins grew driven by our core brands like Mang Juan,
Piattos, Nova, Pic-A, Cloud 9, Nips, Dewberry,
Total Branded Foods including packaging Wafrets and Pretzels. We have maintained our
division posted sales of Php 91.9 billion, an market leadership in salty snacks, candies and
increase of 18.9% versus last year while EBIT chocolates while we are a strong challenger in
grew faster by 30.5% to Php 14.5 billion mainly the biscuits and cakes categories.
due to relaxed input costs for soft commodities,
additional scale, and operational efficiencies. On our joint ventures, Nissin Universal Robina
Topline growth was driven by our major markets (NUR) Cup and Pouch segments performed
namely Philippines, Vietnam, Thailand, and well which resulted to a sales growth of 17.7%.
Indonesia as well as the Griffins consolidation Nissins Cup Noodles remained to be the leader
which started in the middle of November last in the cup segment. On the other hand, sales
year. momentum has consistently increased for our
two new JVs with Danone and Calbee since
BCFG PHILIPPINES: the launch of the products last January and
Margins Healthy Though Topline Growth February, respectively. We expect to gain
is Tempered Given Higher Base additional traction as we continue to invest
in A&P to build the equity of these brands
Branded Foods Philippines continued its strong and distribution expansion. The initial results
performance registering a full year growth of indicated good traction.
10.0% with sales of Php 57.6 billion despite
a higher base and increased competitive Overall, we launched seventy nine (79) new
pressures across our different product products for the year which contributed 5.4%
categories. El Nio has also started affecting to total sales.
consumer demand given weaker sales in the
general trade especially in the Visayas and BCFG INTERNATIONAL:
Mindanao regions. Volume growth, lower Navigated the Difficult
input prices, and operational efficiencies all Macro-Environment Well
contributed to the 23.5% increase in operating
income hitting Php 10.7 billion with all time high Our international business operates in the
EBIT margins of 18.5%. developing countries in the ASEAN where the
macro-environment was very challenging. Our
Beverage remains a significant source of business managed to stay afloat and we have
revenues for the domestic business and posted navigated the situation well.
a growth of 12.7% versus last year mainly coming
from our coffee business with our strong brand, Total international sales grew by 39.4% at
Great Taste. We managed to outpace total Php 33.1 billion (including the consolidation
category growth despite aggressive competitor of Griffins sales for 10.5 months). Growth was
activities and reached 29.5% value market share. driven by Thailand, Indonesia, Vietnam and
RTD beverages growth mainly came from C2 New Zealand. Operating income expanded by
MESSAGE TO SHAREHOLDERS 6
52.7% versus last year amounting to Php 3.8 challenged by the higher trading terms and
billion due to lower input prices partly offset by discounts as well as private label offerings. The
forex volatility. This has improved EBIT margins Australia business posted double-digit growth
by 101 bps. In US dollar terms, sales amounted in volume driven by private label biscuits and
to US$ 736 million, a growth of 36.6% vs. last bars.
years US$ 539 million. Operating income
amounted to US$ 85 million which is a 49.7% On new markets, we have commissioned our
increase from last year. local manufacturing facility last July in Myanmar.
The first line is producing wafers under the brand
Below are the highlights in some major interna- name Halo for the local market. We have also
tional markets where we operate. started selling and distributing products to two
additional frontier markets namely Cambodia
Amidst the slowdown in the Thai economy due and Laos by formally appointing distributors in
to weak private consumption, our business these two geographies.
continued to post double digit growth driven
by our core biscuit brands. Our strategies of NON-BRANDED CONSUMER
providing new products exclusively for some FOODS GROUP:
retailers in the first 6 months of launch, price Topline Grew Double-Digit and
pack for better affordability and promotional Consistently Delivered Stable Profit
programs in all channels have paid off despite Contribution
the very weak consumer sentiment prevailing
in this market. We have maintained our market Non-Branded Consumer Foods Group,
leadership on biscuits and wafers and have composed of Commodity Foods Group (CFG)
driven the growth in these categories. and Agro-Industrial Group (AIG), registered a
double-digit topline growth of 13.5% amounting
Our Vietnam business remained robust with C2 to Php 17.2 billion. This division contributed
maintaining its brand leadership for the RTD 15.8% to total company sales and 24.8% to total
tea market while our energy drink brand, Rong- company operating income for the recently
Do, grew at a very fast pace. We continued to concluded fiscal year.
build our snackfoods franchise to complement
our beverage portfolio with selective launches Commodity Foods Group
and focused distribution initiatives across this Commodity Foods Group, composed of SURE
market. (Sugar and Renewables) and Flour divisions,
posted Php 8.3 billion sales, a 19.0% increase
Indonesia remains on the path to scale with from last year due to higher average selling
topline showing a promising growth despite the prices for the sugar business. Combined
very weak and negative consumer sentiment operating income increased by 1.5% amounting
in the country. Piattos was able to hit all time to Php 3.1 billion. Our Sugar divisions expansion
high sales while our second largest salty into renewables started contributing to topline
snacks brand, Chiz King, continued its growth and income with the inauguration of our 100K
momentum. Our chocolate bar brand, Cloud liters per day bio-ethanol plant in Bais Negros
9, also posted strong sales for the year. URC is
now the fastest growing salty snacks company
in Indonesia with Piattos registering to be the
second largest potato chips brand in this market.
7 MESSAGE TO SHAREHOLDERS
Oriental last November 11, 2014. This segment Looking Ahead:
is currently supplying ethanol requirement to
some local oil companies such as Flying V, Sea
New External Reality Will
Oil, Petron, and Jetti Petroleum among others. Define How We Compete
We also commissioned our 46MW biomass
cogeneration power plant last June 8, 2015 The establishment of the ASEAN Economic
and we are currently exporting around 20MW Community (AEC) in 2015 is a major milestone
power to the grid. On the milling business, our in the regional economic integration agenda
Tolong mill expansion from 3000 to 4000 tons in region of ten countries with an estimated
cane per day was also completed and this has population of 600M. Collectively, it will be the
increased our total milling combined capacity third largest economy in Asia and the seventh
to 31,000TCD. largest in the world. It is expected that the region
will have a hyper-competitive marketplace
Flour registered sales of Php 4.1 billion for the crowded with global multinational, new entrants
full year, at par with last year due to flattish and existing companies, all with ambitions to
volumes as well as slightly lower selling prices. build a regional presence and armed with an
aggressive plan to compete. The integration
Agro-Industrial Group will open an era of the rapid deployment of
Agro-Industrial Group posted sales of Php new rules and regulations which indicates that
8.9 billion and an operating income of Php 1.2 organizations must be flexible and agile to adapt
billion, a growth of 8.9% and 9.7%, respectively world class systems and processes to maintain
driven by better volumes and lower input prices competitive advantage. It is also imperative
for our feeds business. that organizations be staffed with the right mix
of talent that can work in a cross cultural set-up.
Feeds business posted a topline growth of
21.6% versus last year amounting to Php 4.2 It is expected that foreign and intra-ASEAN
billion. The lower input prices helped buoy up investments will influx not only capital but also
its operating income which reached Php 479 influence new ways of doing business with
million, a 46.8% growth versus last year. new foreign ideas and business practices. As a
multinational company, we believe that we are
On our Farms business, Hogs sales volume prepared in this area as we have laid down the
increased by 10.7% but this was offset by the foundation in the past years for a structured
decrease in selling prices resulting to a flattish approach on how we manage supply chain,
revenue growth. The decrease in selling prices branding and marketing, sales and distribution
was due to the increase in market supply. Due as well as back office support such as IT and
to the volatility of live hogs in terms of selling Finance, which further delivers synergies
prices and profitability, we shifted part of our and efficiencies into our business. We have
sales to meat cuts and carcass, and distribution also hired and invested on the right human
to retail and HRI (Hotels, Restaurants, and capital across the business and have installed
Institutions) accounts where prices are relatively and localized management in every market
more stable. With consistent quality processes whenever possible.
and system, Robina Farms Piggery and Poultry
were awarded the Good Animal Husbandry URCS STRATEGIC BRAND SHIFT AND
Process (GAHP), an international certification EVOLUTION IN THE COMING YEARS
by the Bureau of Animal Industry, the first for a
livestock organization in the Philippines. Launch of a New Visual Expression of Our
Corporate Identity
From humble beginnings in 1954 as Universal
Corn Products with corn starch manufacturing,
we have transformed to become a full pledged
MESSAGE TO SHAREHOLDERS 8
and successful food company with market
leading brands and spanning the ASEAN and
TASMAN region. Our strong local heritage
and unceasing entrepreneurial spirit and grit
coupled with strong core values namely Passion
to Win, Dynamism, Integrity and Courage have
brought us to where we are today. The world is
becoming a smaller place and markets are now
connected and interdependent. Globalization maintain our relevance to the target consumer
is now the new normal and consequently we by consistently offering new and innovative
are now articulating our renewed ambition. formats, exciting flavors, on-the-go and better-
The URC brand will evolve into a purposeful for-you (BFY) products. We have deployed
and contemporary global food brand with an a two pronged approach on how to build our
umbrella of innovative, ownable and consistently branded foods business, the first is to maintain
managed tiered portfolio of brands, loved and our core mainstream brands Jack n Jill for
valued by consumers. With this shift, we are snackfoods, C2 for RTD tea, Great Taste for
introducing a new visual expression of our coffee as well as launch new brands or replicate
corporate identity with the aim of uplifting URC existing ones across the ASEAN. These core
as a brand that is closer, valuable, visible and mainstream brands will continue to scale up
meaningful to consumers. in markets such as Indonesia, Vietnam and
Myanmar and sustain our category leadership
As we continue to create value for all our in Thailand and the Philippines. The second
stakeholders, we have likewise reviewed our anchor is the progressive introduction of Griffins
strategic priorities and directions and have brands into Asia starting in FY2016 to build a
crafted our 2020 vision as follows: portfolio of premium brands that will be offered
for consumers that are trading-up, and retailing
A leading, respected and recognized that is shifting into modern-convenience format.
corporate brand spanning the PAN-ASEAN- Our two new joint ventures with Calbee and
TASMAN region with leading consumer and Danone are also positioned to take advantage
household brands in snackfoods and of similar trends and we will further invest to
beverages across the mainstream and build their brand equity and distribution. We
premium segments. have also integrated new media and digital
marketing in our communication strategy as
A stable of leading and cost competitive non- well as executed brand and consumer activation
branded foods businesses in the Philippines to make our target customers experience
providing consistent and robust cash flow our brands. More than investments in brand
generation (food ingredients, renewables building, we have also earmarked bulk of our
and agro-industrial) CAPEX to build facilities, add capacities and
new capabilities in branded foods.
Our aspiration is to be a significant PAN-
ASEAN-TASMAN multinational with five strong We will continue to maintain the
consumer brands namely Jack n Jill, C2, Great competitiveness of our non-branded foods
Taste, Griffins and Nice & Natural. We will businesses in the Philippines with our entry
continue our drive on product innovation and into renewables, value added offerings for
scale up our brands across the markets where farms and opportunistic expansion in flour
we are present. New opportunities are emerging and sugar milling.
and we believe that the market will further
evolve and will gradually adapt to emerging Our foray into ancillary businesses will start
global consumer trends on indulgence, play- to bear fruit with sales and profit contribution
plus, authenticity/provenance, health, wellness coming from our investments in bio-ethanol
and nutrition. Our thrust on innovation is to and biomass cogeneration while we maintain
9 MESSAGE TO SHAREHOLDERS
the competitiveness of our milling operations leverage on suppliers, optimized supply chain
for Sugar, Flour and Feeds. Capacity for sugar to best deliver and handle our products at the
milling has been expanded in our Tolong mill least possible cost, regional manufacturing and
while we opportunistically capture further sourcing to make our unit cost of production
value in our Flour milling business with our very competitive and shared services for our
entry into hauling wheat for freight efficiencies. back-office functions to manage general and
We have also invested in World Class AAA admin expenses better.
slaughterhouse and meat fabrication facility
that will integrate our processing of live hogs to In closing,
meat cuts to further add value on this segment.
Throughout more than half a century, URC
Productivity will be a recurring key initiative has established a rich heritage of success
across the organization to better manage led by our visionary founder and fuelled by
our cost base. We believe that we can do an entrepreneurial spirit, ambition to win and
more with less as we deliberately institute culture of innovation. An intimate knowledge
operational efficiencies and measures in the of the market has enabled us to seize
business. opportunities which are met with products of
the highest standard within a wide portfolio
We believe that URCs regional footprint will be of locally recognized and respected brands.
a significant competitive advantage in a single The company now has evolved from a local
unified economy. With the decline in tariffs for Philippine manufacturer into one of the largest
finished goods to zero, barriers to entry will be ASEAN based multinational company.
collapsed enabling us to enter into new markets
or categories and build our brands.This foray will Your support and confidence have been our
also present greater challenges as investments sources of inspiration. The journey will continue
in brand building and defense coupled with and we will always strive harder to deliver value
distribution expansion will be higher thus better to you, our stakeholders.
cost management through productivity is a
must. We have begun implementing several Thank you for helping us in showing this
initiatives in the organization to further manage greatness to the world.
our costs - from centralized procurement to get
MESSAGE TO SHAREHOLDERS 10
Our
Company
Who We Are
Universal Robina Corporation URC is among the Philippines pioneers in
the industry, having been in operations since
(URC), the first Philippine 1954 when Mr. John Gokongwei, Jr. established
Universal Corn Products, Inc., a cornstarch
multinational is the largest manufacturing plant in Pasig.
listed food company in the
URC is engaged in a wide variety of
Philippines and has established businesses. Its core branded consumer
foods group includes manufacturing and
a strong presence in the PAN- distribution of snackfoods, beverages and
grocery products. In the Philippines, the
ASEAN markets. Recently, the Company is also into food ingredients (flour
Company has further expanded milling, sugar milling & refining) and allied
agro-industrial products (hog farming, animal
its reach to include New feed milling, glucose, soya products, and
veterinary compounds). URC has also invested
Zealand and Australia through in ancillary segments mainly focusing into
renewable sources of energy to further add
the acquisition of Griffins Foods,
value and process by-products to produce
the number one snackfoods biogas, fuel grade bio-ethanol and power
(biomass cogeneration).
company in New Zealand.
In the Philippines, URC is the market leader in
salty snacks, candies, chocolates, and canned
beans. It is also a significant player in biscuits,
with leading positions in cookies and pretzels,
the largest player in the RTD tea market, and a
respectable 2nd player in noodles and coffee.
12
Vision and Values
URCs VISION is to be the best Central to this vision are our core values:
Courage
We seize opportunities in building long-term,
sustainable businesses. We make tough
people and business decisions to ensure
competitive advantage.
13
Branded Consumer Foods Non-Branded Consumer Foods
(BCF) (Non-BCF Agro-Commodities)*
Malaysia/ Distillery
Others Singapore
Renewables
China/
Hong Kong
Myanmar
14
Where We Are
CHINA (3)
MANUFACTURING (BCFG)
OTHER BUSINESSES
HONG KONG
MYANMAR
THAILAND
PHILIPPINES (15)
VIETNAM (4)
SUGAR (5)
FLOUR (3)
MALAYSIA
SINGAPORE AIG (11)
INDONESIA
15
Branded Universal Robina Corporation
(URC) is the leading branded
Foods
brands that Filipinos grew up
with and continues to be the
Group
choice of the new generation.
The Company has successfully evolved the
Branded Consumer Foods Group Philippines
PHILIPPINES
through its trailblazing products, far-
reaching distribution network and impactful
marketing efforts. URC is also a dominant
player in the industry being the market
leader in salty snacks, candies, chocolates,
canned beans and ready-to-drink tea while
continuously holding a strong presence on
coffee, biscuits and noodles.
Snackfoods
KidZania Manila:
The Future Begins Today!
We always ask children what they want to Partnership of URC with KidZania Manila
be when they grow up. What if we tell them
that they can actually live out their dreams URC, the leader in the snackfoods industry in
in the future, today? Kids can now have the the Philippines, has partnered with KidZania
opportunity to be whoever they want to be Manila to launch two factories for childrenthe
thanks to KidZania. Jack n Jill Snack Factory and the Cream-O
Cookie Factory. Were very happy to be part of
KidZania, a play city built for kids from ages KidZania as this partnership promises to bring
4 to 14, is finally here in Manila! This mini- a whole new level of learning and enjoyment
metropolis is complete with establishments to children. Role-playing will promote a fun
simulating the real world such as salon, and effective way for children to learn about
aviation academy, fire station, hospital and the real world. The kids experience becomes
many more. Kids can choose from over 100 even more enjoyable and immersive as the
activities to role play and work as a doctor, factories allow them to get up close and
a singer, a teacher or even a newscaster. By personal with their favorite brands, such as
taking such jobs, they can earn KidZos, the Cream-O said Lance Gokongwei, President
official KidZania currency which teaches them and Chief Executive Officer of Universal Robina
the real value of money. They can use this for Corporation (URC).
spending, investing or saving. KidZania truly
provides an outlet for the kids to understand URC which has the goal of making lives fun
the world more deeply. through its brands now has another channel in
making the lives of the children even more fun.
(FROM L-R) URC Executive VP and Managing Director, Nilo Mapa; Calbee-URC President and COO, Shinji Haruna; URC President
and CEO, Lance Gokongwei; Calbee, Inc. General Manager, Asia Business, Overseas Biz Division, Tetsuya Takiguchi; Calbee-URC
General Manager, Teree Eugenio; and Calbee, Inc. Manager, Engineering Support, Overseas Biz Division, Yasuo Omonishi; formally
opens the Jack n Jill Calbee Pop-up store by performing a Japanese ceremony called Kagami Biraki.
Foods
just as how it made a mark
in its home market, the
Group
Philippines.
URC is considered as the largest
locally based player in the ASEAN for
INTERNATIONAL
snackfoods today with the widest
geographical footprint and reach.
This is evident with its full-scale
presence with manufacturing facilities
in Vietnam, China, Thailand, Malaysia,
Indonesia, Myanmar, and recently
in New Zealand. The Company also
has sales offices in Hong Kong and
Singapore.
Griffins Foods expanded factory in Wiri, markets, including Asia and Australia.
Auckland is set to produce 12,500 tonnes of For 150 years, high quality ingredients and
snack bars by 2018, increasing production iconic kiwi recipes have been at the very heart
volumes and driving export growth. of our business and have helped to put some
of New Zealands favourite brands on shelves
The factory, one of two Griffins factories in around the country, and around the world.
Auckland, has been significantly expanded
following a $25 million investment by the In the last decade, Griffins Foods has
Company. invested more than $110 million towards
upgrading its facilities, laying the foundations
It was opened today by Prime Minister John for continued innovation and growth.
Key.
This latest $25 million investment is a critical
Griffins Foods exports products under its part of setting Griffins Foods up to compete
Griffins, Eta, Huntley & Palmer and Nice & within the growing snacking segments in
Natural brands to over 20 countries throughout Asia as well as remaining competitive in New
the world, with the majority of products made Zealand.
at Griffins two Auckland factories in Papakura
and Wiri. The expanded Wiri factory, which has been
making snacks for Eta and Nice & Natural
Griffins Foods exports currently account since 1972, will predominantly produce Nice
for one-third of total sales and demand is & Natural snack bars for sale in New Zealand,
continuing to grow, Griffins Foods' chief Australia and Asia.
executive officer Alison Barrass said.
The factory will now have the capacity to
The expanded factory will help us meet produce over 390 million individual bars per
demand in New Zealand and in overseas year.
(FROM L-R) Nicola ORourke, Operations Manager Wiri, Griffins; URC President and CEO, Lance Gokongwei; John Key, Prime
Minister of New Zealand; Alison Barrass, CEO, Griffins; Andy Fuge, Operations Director, Griffins (at time of picture), Adrian Coleman,
Group Engineering Manager, Griffins.
Universal Robina Corporation (URC), which sense of play and excitement, using natural
has delighted its customers with big brands ingredients, ensuring traceability of source,
like Jack n Jill, Great Taste and C2, found and providing healthy alternatives. We are very
another way to satisfy new market through excited to introduce and grow these brands in
its acquisition of Griffins Foods, the number Asia.
one biscuits and snackfoods company in
New Zealand. This partnership allows URC Griffins entry to Asia has finally begun
to diversify its product portfolio with Griffins this 2015 with its launch in Singapore last
premium products and in the same manner, November. Offering a broad range of products
gives Griffins the opportunity to extend its from sweet decadent biscuits to nutritious
reach to selected ASEAN markets. muesli bars, and premium crackers, the
Singaporeans will truly be delighted with the
Griffins Foods was founded in New Zealand, following brands readily available in their
by John Griffin, a humble flour miller over market:
150 years ago. Today, Griffins sells over 300
products and operates two manufacturing Griffins Biscuits
super centre facilities in Auckland, New
Zealand (Papakura and Wiri). Griffins offers various biscuit products to
Singapore including the childhood favorite
Mr. Lance Gokongwei, the President and Chief Cookie Bear Hundreds and Thousands, as
Executive Officer of URC, explained why the well as Krispie, Choc Thins and indulgent real
company acquired Griffins Foods: We believe milk chocolate biscuits such as Hokey Pokey
Griffins is at the forefront of global consumer Squiggles, Chit Chats, and Chocolate Fingers.
trends in snacking, including indulgence, a
Huntley & Palmers Crackers through these fancy biscuits, the perfect
accompaniments to an impressive antipasto
Huntley & Palmers history dates back to 1822 platter adorned with aged cheeses, cured
as it was once the official biscuit provider to meats, and delicious dips.
the British Royal Family as well as to other
royalties like Napoleon III and Leopold II of Nice & Natural Snack Bars
Belgium. Griffins Foods obtained the license
to make Huntley & Palmers biscuits in 1985 Nice & Natural Snack Bars are truly fit for the
and continued the uncompromised art of on-the-go consumers in Singapore!
making premium crackers to traditional baking
methods and recipes. Products bursting with the goodness of fruits,
nuts, seeds and grains, Nice & Natural Muesli
With Huntley & Palmers Sesameal Crackers Bars are the perfect packaged snack to help
and Flatbreads accessible to Singapore, you feel naturally energized throughout your
Singaporeans can easily entertain any guests day.
Group
management expertise
including state-of-the-
art diagnostic capability,
is divided into four major
segments namely Robina
Farm Hogs, Robina Farms
Poultry, Commercial Feeds,
and Commercial Drugs.
Robina Farm Hogs and water solubles. URC AIG has also awarded
The Hogs segment breeds and sells live the exclusive dealership of PED Vaccine (Harris
pigs, and warm and chilled carcasses. URC Vaccine) by Harris Company (Iowa, USA)
AIG has configured its business model by which will contribute to the growth of this
increasing the number of concessionaires in segment.
supermarkets, and by launching its first Stand
Alone Meat Shop. All of URC-AIGs livestock and feed products
have been registered with the Bureau of
This segment is preparing for the Animal Industry (BAI) and all of its hog
commencement of operations of the world products are regulated by the National Meat
class AAA Slaughterhouse and Meat Inspection Service (NMIS) which prescribes
Fabrication. This will give way for the planned standards, conducts quality control test of feed
meat exportation to other countries, namely samples, and provides technical assistance if
Japan and Singapore. This world class facility necessary.
is the only AAA Slaughterhouse in Rizal
making AIG the biggest fully integrated and URC AIG also changed the Robina Farms
directly managed Agri Industrial Conglomerate quality management system by defining
in the country today. quality management mechanisms across all
processes, from product development, and
Robina Farms Poultry planning to better serve its customers. To
Robina Farms Poultry produces superior further ensure the quality of meat products,
day-old broiler, layer chicks, and premium the Company applied and granted
table eggs. The Poultry segment has proven certifications such as Good Animal Husbandry
its leadership in innovation in the Farm Practices (GAHAP) and HACCP (Hazard
Technology as it has operated its own biogas Critical Control Points). Lastly, the Company
facility which is first in the poultry farm promotes No Hormone and Antibiotic free for
business. Robina Farms Poultry also pioneered the safety of their consumers.
the new technology for debeaking, using
an infrared laser (Novatech), which reduces URC Agro Industrial Group will continuously
mortality and increases egg production. uphold by its principles of being a Kabalikat,
giving Kalidad to its customers and ensure
Commercial Feeds Kita to its business partners.
Commercial Feeds offers various animal
feed products through its brands like UNO+,
and the recently launched Barangay Uno
and Barangay Supremo that cater to hogs
and gamefowl farms. URC - AIG has also
aggressively implemented the Kabalikat
Farm Concept all throughout the country and
continues to expand the segments distribution
channels as well as manage its existing
customers.
Commercial Drugs
Commercial Drugs manufactures, distributes
and sells a wide range of high-quality and well-
known animal health products like vaccines
35 AGRO-INDUSTRIAL GROUP
S P E C I A L F E AT U R E
URC continues to invest in technologies for renewable energy. After the successful operations of
the Bio-ethanol facility and the Biomass cogeneration plant of URC Sugar, URC has ventured in
another renewable business for sustainability, and this time, for its Agro-Industrial Businessthe
Biogas Technology.
Biogas Technology is a process wherein the agricultural and all other biodegradable wastes
are converted into a Biogas. It uses a biogas digester to collect the methane gas and organic
fertilizer produced during the anaerobic decomposition of waste. In URC-AIGs Biogas facilities,
the methane gas created from the manure of animals (pigs and chickens) is converted into energy
which then can be used to generate electricity.
URC has developed two Biogas facilities that are already running this year with the benefit of
saving on electricity cost:
The biogas technology is also beneficial to the environment since this eliminates manure hauling
resulting to better waste management and the avoidance of toxins and contamination.
AGRO-INDUSTRIAL GROUP 36
Commodity Commodity Foods
Group is responsible
URC Flour Division is one of the top flour The division also offers other products like
millers in the Philippines with milling capacity wheat germ, bran, and pollard which are all
of 2,150 MT per day from its Manila and Davao by-products of its flour production.
plants. The division is able to produce custom-
ized products that fit the specific needs of cus- In addition, URC Flour Division sells com-
tomers because of its state-of-the-art flourmills mercially EL REAL, its very own pasta line.
and blending facilities. Currently, the EL REAL brand offers different
variants like spaghetti, macaroni, flat spaghetti
URC Flour manufactures and sells the follow- and curly macaroni. URC Flour was the first
ing flour segments: to launch spaghetti noodles with real malung-
gay and carrot bits under the brand EL REAL
Hard Flour HEALTHY Spaghetti. Both of these brands are
UNIVERSAL available in key areas nationwide.
GLOBE First Class Flour
URC Flour supplies flour requirements of the
BLEND 100 Flour URC Branded Consumer Food Group, both in
the Philippines and partly International. It also
Soft Flour toll manufactures pasta noodles for one of the
MY ROSE leading fast food chains in the country.
SAMPAGUITA
Specialty Flours
CONTINENTAL All-Purpose Flour
DAISY Cake Flour
FibrA+ Whole Wheat Flour
NOODELICIOUS Noodle Flour
GALACTIC Specialized Flour
Packaging Materials
URC believes that it has a responsibility The Company uses recyclables for its
towards the environment and has taken packaging materials such as PET and
concrete steps towards compliance with Polypropylene. It also incorporates at least 5%
environmental laws, promoting recycling of PET regrind during the bottle production.
and reincorporation, investing in renewable
energy, sustainable sourcing, promoting animal Byproducts
welfare, and sustainable farming. URC reincorporates some byproducts of
its manufacturing processes such as candy
ENVIRONMENTAL LAWS mass and chocolate trimmings back to the
AND COMPLIANCE production process in order to minimize
wastage. URC also makes some by-products
Production Facilities of its flour production like bran and pollard
URC ensures that its production facilities are into animal feeds.
compliant with the latest requirements across
the globe, such as HACCP, ISO 9001:2008, Waste Materials
ISO 22000:2005, and FSMS certifications. Griffins has managed its waste innovatively
Also, URC has created a specific department through recycling such as the following:
that handles occupational, safety, health, and
environmental concerns. Griffins separates food waste into high
protein, starch, dry product and wet
Waste Management product. This allows Griffins to earn
All waste water from URCs production revenue from waste materials and
facilities is treated to ensure that the recycle starch into raw material for
environment is not harmed from the packaging products.
Companys operations. Similar to this, the All product waste of Griffins is moved
Companys New Zealand operations, Griffins, through Ecostock to farms and is used for
is working on enhancing waste management stock feed for both cattle and pigs.
by reducing total waste and increasing Griffins waste oil is broken down and
recycling as a percentage of waste to minimize used as biodiesel.
the impact on landfills. Griffins pallets that are removed from site
by EnviroWaste are broken down and
reused in playground construction.
41 SUSTAINABILITY
RENEWABLES SUSTAINABLE FARMING
Listed below are renewable facilities wherein URC has a Planters Program that helps its
URC has invested. These further process its partner sugar cane farmers by providing the
byproducts into renewable sources of energy following sources of assistance:
that are either used internally to power the
companys facilities and/or are sold to the grid Cultivation/tractor assistance
(power) and petrol companies (bioethanol). Fertilizer assistance
Propagation and deployment of high
Bioethanol Distillery - utilizes blackstrap yielding varieties of sugar cane
molasses from its sugar business
Social
Biogas Facility - uses manure waste from
its agro-industrial business
Biomass Cogeneration Plant - uses
bagasse from its sugar business URC believes that its commitment to society
rests on providing safe and healthy products,
SUPPLIERS taking care of the people involved in its
business and operations, and giving back
The Company has a dedicated supplier to the underprivileged.
selection team that employs a stringent
selection process. As such, URC works with PRODUCTS
suppliers that have a strong commitment to
sustainability like Cargill, Barry Callebaut, and Healthy Products
Bunge. The Company further encourages its URC offers low calorie and healthy alternatives
supplier base to promote sustainability. such as its C2 tea made from real tea leaves
In Griffins, all palm oil purchases are being and its Nova Multigrain snacks to promote
certified by the Round Table for Sustainable healthy eating and nutrition. The Company
Palm Oil. also provides vitamin fortified snacks for kids
that bear the Sangkap Pinoy seal from the
ANIMAL WELFARE Department of Health.
SUSTAINABILITY 42
WORKFORCE CORPORATE SOCIAL RESPONSIBILITY
43 SUSTAINABILITY
S P E C I A L F E AT U R E
SUSTAINABILITY 44
Corporate Universal Robina
Corporation (URC) is
Board
The Board has adopted the Revised Corporate Governance Manual in June 22, 2015 for the Company. The Manual
elaborates on the governance roles and responsibilities of the Board and its Directors. The Board ensures that all material
information about the Company is disclosed to the public on a timely manner. The Board likewise is strongly committed
to respect and promote the rights of stockholders in accordance with the Revised Corporate Governance Manual, the
Companys Articles of Incorporation, and By-Laws.
Composition
The Board is composed of nine directors (four executive directors, three non-executive directors, and two
independent directors) with diverse backgrounds and work experience
None of the independent directors own more than 2% of the Companys capital stock
Different persons assume the role of Chairman of the Board and CEO
Role
A Directors Office is one of trust and confidence. A Director should act in the best interest of the Company in a manner
characterized by transparency, accountability, and fairness. He should also exercise leadership, prudence, and integrity in
directing the Company towards sustained progress.
Attendance of Directors
October 2014 to September 2015
MEETINGS MEETINGS
Board Name Date of Election DURING THE YEAR ATTENDED %
Member John L. Gokongwei, Jr. May 27, 2015 11 11 100%
Chairman James L. Go May 27, 2015 11 11 100%
Member Lance Y. Gokongwei May 27, 2015 11 11 100%
Member Patrick Henry C. Go May 27, 2015 11 10 90.91%
Member Frederick D. Go May 27, 2015 11 11 100%
Member Johnson Robert G. Go, Jr. May 27, 2015 11 11 100%
Member Robert G. Coyiuto, Jr. May 27, 2015 11 11 100%
Independent Wilfrido E. Sanchez May 27, 2015 11 11 100%
Independent Pascual S. Guerzon May 27, 2015 11 11 100%
46
Code of Business Conduct and Ethics Conduct with the Conflicts of Interest Committee. Reports
or disclosures can be made in writing or by email using
Conflict of Interest the following contact details:
The Companys Code of Business Conduct and Conflicts of
Interest Policy require employees to make a conscious effort a. Email Address: [email protected]
to avoid conflict of interest situations; that his judgment and b. Fax Number 395-2890
discretion are not influenced by considerations of personal c. Mailing Address
gain or benefit. A conflict of interest may also occur because Must be sent in a sealed envelope clearly marked
of the actions, employment, or investments of an immediate Strictly Private and Confidential-To Be Opened by
family member of an employee. Addressee Only. CICOM
JG Summit Holdings, Inc.
Conduct of Business and Fair Dealings 44th Flr. Robinsons Equitable Tower
The Companys employees that recommend, endorse, or ADB Avenue, Cor., Poveda Road,
approve the procurement or sale of goods and services Pasig City
should make a conscious effort to avoid any conflict of
interest situation in transactions that they are involved in. The complaint shall be filed using the Complaint/
Disclosure Form (CDF) available in the company website.
Receipt of Gifts from Third Parties All information received in connection with the reports or
The Company discourage the acceptance of gifts. disclosures shall be strictly confidential and shall not be
However, gifts like advertising novelties maybe given disclosed to any person without prior consent of CICOM.
or accepted during the Christmas season. There is no
restriction in the value of the gift accepted. However, Conflict Resolution
accepted gift with estimated value over Php 2,000 must The Conflicts of Interest Committee submits
be disclosed to the Conflicts of interest Committee. recommendations on courses of action to be taken on
conflicts of interest situations. The decision is done by the
Compliance with Laws and Regulations Executive Committee.
The Company ensures that all transactions comply
with relevant laws and regulations. Any deficiencies are Audit and Risk Management Committee
immediately rectified. The Company aims to identify measure, analyze, monitor,
and control all forms of risks that would affect the Company
Respect for Trade Secrets/Use of Non-Public through the Audit and Risk Management Committee.
Information
The Company has policies that ensure proper and The Audit and Risk Management Committee reviews the
authorized disclosure of confidential information. effectiveness of risk management systems employed by
Disclosures to the public can only be done after the the Company. It shall assist the Groups Board of Directors
disclosure to SEC and PSE by the Companys authorized in its fiduciary responsibilities by providing an independent
officers. and objective assurance to the Corporations stakeholders
for the continuous improvement of risk management
Use of Company Funds, Assets and Information systems, internal control systems, governance processes,
Employees are required to safeguard the Company business operations, and proper safeguarding and use of
resources and assets with honesty and integrity. the Corporations resources and assets.
Employees must ensure that these assets are efficiently,
effectively, and responsibly utilized. The Audit and Risk Management Committee aims to
ensure that:
Employment and Labor Laws and Policies a. Financial reports comply with established internal
The Companys Human Resources Unit ensures policies and procedures, pertinent accounting and
compliance with employment and labor laws and policies. auditing standards and other regulatory requirements;
b. Risks are properly identified, evaluated and managed,
Disciplinary Action specifically in the areas of managing credit, market
Violation of any provision of the Code of Business liquidity, operational, legal and other risks, and crisis
Conduct may result to disciplinary action, including management;
dismissal and reimbursement for any loss to the Company c. Audit activities of internal and external auditors are
that result from the employees action. If appropriate, a done based on plan and deviations, and are explained
violation may result in legal action against the employee through the performance of direct interface functions
or referral to the appropriate government authorities. with the internal and external auditors; and
d. Rhe Groups Board of Directors is properly assisted in
Whistle Blower
the development of policies that would enhance the
Any employee may discuss or disclose in writing any
risk management and control systems.
concern on potential violation of the Code of Business
47
Moreover, at the end of each calendar year, the Chief 5. Control Activities - policies and procedures are
Executive Officer (CEO) and Chief Audit Executive (CAE) established and approved by the Groups BOD and
executes a written attestation that a sound internal audit, implemented to ensure that the risk responses are
control and compliance system is in place and working effectively carried out enterprise-wide.
effectively. The attestation is presented to and confirmed 6. Information and Communication - relevant risk
by the Audit and Risk Management during the meeting. management information is identified, captured and
communicated in form and substance that enable all
Enterprise Risk Management Group (ERMG) personnel to perform their risk management roles.
The ERMG was created to be primarily responsible for the 7. Monitoring - the ERMG, Internal Audit Group,
execution of the enterprise risk management framework. Compliance Office and Business Assessment
Team constantly monitor the management of risks
The ERMGs main concerns include: through risk limits, audit reviews, compliance checks,
a. Recommending risk policies, strategies, principles, revalidation of risk strategies and performance
framework and limits; reviews.
b. Managing fundamental risk issues and monitoring of
relevant risk decisions; Risk Management Support Groups
c. Providing support to management in implementing The Groups BOD created the following departments
the risk policies and strategies; and within the Group to support the risk management
activities of the Group and the other business units:
d. Developing a risk awareness program.
1. Corporate Security and Safety Board (CSSB)
ERM Framework - under the supervision of ERMG, the CSSB
The Groups BOD is also responsible for establishing and administers enterprise-wide policies affecting physical
maintaining a sound risk management framework and security of assets exposed to various forms of risks.
is accountable for risks taken by the Group. The Groups 2. Corporate Supplier Accreditation Team (CORPSAT)
BOD also shares the responsibility with the ERMG in - under the supervision of ERMG, the CORPSAT
promoting the risk awareness program enterprise-wide. administers enterprise-wide procurement policies
to ensure availability of supplies and services of high
The ERM framework revolves around the following eight quality and standards to all business units.
interrelated risk management approaches: 3. Process Risk Management Department (PRMD)
- the PRMD is responsible for the formulation of
1. Internal Environmental Scanning - it involves the enterprise-wide policies and procedures.
review of the overall prevailing risk profile of the
4. Corporate Planning and Legal Affairs (CORPLAN)
business unit to determine how risks are viewed and
- the CORPLAN is responsible for the administration
addressed by the management. This is presented
of strategic planning, budgeting and performance
during the strategic planning, annual budgeting and
review processes of the business units.
mid-year performance reviews of the business unit.
5. Corporate Insurance Department (CID) - the CID
2. Objective Setting - the Groups BOD mandates
is responsible for the administration of the insurance
the Groups management to set the overall annual
program of business units concerning property, public
targets through strategic planning activities, in order
liability, business interruption, money and fidelity, and
to ensure that the management has a process in place
employer compensation insurances, as well as in the
to set objectives which are aligned with the Groups
procurement of performance bonds.
goals.
3. Risk Assessment - the identified risks are analyzed
Compliance Officer
relative to the probability and severity of potential loss
The Compliance Officer assists the Board of Directors
which serves as a basis for determining how the risks
in complying with the principles of good corporate
should be managed. The risks are further assessed
governance.
as to which risks are controllable and uncontrollable,
risks that require managements attention, and risks
He shall be responsible for monitoring actual compliance
which may materially weaken the Groups earnings
with the provisions and requirements of the Corporate
and capital.
Governance Manual and other requirements on good
4. Risk Response - the Groups BOD, through the
corporate governance, identifying and monitoring
oversight role of the ERMG, approves the Groups
control compliance risks, determining violations, and
responses to mitigate risks, either to avoid, self-insure,
recommending penalties on such infringements for
reduce, transfer or share risk.
further review and approval of the Board of Directors,
among others.
48
Role of Stakeholders
Customers Welfare
The Company has a customer relations policy and procedures to ensure that customers welfare are protected and
questions are addressed.
Supplier/Contractor Selection
We have a Supplier Accreditation Policy to ensure that the Companys suppliers and contractors are qualified to meet its
commitments to the Company.
As of September 30, 2015, the Company has invested about Php 220 million in wastewater treatment in its facilities in the
Philippines.
The Company ensures that the products are safe for human consumption, and that the Company conforms to
standards and quality measures prescribed by regulatory bodies such as Bureau of Foods and Drugs, Sugar Regulatory
Administration, Bureau of Animal Industry, and Department of Agriculture.The following manufacturing facilities of URCs
branded consumer foods group are certified: Administration, Bureau of Animal Industry, and Department of Agriculture.
The following manufacturing facilities of URCs branded consumer foods group are certified:
ISO 9001:2008, Quality Rosario plant, Meat and Canning Division (MCD) Libis plant, Bagong Ilog plant,
Management System Pampanga plant, Tarlac plant, Cavite plant, Nissin-URC plant, Canlubang plant,
Calamba plant, Cebu plant, ESMO plant, San Pedro 1 plant, Binan plant, Corporate
Engineering/Corporate IE, Supply Chain, Quality Assurance, Technology Department,
Procurement Department, BOPP plant, Thailand, Indonesia, Malaysia, Vietnam, China
Shanghai, China Qidong
ISO 22000:2005, Food Safety Rosario plant cake line, Pampanga plant biscuits line, Pampanga plant C2 line, Cavite
Management System plant tetra line, Calamba plant C2 line, Binan plant biscuits line, Thailand, Vietnam
HACCP Certified Line/Products Rosario chocolate line, Rosario SUP line (tomato sauce, BBQ, spaghetti sauce),
MCD Canning and SUP line (Pork & Beans, Chili and Baked Beans), MCD potato
ring line (Roller Coaster- all variants), MCD fabricated line (Piattos- all variants),
Bagong Ilog cookie line (Cream-O biscuit- all variants), Pampanga corn chips line
(Chippy- all variants, Tostillas-all variants), Pampanga fabricated line (Piattos- all
variants), Pampanga multigrain line (Nova- all variants), Calamba beverage line
(C2- all variants), Canlubang corn chips line (Chippy- all variants), Cavite cracker
line (Magic plain and creams- all variants), Cavite hard candy line (Maxx & XO- all
variants), Cavite chocolate line (Chooey- all variants), Cavite tetra line, Nissin-URC
noodle cup line (Nissin Cup- all variants), Nissin-URC pouch line (Nissin noodles- all
variants), Tarlac noodle line (Payless- all variants), Cebu cracker line (Magic premium
and creams- all variants), Cebu noodle line (Mamamee and Payless- all variants), San
Pablo bottled water line (Refresh), Thailand, Vietnam, China Shanghai, China Panyu,
China Qidong
ISO 17025:2005, PAO Accredited Technology Central Laboratory- Physico-Chem, Micro, Sensory Testing and
Laboratory Calibration
49
CERTIFICATION MANUFACTURING FACILITY/DEPARTMENT
Department of Environment Technology Central Lab- Water & Waste Water Lab
and Natural Resources (DENR)
Recognized Laboratory
The Company also focuses on uplifting the socio-economic condition of the country through education. The Company
partners with organizations that promote education of Filipinos through grants, endowments, scholarships, and
educational facilities.
Employees
The Company continuously provides learning and development opportunities for its employees through the John
Gokongwei Institute for Leadership and Enterprise Development or what is commonly known as JG-ILED. JG-ILED is the
leadership platform for systematic and sustained development programs across the conglomerate. Its mission is to enable
a high performing organization that will facilitate the learning process and develop the intellectual and personal growth of
all employees through targeted and customized trainings and development programs.
Ownership Structure
(As of December 31, 2015)
PCD Nominee Corporation (Non-Filipino) 705,765,610 32.35% PCD Participants and their clients
PCD Nominee Corporation (Filipino) 248,100,675 11.37% PCD Participants and their clients
Company Website
URC updates the public with operating and financial results through timely disclosures filed with SEC and PSE. These are
available on the companys website: http://www2.urc.com.ph/
50
Board of Directors
and Executive
Officers
Board
of
Directors
John L. Gokongwei, Jr.
Director, Chairman Emeritus
52
Patrick Henry C. Go Frederick D. Go Johnson Robert G. Go, Jr.
Director, Vice President Director Director
53
URC Branded
Consumer Foods Group
54
Teofilo B. Eugenio, Jr. Francis Emmanuel Puno Premchai Navarasuchitr
Vice President, Senior Vice President and Business Unit General Manager,
Marketing Snacks Regional Director, URC Thailand
Singapore, Indonesia and Malaysia Cluster
55
Joint Ventures
Griffins Agro-Industrial
Foods Group
56
Commodity Foods Group
Packaging Division
57
Executive
Officers
James L. Go Cornelio S. Mapa, Jr.
CHAIRMAN EXECUTIVE VICE PRESIDENT AND
MANAGING DIRECTOR
Lance Y. Gokongwei URC Branded Consumer Foods Group
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Constante T. Santos
Patrick Henry C. Go SENIOR VICE PRESIDENT
DIRECTOR, VICE PRESIDENT
Bach Johann M. Sebastian
SENIOR VICE PRESIDENT
Chona R. Ferrer
FIRST VICE PRESIDENT
Ester T. Ang
VICE PRESIDENT TREASURER
Anne Patricia C. Go
VICE PRESIDENT
Alan D. Surposa
VICE PRESIDENT
Michael P. Liwanag
VICE PRESIDENT
Rosalinda F. Rivera
CORPORATE SECRETARY
Arlene S. Denzon
COMPLIANCE OFFICER
58
Awards &
Recognition
URCs continuous thrust to create value for its stakeholders while
maintaining good corporate governance and investor engagement
has been recognized with the following awards, citation and
recognitions this 2015.
FinanceAsia
For second year in a row, URC has been part of for the Philippines respectively. The Company
Asias Best awarding by the leading business was also ranked among the top ten in the
magazine, FinanceAsia. URC and Mr. Lance country awards in terms of investor relations,
Gokongwei were voted as the Best Managed dividend payment, corporate governance and
Consumer Company in Asia and the Best CEO best managed as a public corporation.
From L to R: Manuel N. Tordesillas, President and CEO, Maybank ATR Kim Eng Capital Partners, Inc.; Lance Gokongwei, URC President
& CEO; Ramon B. Arnaiz Chairman, Maybank ATR Kim Eng Capital Partners, Inc.; Cornelio Mapa, Jr. , EVP&MD, URC Branded Consumer
Foods Group; and Lorenzo T. Roxas, Chairman and President, Maybank ATR Kim Eng Securities, Inc.
59
IR Magazine Awards from L to R: URC as the Best in Sector: From L to R: Marcia Gokongwei, Nissin URC and Hunts URC
Consumer; and Lance Gokongwei as the Best IR by a Senior Business Unit General Manager; Edwin Totanes, Vice President
Management Team and Group Head for Marketing; Philip Kotler, AMF Honorary
Fellow and marketing guru; Takuya Goto, AMF President
IR Magazine
URC was recognized as one of the leading Asia Marketing Federation
organizations in Southeast Asia by more URC was named the Marketing Company of
than 400 analysts and portfolio managers the Year by Asias foremost governing body
who participated in IR Magazines Investor of marketing associations, Asia Marketing
perception survey. During the IR Magazine Federation (AMF). The Company was
Awards & ConferenceSouth East Asia 2015, recognized for its significant sales, market
Mr. Lance Gokongwei won as the Best Investor share and net income growth over the past
Relations by a Senior Management Team - three years driven by outstanding innovation,
CEO (large cap) and URC was awarded as the strategies and values.
Best in consumer sector for South East Asia.
Institutional Investor All Asia Executive
Team Rankings
For the second year in a row, both Mr. Lance
Gokongwei, URC President & CEO, and Mr.
Michael Liwanag, VP for Corporate Planning
& Investor Relations were once again part of
Institutional Investors All Asia Executive Team
annual rankings. This year, 820 investors
and 625 sell-side analysts voted for the best
CEOs, CFOs, IR Professionals and IR Programs
across Asia. Universal Robina Corporation is
distinguished as Most Honored based on its
From L to R: Marcus Langston Senior manager of Euromoney;
success across the following positions in the
Lance Gokongwei, URC President & CEO; Cornelio Mapa, Jr., Consumer sector:
EVP & MD, URC Branded Consumer Foods Group
Best Investor Relations - Third Place -
Euromoney
Nominated by the Buy Side
URC was awarded as Best Managed
Best CEO - First Place - Lance Gokongwei
Company-Food, Drink & Tobacco in Asia by
- Nominated by the Buy Side
Euromoney.
Best Investor Relations Professional
Euromoney surveyed analysts at leading - Second Place - Michael Liwanag -
banks and research institutes on companies Nominated by the Buy Side
that they think have the best management
and corporate governance in their respective
sectors and regions.
60
URC Directory
Philippines
61
International
62
Financial
Statements
64
SyCip Gorres Velayo & Co. Tel: (632) 891 0307 BOA/PRC Reg. No. 0001,
6760 Ayala Avenue Fax: (632) 819 0872 December 14, 2015, valid until December 31, 2018
1226 Makati City ey.com/ph SEC Accreditation No. 0012-FR-4 (Group A),
Philippines November 10, 2015, valid until November 9, 2018
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with Philippine Financial Reporting Standards, and for such internal control
as management determines is necessary to enable the preparation of consolidated financial statements
that are free from material misstatement, whether due to fraud or error.
Auditors Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits. We conducted our audits in accordance with Philippine Standards on Auditing. Those
standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditors judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entitys preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entitys internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of Universal Robina Corporation and Subsidiaries as at September 30, 2015 and
2014, and their financial performance and their cash flows for each of the three years in the period
ended September 30, 2015 in accordance with Philippine Financial Reporting Standards.
Aris C. Malantic
Partner
CPA Certificate No. 90190
SEC Accreditation No. 0326-AR-3 (Group A),
May 1, 2015, valid until April 30, 2018
Tax Identification No. 152-884-691
BIR Accreditation No. 08-001998-54-2015,
February 27, 2015, valid until February 26, 2018
PTR No. 5321657, January 4, 2016, Makati City
January 8, 2016
September 30
2015 2014
ASSETS
Current Assets
Cash and cash equivalents (Note 7) P
=18,298,379,441 =10,076,223,083
P
Financial assets at fair value through profit or loss (Note 8) 401,701,602 476,260,026
Receivables (Notes 10 and 35) 10,833,224,194 9,319,201,703
Inventories (Note 11) 16,034,613,897 15,129,022,837
Biological assets (Note 15) 1,177,607,861 1,278,304,318
Other current assets (Note 12) 835,739,493 3,976,999,288
47,581,266,488 40,256,011,255
Noncurrent Assets
Property, plant and equipment (Note 13) 38,831,973,783 34,407,755,976
Available-for-sale financial assets (Note 14) 40,880,000 21,720,000
Biological assets (Note 15) 444,722,865 455,817,612
Goodwill (Note 16) 14,706,811,446 793,415,185
Intangible assets (Note 16) 7,281,943,040 475,000,000
Investments in joint ventures (Note 17) 494,242,502 441,223,735
Investment properties (Note 18) 53,518,151 57,175,938
Deferred tax assets (Note 33) 597,598,936 404,393,056
Other noncurrent assets (Note 19) 714,124,310 608,694,233
63,165,815,033 37,665,195,735
TOTAL ASSETS P
=110,747,081,521 =77,921,206,990
P
(Forward)
67
September 30
2015 2014
Equity
Equity attributable to equity holders of the parent
Paid-up capital (Note 23) P
=19,056,685,251 =19,056,685,251
P
Retained earnings (Note 23) 48,628,034,035 42,789,191,854
Other comprehensive income (Note 24) 3,326,070,120 330,447,069
Equity reserve (Note 23) (5,075,466,405) (5,556,531,939)
Treasury shares (Note 23) (670,386,034) (670,386,034)
65,264,936,967 55,949,406,201
Equity attributable to non-controlling interests
(Notes 17 and 23) 94,691,324 77,590,099
65,359,628,291 56,026,996,300
TOTAL LIABILITIES AND EQUITY P
=110,747,081,521 =77,921,206,990
P
68
UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
69
UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
70
UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 2015, 2014 AND 2013
71
Other comprehensive income 2,982,525,738 19,160,000 (1,449,501) 3,000,236,237 (4,613,186) 2,995,623,051 2,995,623,051 (1,217,862) 2,994,405,189
Total comprehensive income 12,383,347,980 12,383,347,980 2,982,525,738 19,160,000 (1,449,501) 3,000,236,237 (4,613,186) 2,995,623,051 15,378,971,031 120,355,746 15,499,326,777
Cash dividends (Note 23) (6,544,505,799) (6,544,505,799) (6,544,505,799) (128,839,987) (6,673,345,786)
Sale of equity interest in a
subsidiary 481,065,534 481,065,534 25,585,466 506,651,000
Appropriation of retained earnings (2,000,000,000) 2,000,000,000
Balances as at September 30, 2015 P= 2,227,638,933 P
= 16,829,046,318 P
= 19,056,685,251 P46,628,034,035
= P2,000,000,000
= P48,628,034,035 (P
= = 5,075,466,405) =
P3,801,908,167 = 19,160,000
P (P
= 1,449,501) =
P3,819,618,666 (P
= 493,548,546) = 3,326,070,120
P (P
= 670,386,034) P65,264,936,967
= P94,691,324
= P65,359,628,291
=
Balances as at October 1, 2013 =2,227,638,933 P
P =16,829,046,318 P=19,056,685,251 =37,774,987,907
P =
P =37,774,987,907 (P
P =5,556,531,939) = P601,100,078 =
P =
P P601,100,078
= (P
=426,630,877) =174,469,201
P (P
=670,386,034) =50,779,224,386
P =50,805,256
P =50,830,029,642
P
Net income for the year 11,558,709,746 11,558,709,746 11,558,709,746 96,582,268 11,655,292,014
Other comprehensive income 218,282,351 218,282,351 (62,304,483) 155,977,868 155,977,868 202,575 156,180,443
Total comprehensive income 11,558,709,746 11,558,709,746 218,282,351 218,282,351 (62,304,483) 155,977,868 11,714,687,614 96,784,843 11,811,472,457
Cash dividends (Note 23) (6,544,505,799) (6,544,505,799) (6,544,505,799) (70,000,000) (6,614,505,799)
Balances as at September 30, 2014 P=2,227,638,933 P=16,829,046,318 P=19,056,685,251 =42,789,191,854
P =
P =42,789,191,854 (P
P =5,556,531,939) P =819,382,429 =
P =
P =819,382,429
P (P
=488,935,360) =330,447,069
P (P
=670,386,034) =55,949,406,201
P =77,590,099
P =56,026,996,300
P
Balances as at October 1, 2012 P2,227,638,933 =
= P16,829,046,318 =
P19,056,685,251 =27,966,037,047
P =5,000,000,000
P =32,966,037,047 (P
P =5,556,531,939) =142,947,365
P =650,504,738
P =
P =793,452,103
P (P
=259,408,375) =534,043,728
P (P
=670,386,034) =46,329,848,053
P =34,680,408
P =46,364,528,461
P
Net income for the year 10,044,555,499 10,044,555,499 10,044,555,499 72,774,111 10,117,329,610
Other comprehensive income 458,152,713 (650,504,738) (192,352,025) (167,222,502) (359,574,527) (359,574,527) (649,263) (360,223,790)
Total comprehensive income 10,044,555,499 10,044,555,499 458,152,713 (650,504,738) (192,352,025) (167,222,502) (359,574,527) 9,684,980,972 72,124,848 9,757,105,820
Appropriation of retained earnings (6,000,000,000) 6,000,000,000
Reversal of previous appropriations 11,000,000,000 (11,000,000,000)
Cash dividends (Note 23) (5,235,604,639) (5,235,604,639) (5,235,604,639) (56,000,000) (5,291,604,639)
Balances as at September 30, 2013 P =2,227,638,933 P
=16,829,046,318 P
=19,056,685,251 =37,774,987,907
P =
P =37,774,987,907 (P
P =5,556,531,939) =601,100,078
P =
P =
P =601,100,078
P (P
=426,630,877) =174,469,201
P (P
=670,386,034) =50,779,224,386
P =50,805,256
P =50,830,029,642
P
72
Years Ended September 30
2015 2014 2013
Decrease (increase) in:
Other noncurrent assets (P
= 107,666,268) (P
=133,847,208) (P
=48,923,388)
Net pension liability (25,765,981) (339,518,483) (6,495,846)
Dividends received (Note 17) 16,999,995 18,499,995 29,999,991
Net cash provided by (used in) investing activities (13,474,224,702) (8,472,921,118) 9,945,205,782
CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of:
Short-term debt (3,496,301,000) (1,113,740,856) (8,586,397,274)
Long-term debt (Notes 16 and 22) (16,387,274,619) (3,000,000,000)
Proceeds from:
Availment of short-term debt 13,595,643 3,496,301,000 1,945,430,681
Availment of long-term debt 24,355,805,004
Cash dividends paid (Note 23) (6,673,345,786) (6,614,505,799) (5,291,604,639)
Net cash used in financing activities (2,187,520,758) (4,231,945,655) (14,932,571,232)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 8,222,156,358 (1,957,085,498) 6,687,475,184
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 10,076,223,083 12,033,308,581 5,345,833,397
CASH AND CASH EQUIVALENTS AT
END OF YEAR P
=18,298,379,441 P
=10,076,223,083 P
=12,033,308,581
73
UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate Information
Universal Robina Corporation (hereinafter referred to as the Parent Company or URC) is
incorporated and domiciled in the Republic of the Philippines, and is listed in the Philippine Stock
Exchange. The registered office address of the Parent Company is at 110 E. Rodriguez Avenue,
Bagumbayan, Quezon City, Philippines.
The Parent Company is a majority owned subsidiary of JG Summit Holdings, Inc. (the Ultimate
Parent Company or JGSHI).
The Parent Company and its subsidiaries (hereinafter referred to as the Group) is one of the
largest branded food products companies in the Philippines and has a growing presence in other
markets in Asia. The Group is involved in a wide range of food-related businesses which are
organized into three (3) business segments: (a) the branded consumer food segment which
manufactures and distributes a diverse mix of salty snacks, chocolates, candies, biscuits, bakery
products, beverages, noodles and tomato-based products; (b) the agro-industrial segment which
engages in hog and poultry farming, production and distribution of animal health products and
manufacture and distribution of animal feeds, glucose and soya bean products; and (c) the
commodity food segment which engages in sugar milling and refining, flour milling and pasta
manufacturing and renewable energy development. The Parent Company also engages in
consumer product-related packaging business through its packaging division which manufactures
bi-axially oriented polypropylene (BOPP) film and through its subsidiary, CFC Clubhouse
Property, Inc. (CCPI), which manufactures polyethylene terephthalate (PET) bottles and printed
flexible packaging materials. The Parent Companys packaging business is included in the
branded consumer food segment.
On May 27, 2015, the Board of Directors (BOD) and Stockholders approved the amendment to the
Articles of Incorporation (AOI) of the Parent Company to include in its secondary purpose the
transportation of all kinds of materials and products and for the Parent Company to engage in such
activity. On June 25, 2015, the Securities and Exchange Commission (SEC) approved the
amendment to the secondary purpose.
On November 26, 2012, the BOD and Stockholders approved the amendment to the AOI of the
Parent Company to include in its secondary purpose the business of power generation either for
use of the Parent Company and its division and/or for sale. On March 21, 2013, the SEC approved
the amendment to the secondary purpose.
On October 29, 2012, CCPI transferred its pet bottle operations to the Parent Company.
The operations of certain subsidiaries are registered with the Board of Investments (BOI) as
preferred pioneer and nonpioneer activities. Under the terms of the registrations and subject to
certain requirements, the Parent Company and certain subsidiaries are entitled to certain fiscal and
non-fiscal incentives, including among others, an income tax holiday (ITH) for a period of three
(3) years to six (6) years from respective start dates of commercial operations (see Note 36). The
Group is also subject to certain regulations with respect to, among others, product composition,
packaging, labeling, advertising and safety.
The principal activities of the Group are further described in Note 6 to the consolidated financial
statements.
74
2. Summary of Significant Accounting Policies
Basis of Preparation
The accompanying consolidated financial statements of the Group have been prepared on a
historical cost basis, except for financial assets at fair value through profit or loss (FVPL),
available-for-sale (AFS) financial assets and derivative financial instruments that have been
measured at fair value, and biological assets and agricultural produce that have been measured at
fair value less estimated costs to sell.
The consolidated financial statements of the Group are presented in Philippine Peso. The
functional and presentation currency of the Parent Company and its Philippine subsidiaries is the
Philippine Peso. All values are rounded to the nearest peso except when otherwise stated.
Except for certain foreign subsidiaries of the Parent Company, which are disclosed below, the
functional currency of other consolidated foreign subsidiaries is the US dollar (USD). The
functional currencies of the Groups consolidated foreign subsidiaries follow:
Country of Functional
Subsidiaries Incorporation Currency
Universal Robina (Cayman), Limited (URCL) Cayman Islands US Dollar
URC Philippines, Limited (URCPL) British Virgin Islands - do -
URC Asean Brands Co. Ltd. (UABCL) - do - - do -
Hong Kong China Foods Co. Ltd. (HCFCL) - do - - do -
URC International Co. Ltd. (URCICL) - do - - do -
URC Oceania Co. Ltd. - do - - do -
Shanghai Peggy Foods Co., Ltd.
(Shanghai Peggy) China Chinese Renminbi
URC China Commercial Co. Ltd. (URCCCL) - do - - do -
Xiamen Tongan Pacific Food Co., Ltd. - do - - do -
Guangzhou Peggy Foods Co., Ltd. - do - - do -
Shantou SEZ Shanfu Foods Co., Ltd. - do - - do -
Jiangsu Acesfood Industrial Co., Ltd. - do - - do -
Shantou Peggy Co. Ltd. - do - - do -
URC Hong Kong Company Limited Hong Kong Hong Kong Dollar
PT URC Indonesia Indonesia Indonesian Rupiah
URC Snack Foods (Malaysia) Sdn. Bhd. Malaysia Malaysian Ringgit
Ricellent Sdn. Bhd. - do - - do -
URC Foods (Singapore) Pte. Ltd. Singapore Singapore Dollar
Acesfood Network Pte. Ltd. - do - - do -
Acesfood Holdings Pte. Ltd. - do - - do -
Acesfood Distributors Pte. Ltd. - do - - do -
Advanson International Pte. Ltd. - do - - do -
URC (Thailand) Co., Ltd. Thailand Thai Baht
Siam Pattanasin Co., Ltd. - do - - do -
URC (Myanmar) Co. Ltd. Myanmar Myanmar Kyats
URC Vietnam Co., Ltd. Vietnam Vietnam Dong
URC Hanoi Company Limited - do - - do -
URC Central Co. Ltd. - do - - do -
URC New Zealand Holding Co. Ltd. New Zealand Kiwi
URC New Zealand Finance Co. Ltd. - do - - do -
Griffins Food Limited - do - - do -
Nice and Natural Limited - do - - do -
75
Statement of Compliance
The consolidated financial statements of the Group have been prepared in compliance with
Philippine Financial Reporting Standards (PFRS).
Basis of Consolidation
The consolidated financial statements include the financial statements of the Parent Company and
the following wholly and majority owned subsidiaries:
Effective Percentages of
Country of Ownership
Subsidiaries Incorporation 2015 2014 2013
CCPI Philippines 100.00 100.00 100.00
CFC Corporation - do - 100.00 100.00 100.00
Bio-Resource Power Generation
Corporation and a Subsidiary - do - 100.00 100.00 100.00
Nissin-URC (NURC) - do - 51.00 65.00 65.00
URCPL British Virgin Islands 100.00 100.00 100.00
URCICL and Subsidiaries* - do - 100.00 100.00 100.00
URCL Cayman Islands 100.00 100.00 100.00
URCCCL China 100.00 100.00 100.00
* Subsidiaries are located in Thailand, Singapore, Malaysia, Vietnam, Indonesia, China, Hong Kong,
Myanmar, British Virgin Islands, and New Zealand.
On March 10, 2015 and May 27, 2015, the BOD and stockholders of the Parent Company,
respectively, approved the plan to merge CCPI with Parent Company, subject to SEC approval.
In December 2014, the Parent Company and Mitsubishi Corporation (Mitsubishi) entered into a
share purchase agreement with Nissin Foods (Asia) Pte, Ltd. (Nissin) to sell 14% and 10%,
respectively, of their equity interests in NURC. As a result, the ownership interest of URC,
Nissin and Mitsubishi Corporation changed from 65%, 25% and 10% to 51%, 49% and nil,
respectively.
In 2014, URC Oceania Company Ltd. (URC Oceania), URC New Zealand Holding Company Ltd.
(URCNZHCL), and URC New Zealand Finance Company Ltd. (URC NZ FinCo) were
incorporated under URCICL.
Control is achieved when the Group is exposed, or has rights; to variable returns from its
involvement with the investee aand has the ability to affect those returns through its power over
the investee. Specifically, the Group controls an investee if and only if the Group has:
Power over the investee (i.e., existing rights that give it the current ability to direct the
relevant activities of the investee);
Exposure, or rights, to variable returns from its involvement with the investee; and
The ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group
considers all relevant facts and circumstances in assessing whether it has power over an investee,
including:
The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Groups voting rights and potential voting rights.
76
When the Group has less than a majority of the voting or similar rights of an investee, the Group
considers all relevant facts and circumstances in assessing whether it has power over an investee,
including:
The contractual arrangement with the other vote holders of the investee;
Rights arising from other contractual arrangements; and
The Groups voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate
that there are changes to one or more of the three elements of control. Consolidation of a
subsidiary begins when the Parent Company obtains control over the subsidiary and ceases when
the Parent Company loses control of the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed of during the year are included in the statement of comprehensive
income from the date the Parent Company gains control until the date it ceases to control the
subsidiary.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the
accounting policies used in line with those used by the Group.
All intragroup transactions, balances, income and expenses are eliminated in the consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately
from the Groups equity therein. The interest of non-controlling shareholders may be initially
measured at fair value or at the non-controlling interests proportionate share of the acquirees
identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition
basis. Subsequent to acquisition, non-controlling interests consist of the amount attributed to such
interests at initial recognition and the non-controlling interests share of changes in equity since the
date of the combination.
Changes in the Groups interest in subsidiary that do not result in a loss of control are accounted
for as equity transactions. Any difference between the amount by which the NCIs are adjusted
and the fair value of the consideration paid or received is recognized directly in equity and
attributed to the Group.
Some of the Group's subsidiaries have a local statutory accounting reference date of December 31.
These are consolidated using management prepared information on a basis coterminous with the
Group's accounting reference date.
77
Below are the subsidiaries with a different accounting reference date from that of the Parent
Company:
Subsidiaries Year-end
URCCCL December 31
Shantou SEZ Shanfu Foods Co., Ltd. -do-
Guangzhou Peggy Foods Co., Ltd. -do-
Jiangsu Acesfood Industrial Co., Ltd. -do-
Acesfood Network Pte. Ltd. (Acesfood) -do-
Acesfood Holdings Pte. Ltd. -do-
Acesfood Distributors Pte. Ltd. -do-
Advanson International Pte. Ltd. (Advanson) -do-
URC Oceania Co. Ltd. -do-
URC New Zealand Holding Co. Ltd. -do-
URC New Zealand Finance Co. Ltd. -do-
Under PFRS 10, Consolidated Financial Statements, it is acceptable to use, for consolidation
purposes, the financial statements of subsidiaries for fiscal periods differing from that of the
Parent Company if it is impracticable for the management to prepare financial statements with the
same accounting period with that of the Parent Company and the difference is not more than three
months.
Any significant transactions or events that occur between the date of the fiscal subsidiaries
financial statements and the date of the Parent Companys financial statements are adjusted in the
consolidated financial statements.
The assets and liabilities of the combining entities are reflected in the consolidated financial
statements at their carrying amounts. No adjustments are made to reflect fair values, or
recognize any new assets or liabilities, at the date of the combination. The only adjustments
that are made are those adjustments to harmonize accounting policies.
No new goodwill is recognized as a result of the combination. The only goodwill that is
recognized is any existing goodwill relating to either of the combining entities. Any
difference between the consideration paid or transferred and the equity acquired is reflected as
Equity Reserves within equity.
The effects of intercompany transactions on current assets, current liabilities, revenues, and cost of
sales for the periods presented and on retained earnings at the date of acquisition are eliminated to
the extent possible.
78
Business Combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition
is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities
incurred or assumed, and equity instruments issued by the Group in exchange for control of the
acquiree. Acquisition-related costs are recognized in profit or loss in the consolidated statement of
comprehensive income as incurred.
Where appropriate, the cost of acquisition includes any asset or liability resulting from a
contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent
changes in such fair values are adjusted against the cost of acquisition where they qualify as
measurement period adjustments. All other subsequent changes in the fair value of contingent
consideration classified as an asset or liability are accounted for in accordance with relevant
PFRS. Changes in the fair value of contingent consideration classified as equity are not
recognized.
If the initial accounting for a business combination is incomplete by the end of the reporting
period in which the combination occurs, the Group reports provisional amounts for the items for
the accounting is incomplete. Those provisional amounts are adjusted during the measurement
period, or additional assets or liabilities are recognized, to reflect new information obtained about
facts and circumstances that existed as of the acquisition date that if known, would have effected
the amounts recognized as of that date. The measurement period is the period from the date of
acquisition to the date the Group receives complete information about facts and circumstances that
existed as of the acquisition date and is subject to a maximum period of one year.
If the business combination is achieved in stages, the Groups previously-held interests in the
acquired entity are remeasured to fair value at the acquisition date (the date the Group attains
control) and the resulting gain or loss, if any, is recognized in profit or loss in the consolidated
statement of comprehensive income. Amounts arising from interests in the acquiree prior to the
acquisition date that have previously been recognized in other comprehensive income are
reclassified to profit or loss in the consolidated statement of comprehensive income, where such
treatment would be appropriate if that interest were disposed of.
Investment Entities (Amendments to PFRS 10, Consolidated Financial Statements, PFRS 12,
Disclosure of Interests in Other Entities, and Philippine Accounting Standard (PAS) 27, Separate
Financial Statements)
These amendments provide an exception to the consolidation requirement for entities that meet the
definition of an investment entity under PFRS 10. The exception to consolidation requires
investment entities to account for subsidiaries at fair value through profit or loss. The
amendments must be applied retrospectively, subject to certain transition relief. These
amendments have no impact to the Group, since none of the entities within the Group qualifies to
be an investment entity under PFRS 10.
79
PAS 32, Financial Instruments: Presentation - Offsetting Financial Assets and Financial
Liabilities (Amendments)
These amendments clarify the meaning of currently has a legally enforceable right to set-off and
the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for
offsetting and are applied retrospectively. These amendments have no impact to the Group, since
none of the entities within the Group qualifies to be an investment entity under PFRS 10. The
Group is currently assessing impact of the amendments to PAS 32.
PAS 39, Financial Instruments: Recognition and Measurement - Novation of Derivatives and
Continuation of Hedge Accounting (Amendments)
These amendments provide relief from discontinuing hedge accounting when novation of a
derivative designated as a hedging instrument meets certain criteria and retrospective application
is required. These amendments have no impact on the Group as the Group has not novated its
derivatives during the current or prior periods.
PAS 36, Impairment of Assets - Recoverable Amount Disclosures for Non-Financial Assets
(Amendments)
These amendments remove the unintended consequences of PFRS 13, Fair Value Measurement,
on the disclosures required under PAS 36. In addition, these amendments require disclosure of the
recoverable amounts for assets or cash-generating units (CGUs) for which impairment loss has
been recognized or reversed during the period. The amendments affect disclosures only and have
no impact on the Groups financial position or performance.
80
Annual Improvements to PFRS (2010-2012 cycle)
In the 2010-2012 annual improvements cycle, seven amendments to six standards were issued,
which included an amendment to PFRS 13. The amendment to PFRS 13 is effective immediately
and it clarifies that short-term receivables and payables with no stated interest rates can be
measured at invoice amounts when the effect of discounting is immaterial. This amendment has
no impact on the Group.
PAS 19, Employee Benefits- Defined Benefit Plans: Employee Contributions (Amendments)
The amendments apply to contributions from employees or third parties to defined benefit plans.
Contributions that are set out in the formal terms of the plan shall be accounted for as reductions
to current service costs if they are linked to service or as part of the re-measurements of the net
defined benefit asset or liability if they are not linked to service. Contributions that are
discretionary shall be accounted for as reductions of current service cost upon payment of these
contributions to the plans. The amendments to PAS 19 are to be retrospectively applied for annual
periods beginning on or after July 1, 2014. The Group does not expect that adoption of the
amendments in PAS 19 will have material financial impact in future financial statements.
81
PFRS 8, Operating Segments - Aggregation of Operating Segments and Reconciliation of the
Total of the Reportable Segments Assets to the Entitys Assets
The amendments require entities to disclose the judgment made by management in aggregating
two or more operating segments. This disclosure should include a brief description of the
operating segments that have been aggregated in this way and the economic indicators that have
been assessed in determining that the aggregated operating segments share similar economic
characteristics. The amendments also clarify that an entity shall provide reconciliations of the
total of the reportable segments assets to the entitys assets if such amounts are regularly provided
to the chief operating decision maker. These amendments are effective for annual periods
beginning on or after July 1, 2014 and are applied retrospectively. The amendments affect
disclosures only and have no impact on the Groups statement of financial position or statement of
income.
PAS 16, Property, Plant and Equipment - Revaluation Method - Proportionate Restatement of
Accumulated Depreciation
The amendment clarifies that, upon revaluation of an item of property, plant and equipment, the
carrying amount of the asset shall be adjusted to the revalued amount, and the asset shall be
treated in one of the following ways:
a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation of the
carrying amount of the asset. The accumulated depreciation at the date of revaluation is
adjusted to equal the difference between the gross carrying amount and the carrying amount of
the asset after taking into account any accumulated impairment losses.
b. The accumulated depreciation is eliminated against the gross carrying amount of the asset.
The amendment is effective for annual periods beginning on or after July 1, 2014. The
amendment shall apply to all revaluations recognized in annual periods beginning on or after the
date of initial application of this amendment and in the immediately preceding annual period. The
amendment has no impact on the Groups statement of financial position or statement of income.
a. The gross carrying amount is adjusted in a manner that is consistent with the revaluation of the
carrying amount of the asset. The accumulated amortization at the date of revaluation is
adjusted to equal the difference between the gross carrying amount and the carrying amount of
the asset after taking into account any accumulated impairment losses.
82
b. The accumulated amortization is eliminated against the gross carrying amount of the asset.
The amendments also clarify that the amount of the adjustment of the accumulated amortization
should form part of the increase or decrease in the carrying amount accounted for in accordance
with the standard.
The amendments are effective for annual periods beginning on or after July 1, 2014. The
amendments shall apply to all revaluations recognized in annual periods beginning on or after the
date of initial application of this amendment and in the immediately preceding annual period. The
amendments have no impact on the Groups statement of financial position or statement of
income.
The principal or the most advantageous market must be accessible to by the Group.
83
The fair value of an asset or a liability is measured using the assumptions that market participants
would use when pricing the asset or liability, assuming that market participants act in their
economic best interest.
A fair value measurement of a non-financial asset takes into account a market participants ability
to generate economic benefits by using the asset in its highest and best use or by selling it to
another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs.
The classification depends on the purpose for which the investments were acquired and whether
they are quoted in an active market. Management determines the classification of its investments
at initial recognition and, where allowed and appropriate, re-evaluates such designation at every
reporting date.
Day 1 difference
Where the transaction price in a non-active market is different from the fair value based on other
observable current market transactions in the same instrument or based on a valuation technique
whose variables include only data from an observable market, the Group recognizes the difference
between the transaction price and fair value (a Day 1 difference) in the consolidated statement of
income. In cases where variables used are made of data which is not observable, the difference
between the transaction price and model value is only recognized in the consolidated statement of
income when the inputs become observable or when the instrument is derecognized. For each
transaction, the Group determines the appropriate method of recognizing the Day 1 difference
amount.
84
Financial assets and financial liabilities at FVPL
Financial assets and financial liabilities at FVPL include financial assets and financial liabilities
held for trading purposes, derivative financial instruments, or those designated upon initial
recognition at FVPL when any of the following criteria are met:
1. Financial assets and liabilities are classified as held for trading if they are acquired for the
purpose of selling and repurchasing in the near term.
2. Derivatives are also classified under financial assets or liabilities at FVPL, unless they are
designated as hedging instruments in an effective hedge
Financial assets and financial liabilities at FVPL are recorded in the consolidated statement of
financial position at fair value. Changes in fair value are reflected in the consolidated statement of
income. Interest earned or incurred is recorded in interest income or expense, respectively, while
dividend income is recorded in other operating income according to the terms of the contract, or
when the right of the payment has been established.
The fair values of the Groups derivative instruments are calculated using certain standard
valuation methodologies.
Hedge accounting
At the inception of a hedging relationship, the Group formally designates and documents the
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hedge relationship to which the Group wishes to apply hedge accounting and risk management
objective and its strategy for undertaking the hedge. The documentation includes identification of
the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and
how the entity will assess the hedging instruments effectiveness in offsetting the exposure to
changes in the hedged items fair value or cash flows attributable to the hedged risk. Such hedges
are expected to be highly effective in achieving offsetting changes in fair value or cash flows and
are assessed on an ongoing basis that they actually have been highly effective throughout the
financial reporting periods for which they were designated.
Amounts accumulated in other comprehensive income are recycled to profit or loss in the periods
in which the hedged item will affect profit or loss.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss recognized in other comprehensive income is
eventually recycled in profit or loss.
The documentation of each hedging relationship sets out how the effectiveness of the hedge is
assessed. The method that the Group adopts for assessing hedge effectiveness will depend on its
risk management strategy.
For prospective effectiveness, the hedging instrument must be expected to be highly effective in
offsetting changes in fair value or cash flows attributable to the hedged risk during the period for
which the hedge is designated. The Group applies the dollar-offset method using hypothetical
derivatives in performing hedge effectiveness testing. For actual effectiveness to be achieved, the
changes in fair value or cash flows must offset each other in the range of 80 to 125 percent. Any
hedge ineffectiveness is recognized in profit or loss.
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Embedded derivatives
An embedded derivative is separated from the host contract and accounted for as a derivative if all
of the following conditions are met: a) the economic characteristics and risks of the embedded
derivative are not closely related to the economic characteristics and risks of the host contract; b) a
separate instrument with the same terms as the embedded derivative would meet the definition of a
derivative; and c) the hybrid or combined instrument is not recognized at FVPL.
Subsequent reassessment is prohibited unless there is a change in the terms of the contract that
significantly modifies the cash flows that otherwise would be required under the contract, in which
case reassessment is required. The Group determines whether a modification to cash flows is
significant by considering the extent to which the expected future cash flows associated with the
embedded derivative, the host contract or both have changed and whether the change is significant
relative to the previously expected cash flow on the contract.
This accounting policy applies primarily to the Groups cash and cash equivalents and receivables.
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After initial measurement, AFS financial assets are subsequently measured at fair value. The
effective yield component of AFS debt securities, as well as the impact of restatement on foreign
currency-denominated AFS debt securities, is reported in the consolidated statement of
comprehensive income. The unrealized gains and losses arising from the fair valuation of AFS
financial assets are excluded, from reported earnings and are reported under the Unrealized gain
(loss) on available-for-sale financial assets section of the consolidated statement of
comprehensive income.
When the security is disposed of, the cumulative gain or loss previously recognized in equity is
recognized under Gain on sale of investments in the consolidated statement of income. Interest
earned on holding AFS financial assets are reported as interest income using the EIR method.
Where the Group holds more than one investment in the same security, these are deemed to be
disposed of on a first-in, first-out basis.
Dividends earned on holding AFS financial assets are recognized in the consolidated statement of
income, when the right to receive payment has been established. The losses arising from
impairment of such investments are recognized under Impairment Losses in the consolidated
statement of income.
All loans and borrowings are initially recognized at the fair value of the consideration received
less directly attributable debt issuance costs. Debt issuance costs are amortized using the EIR
method and unamortized debt issuance costs are offset against the related carrying value of the
loan in the consolidated statement of financial position.
After initial measurement, other financial liabilities are subsequently measured at amortized cost
using the EIR method. Amortized cost is calculated by taking into account any discount or
premium on the issue and fees that are an integral part of the EIR.
When a loan is paid, the related unamortized debt issuance costs at the date of repayment are
charged against current operations. Gains and losses are recognized in the consolidated statement
of income when the liabilities are derecognized or impaired, as well as through the amortization
process.
This accounting policy applies primarily to the Groups short-term (see Note 20) and long-term
debt (see Note 22), accounts payable and other accrued liabilities (see Note 21) and other
obligations that meet the above definition (other than liabilities covered by other accounting
standards, such as pension liabilities or income tax payable).
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Classification of Financial Instruments Between Debt and Equity
A financial instrument is classified as debt if it provides for a contractual obligation to:
If the Group does not have an unconditional right to avoid delivering cash or another financial
asset to settle its contractual obligation, the obligation meets the definition of a financial liability.
The components of issued financial instruments that contain both liability and equity elements are
accounted for separately, with the equity component being assigned the residual amount after
deducting from the instrument as a whole the amount separately determined as the fair value of the
liability component on the date of issue.
The Group evaluates its AFS investments whether the ability and intention to sell them in the near
term is still appropriate. When the Group is unable to trade these financial assets due to inactive
markets and managements intention to do so significantly changes in the foreseeable future, the
Group may elect to reclassify these financial assets in rare circumstances. Reclassification to
loans and receivables is permitted when the financial assets meet the definition of loans and
receivables and the Group has the ability and intention to hold these assets for the foreseeable
future or until maturity. Reclassification to the HTM category is permitted only when the
entityhas the ability and intention to hold the financial asset to maturity.
For a financial asset reclassified out of the AFS category, any previous gain or loss on that asset
that has been recognized in equity is amortized to profit or loss over the remaining life of the
investment using the effective interest method. Any difference between the new amortized cost
and the expected cash flows is also amortized over the remaining life of the asset using the
effective interest method. If the asset is subsequently determined to be impaired, then the amount
recorded in equity is reclassified to profit or loss.
the financial asset is no longer held for the purpose of selling or repurchasing it in the near
term; and
there is a rare circumstance.
A financial asset that is reclassified out of the FVPL category is reclassified at its fair value on the
date of reclassification. Any gain or loss already recognized in the consolidated statement of
income is not reversed. The fair value of the financial asset on the date of reclassification
becomes its new cost or amortized cost, as applicable.
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estimated. Evidence of impairment may include indications that the borrower or a group of
borrowers is experiencing significant financial difficulty, default or delinquency in interest or
principal payments, the probability that they will enter bankruptcy or other financial
reorganization and where observable data indicate that there is a measurable decrease in the
estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be
related objectively to an event occurring after the impairment was recognized, the previously
recognized impairment loss is reversed.
The Group performs a regular review of the age and status of its trade and other receivables,
designed to identify receivables with objective evidence of impairment and provide the
appropriate allowance for impairment loss. The review is accomplished using a combination of
specific and collective assessment approaches, with the impairment loss being determined for each
risk grouping identified by the Group (see Note 10).
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through the consolidated statement of income. Increases in fair value after impairment are
recognized directly as part of other comprehensive income.
In the case of debt instruments classified as AFS financial assets, impairment is assessed based on
the same criteria as financial assets carried at amortized cost. Future interest income is based on
the reduced carrying amount and is accrued based on the rate of interest used to discount future
cash flows for the purpose of measuring impairment loss. Such accrual is recorded under interest
income in the consolidated statement of income. If, in subsequent year, the fair value of a debt
instrument increases, and the increase can be objectively related to an event occurring after the
impairment loss was recognized in the consolidated statement of income, the impairment loss is
reversed through in the consolidated statement of income.
the rights to receive cash flows from the asset have expired;
the Group retains the right to receive cash flows from the asset, but has assumed an obligation
to pay them in full without material delay to a third party under a pass-through arrangement;
or
the Group has transferred its rights to receive cash flows from the asset and either (a) has
transferred substantially all the risks and rewards of ownership and retained control of the
asset, or (b) has neither transferred nor retained the risk and rewards of the asset but has
transferred the control of the asset.
Where the Group has transferred its rights to receive cash flows from an asset or has entered into a
pass-through arrangement, and has neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control of the asset, the asset is recognized to the extent of the
Groups continuing involvement in the asset. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the lower of original carrying amount of the
asset and the maximum amount of consideration that the Group could be required to repay.
Financial liabilities
A financial liability is derecognized when the obligation under the liability is discharged or
cancelled or has expired. Where an existing financial liability is replaced by another from the
same lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original liability
and the recognition of a new liability, and the difference in the respective carrying amounts is
recognized in the consolidated statement of income.
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Inventories
Inventories, including goods-in-process, are valued at the lower of cost or net realizable value
(NRV). NRV is the estimated selling price in the ordinary course of business, less estimated costs
of completion and the estimated costs necessary to make the sale. NRV for materials, spare parts
and other supplies represents the related replacement costs.
When the inventories are sold, the carrying amounts of those inventories are recognized under
Cost of Sales and Services in profit or loss in the period when the related revenue is recognized.
Costs incurred in bringing each product to its present location and conditions are accounted for as
follows:
Materials in-transit
Cost is determined using the specific identification basis.
Biological Assets
The biological assets of the Group are divided into two major categories with sub-categories as
follows:
Biological assets are measured on initial recognition and at each statement of financial position
date at its fair value less estimated costs to sell, except for a biological asset where fair value is not
clearly determinable. Agricultural produce harvested from an entitys biological assets are
measured at its fair value less estimated costs to sell at the time of harvest.
The Group is unable to measure fair values reliably for its poultry livestock breeders in the
absence of: (a) available market determined prices or values; and (b) alternative estimates of fair
values that are determined to be clearly reliable; thus, these biological assets are measured at cost
less accumulated depreciation and any accumulated impairment losses. However, once the fair
values become reliably measurable, the Group measures these biological assets at their fair values
less estimated costs to sell.
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Agricultural produce is the harvested product of the Groups biological assets. A harvest occurs
when agricultural produce is either detached from the bearer biological asset or when a biological
assets life processes cease. A gain or loss arising on initial recognition of agricultural produce at
fair value less estimated costs to sell is recognized in the consolidated statement of income in the
period in which it arises. The agricultural produce in swine livestock is the suckling that
transforms into weanling then into fatteners/finishers, while the agricultural produce in poultry
livestock is the hatched chick and table eggs.
Depreciation is computed using the straight-line method over the estimated useful lives (EUL) of
the biological assets, regardless of utilization. The EUL of biological assets is reviewed annually
based on expected utilization as anchored on business plans and strategies that considers market
behavior to ensure that the period of depreciation is consistent with the expected pattern of
economic benefits from items of biological assets. The EUL of biological assets ranges from two
to three years.
The carrying values of biological assets are reviewed for impairment when events or changes in
the circumstances indicate that the carrying values may not be recoverable (see further discussion
under Impairment of Nonfinancial Assets).
A gain or loss on initial recognition of a biological asset at fair value less estimated costs to sell
and from a change in fair value less estimated costs to sell of a biological asset shall be included in
the consolidated statement of income in the period in which it arises.
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In circumstances where certain events have extended the period to complete the sale of a disposal
group beyond one year, the disposal group continues to be classified as held for sale if the delay is
caused by events or circumstances beyond the Groups control and there is sufficient evidence that
the Group remains committed to its plan to sell the disposal group. Otherwise, if the criteria for
classification of a disposal group as held for sale are no longer met, the Group ceases to classify
the disposal group as held for sale.
Noncurrent assets (disposal group) held for sale are measured at the lower of their carrying
amount or fair value less costs to sell. Impairment losses are recognized for any initial or
subsequent write-down of the assets held for sale to the extent that these have not been previously
recognized at initial recognition. Reversals of impairment losses for any subsequent increases in
fair value less cost to sell of the assets held for sale are recognized as a gain, but not in excess of
the cumulative impairment loss that has been previously recognized. Liabilities directly related to
noncurrent assets held for sale are measured at their expected settlement amounts.
The initial cost of an item of property, plant and equipment comprises its purchase price and any
cost attributable in bringing the asset to its intended location and working condition. Cost also
includes: (a) interest and other financing charges on borrowed funds used to finance the
acquisition of property, plant and equipment to the extent incurred during the period of installation
and construction; and (b) asset retirement obligation relating to property, plant and equipment
installed/constructed on leased properties, if any.
Subsequent costs are capitalized as part of the Property, plant and equipment, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably. Cost of repairs and maintenance are expensed when
incurred.
Foreign exchange differentials arising from foreign currency borrowings used for the acquisition
of property, plant and equipment are capitalized to the extent that these are regarded as
adjustments to interest costs.
Depreciation and amortization of property, plant and equipment commence, once the property,
plant and equipment are available for use and are computed using the straight-line method over the
EUL of the assets regardless of utilization.
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The EUL of property, plant and equipment of the Group follow:
Years
Land improvements 20
Buildings and improvements 10 to 30
Machinery and equipment 10
Transportation equipment 5
Furniture, fixtures and equipment 5
Leasehold improvements are amortized over the shorter of their EUL or the corresponding lease
terms.
The residual values, useful lives and methods of depreciation and amortization of property, plant
and equipment are reviewed periodically and adjusted, if appropriate, at each financial year-end to
ensure that the method and period of depreciation and amortization are consistent with the
expected pattern of economic benefits from items of property, plant and equipment. Any change
in the expected residual values, useful lives and methods of depreciation are adjusted
prospectively from the time the change was determined necessary.
Construction-in-progress is stated at cost. This includes the cost of construction and other direct
costs. Borrowing costs that are directly attributable to the construction of property, plant and
equipment are capitalized during the construction period. Construction in-progress is not
depreciated until such time as the relevant assets are completed and put into operational use.
Construction in-progress are transferred to the related Property, plant and equipment when the
construction or installation and related activities necessary to prepare the property, plant and
equipment for their intended use are completed, and the property, plant and equipment are ready
for service.
Major spare parts and stand-by equipment items that the Group expects to use over more than one
period and can be used only in connection with an item of property, plant and equipment are
accounted for as property, plant and equipment. Depreciation and amortization on these major
spare parts and stand-by equipment commence once these have become available for use (i.e.,
when it is in the location and condition necessary for it to be capable of operating in the manner
intended by the Group).
An item of property, plant and equipment is derecognized upon disposal or when no future
economic benefits are expected to arise from the continued use of the asset. Any gain or loss
arising on derecognition of the property, plant and equipment (calculated as the difference
between the net disposal proceeds and the carrying amount of the item) is included in the
consolidated statement of income, in the year the item is derecognized.
Fully depreciated property, plant and equipment are retained in the accounts until these are no
longer in use.
Investment Properties
Investment properties consist of properties that are held to earn rentals or for capital appreciation
or both, and those which are not occupied by entities in the Group. Investment properties, except
for land, are carried at cost less accumulated depreciation and any impairment in value. Land is
carried at cost less any impairment in value. The carrying amount includes the cost of replacing
part of an existing investment property at the time that cost is incurred if the recognition criteria
are met, and excludes the cost of day-to-day servicing of an investment property.
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Investment properties are measured initially at cost, including transaction costs. Transaction costs
represent nonrefundable taxes such as capital gains tax and documentary stamp tax that are for the
account of the Group. An investment property acquired through an exchange transaction is
measured at fair value of the asset acquired unless the fair value of such an asset cannot be
measured in, which case, the investment property acquired is measured at the carrying amount of
asset given up.
The Groups investment properties are depreciated using the straight-line method over their EUL
as follows:
Years
Land improvements 10
Buildings and building improvements 10 to 30
The depreciation and amortization method and useful life are reviewed periodically to ensure that
the method an d period of depreciation and amortization are consistend with the expected pattern
of economic useful benefits from items of investment properties.
Investment properties are derecognized when either they have been disposed of or when they are
permanently withdrawn from use and no future economic benefit is expected from their disposal.
Any gains or losses on the retirement or disposal of investment properties are recognized in the
consolidated statement of income in the year of retirement or disposal.
Transfers are made to investment property when, and only when, there is a change in use,
evidenced by the end of owner occupation, commencement of an operating lease to another party
or by the end of construction or development. Transfers are made from investment property when,
and only when, there is a change in use, evidenced by commencement of owner occupation or
commencement of development with a view to sale.
For a transfer from investment property to owner-occupied property to inventories, the deemed
cost of property for subsequent accounting is its fair value at the date of change in use. If the
property occupied by the Group as an owner-occupied property becomes an investment property,
the Group accounts for such property in accordance with the policy stated under Property, Plant
and Equipment account up to the date of change in use.
Goodwill
Goodwill represents the excess of the cost of the acquisition over the fair value of identifiable net
assets of the investee at the date of acquisition which is not identifiable to specific assets.
Goodwill acquired in a business combination from the acquisition date is allocated to each of the
Groups cash-generating units, or groups of cash-generating units that are expected to benefit from
the synergies of the combination, irrespective of whether other assets or liabilities of the Group are
assigned to those units or groups of units.
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Following initial recognition, goodwill is measured at cost, less any accumulated impairment
losses. Goodwill is reviewed for impairment annually or more frequently, if events or changes in
circumstances indicate that the carrying value may be impaired (see further discussion under
Impairment of Nonfinancial Assets).
If the acquirers interest in the net fair value of the identifiable assets, liabilities and contingent
liabilities exceeds the costs of the business combination, the acquirer shall recognize immediately
in the consolidated statement of income any excess remaining after reassessment.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the operation disposed of is included in the carrying
amount of the operation when determining the gain or loss on disposal of the operation. Goodwill
disposed of in this circumstance is measured based on the relative values of the operation disposed
of and the portion of the cash-generating unit retained.
Intangible Assets
Intangible assets (other than goodwill) acquired separately are measured on initial recognition at
cost. The cost of intangible asset acquired in a business combination is its fair value as at the
acquisition date. Following initial recognition, intangible assets are measured at cost less any
accumulated amortization and impairment losses, if any.
The useful lives of intangible assets with a finite life are assessed at the individual asset level.
Intangible assets with finite lives are amortized on a straight line basis over the assets EUL and
assessed for impairment, whenever there is an indication that the intangible assets may be
impaired. The amortization period and the amortization method for an intangible asset with a
finite useful life are reviewed at least at each reporting date. Changes in the EUL or the expected
pattern of consumption of future economic benefits embodied in the asset is accounted for by
changing the amortization period or method, as appropriate, and treated as changes in accounting
estimates. The amortization expense on intangible assets with finite useful lives is recognized in
the consolidated statement of income in the expense category consistent with the function of the
intangible asset.
Intangible assets with indefinite useful lives are tested for impairment annually either individually
or at the cash-generating unit level (see further discussion under Impairment of Nonfinancial
Assets). Such intangibles are not amortized. The useful life of an intangible asset with an
indefinite useful life is reviewed annually to determine whether indefinite life assessment
continues to be supportable. If not, the change in the useful life assessment from indefinite to
finite is made on a prospective basis.
A gain or loss arising from derecognition of an intangible asset is measured as the difference
between the net disposal proceeds and the carrying amount of the asset and is recognized in the
consolidated statement of income when the asset is derecognized.
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A summary of the policies applied to the Groups intangible assets follows:
Internally generated
EUL Amortization method used or acquired
Product Formulation Indefinite No amortization Acquired
Trademarks/Brands Indefinite No amortization Acquired
Trademarks Finite (4 years) Straight line amortization Acquired
Software Costs Finite (10 years) Straight line amortization Acquired
Customer Relationship Finite (35 years) Straight line amortization Acquired
The Groups investment in joint venture is accounted for using the equity method of accounting.
Under the equity method, the investment in a joint venture is carried in the consolidated statement
of financial position at cost plus post-acquisition changes in the Groups share in the net assets of
the joint venture. The consolidated statement of income reflects the Groups share in the results of
operations of the joint venture. Where there has been a change recognized directly in the
investees equity, the Group recognizes its share of any changes and discloses this, when
applicable, in the other comprehensive income in the consolidated statement of changes in equity.
Profits and losses arising from transactions between the Group and the joint ventures are
eliminated to the extent of the interest in the joint ventures.
The investee companys accounting policies conform to those used by the Group for like
transactions and events in similar circumstances.
Except for goodwill and intangible assets with indefinite useful lives which are tested for
impairment annually, the Group assesses at each statement of financial position date whether there
is an indication that its nonfinancial assets may be impaired. When an indicator of impairment
exists or when an annual impairment testing for an asset is required, the Group makes a formal
estimate of recoverable amount. Recoverable amount is the higher of an assets (or cash-
generating units) fair value less costs to sell and its value in use and is determined for an
individual asset, unless the asset does not generate cash inflows that are largely independent of
those from other assets or groups of assets, in which case the recoverable amount is assessed as
part of the cash-generating unit to which it belongs. Where the carrying amount of an asset (or
cash generating unit) exceeds its recoverable amount, the asset (or cash-generating unit) is
considered impaired and is written down to its recoverable amount. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset
(or cash-generating unit).
Impairment losses are recognized under Impairment Losses in the consolidated statement of
income.
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The following criteria are also applied in assessing impairment of specific assets:
Property, plant and equipment, investment properties, intangible assets with definite useful lives
For property, plant and equipment, investment properties, intangible assets with definite useful
lives, an assessment is made at each reporting date as to whether there is any indication that
previously recognized impairment losses may no longer exist or may have decreased. If such
indication exists, the recoverable amount is estimated. A previously recognized impairment loss is
reversed only if there has been a change in the estimates used to determine the assets recoverable
amount since the last impairment loss was recognized. If that is the case, the carrying amount of
the asset is increased to its recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of depreciation and amortization, had no
impairment loss been recognized for the asset in prior years. Such reversal is recognized in the
consolidated statement of income. After such a reversal, the depreciation and amortization
expense is adjusted in future years to allocate the assets revised carrying amount, less any
residual value, on a systematic basis over its remaining life.
Goodwill
Goodwill is reviewed for impairment, annually or more frequently, if events or changes in
circumstances indicate that the carrying value may be impaired.
Impairment is determined by assessing the recoverable amount of the cash-generating unit (or
group of cash-generating units) to which the goodwill relates. Where the recoverable amount of
the cash-generating unit (or group of cash-generating units) is less than the carrying amount to
which goodwill has been allocated, an impairment loss is recognized. Where goodwill forms part
of a cash-generating unit (or group of cash-generating units) and part of the operations within that
unit is disposed of, the goodwill associated with the operation disposed of is included in the
carrying amount of the operation when determining the gain or loss on disposal of the operation.
Goodwill disposed of in this circumstance is measured on the basis of the relative fair values of
the operation disposed of and the portion of the cash-generating unit retained. Impairment losses
relating to goodwill cannot be reversed in future periods.
Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the
Group and the revenue can be reliably measured. Revenue is measured at the fair value of the
consideration received, excluding discounts, rebates and other sales taxes or duties. The Group
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Company assesses its revenue arrangements against specific criteria in order to determine if it is
acting as principal or agent. The Group has concluded that it is acting principal in all of its
revenue arrangements.
The following specific recognition criteria must also be met before revenue is recognized:
Sale of goods
Revenue from sale of goods is recognized upon delivery, when the significant risks and rewards of
ownership of the goods have passed to the buyer and the amount of revenue can be measured
reliably. Revenue is measured at the fair value of the consideration received or receivable, net of
any trade discounts, prompt payment discounts and volume rebates.
Dividend income
Dividend income is recognized when the shareholders right to receive the payment is established.
Rent income
Rent income arising on investment properties is accounted for on a straight-line basis over the
lease term on ongoing leases.
Interest income
Interest income is recognized as it accrues using the effective interest rate (EIR) method under
which interest income is recognized at the rate that exactly discounts estimated future cash
receipts through the expected life of the financial instrument to the net carrying amount of the
financial asset.
Provisions
Provisions are recognized when: (a) the Group has a present obligation (legal or constructive) as a
result of a past event; (b) it is probable (i.e., more likely than not) that an outflow of resources
embodying economic benefits will be required to settle the obligation; and (c) a reliable estimate
can be made of the amount of the obligation. Provisions are reviewed at each statement of
financial position date and adjusted to reflect the current best estimate. If the effect of the time
value of money is material, provisions are determined by discounting the expected future cash
flows at a pre-tax rate that reflects current market assessment of the time value of money and,
where appropriate, the risks specific to the liability. Where discounting is used, the increase in the
provision due to the passage of time is recognized as interest expense under Financ Cost in the
consolidated statement of income. Where the Group expects a provision to be reimbursed, the
reimbursement is recognized as a separate asset but only when the reimbursement is probable.
Contingencies
Contingent liabilities are not recognized in the consolidated financial statements but disclosed
unless the possibility of an outflow of resources embodying economic benefits is remote.
Contingent assets are not recognized in the consolidated financial statements but disclosed when
an inflow of economic benefits is probable.
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Pension Costs
The net defined benefit liability or asset is the aggregate of the present value of the defined benefit
obligation at the end of the reporting period reduced by the fair value of plan assets (if any),
adjusted for any effect of limiting a net defined benefit asset to the asset ceiling. The asset ceiling
is the present value of any economic benefits available in the form of refunds from the plan or
reductions in future contributions to the plan.
The cost of providing benefits under the defined benefit plans is actuarially determined using the
projected unit credit method.
Service costs which include current service costs, past service costs and gains or losses on non-
routine settlements are recognized as expense in profit or loss. Past service costs are recognized
when plan amendment or curtailment occurs. These amounts are calculated periodically by
independent qualified actuaries.
Net interest on the net defined benefit liability or asset is the change during the period in the net
defined benefit liability or asset that arises from the passage of time which is determined by
applying the discount rate based on government bonds to the net defined benefit liability or asset.
Net interest on the net defined benefit liability or asset is recognized as expense or income in the
consolidated statement of income.
Remeasurements comprising actuarial gains and losses, return on plan assets and any change in
the effect of the asset ceiling (excluding net interest on defined benefit liability) are recognized
immediately in other comprehensive income in the period in which they arise. Remeasurements
are not reclassified to statement of income in subsequent periods.
Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance
policies. Plan assets are not available to the creditors of the Group, nor can they be paid directly
to the Group. Fair value of plan assets is based on market price information. When no market
price is available, the fair value of plan assets is estimated by discounting expected future cash
flows using a discount rate that reflects both the risk associated with the plan assets and the
maturity or expected disposal date of those assets (or, if they have no maturity, the expected
period until the settlement of the related obligations). If the fair value of the plan assets is higher
than the present value of the defined benefit obligation, the measurement of the resulting defined
benefit asset is limited to the present value of economic benefits available in the form of refunds
from the plan or reductions in future contributions to the plan.
The Groups right to be reimbursed of some or all of the expenditure required to settle a defined
benefit obligation is recognized as a separate asset at fair value when and only when
reimbursement is virtually certain.
Termination benefit
Termination benefits are employee benefits provided in exchange for the termination of an
employees employment as a result of either an entitys decision to terminate an employees
employment before the normal retirement date or an employees decision to accept an offer of
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benefits in exchange for the termination of employment.
A liability and expense for a termination benefit is recognized at the earlier of when the entity can
no longer withdraw the offer of those benefits and when the entity recognizes related restructuring
costs. Initial recognition and subsequent changes to termination benefits are measured in
accordance with the nature of the employee benefit, as either post-employment benefits, short-
term employee benefits, or other long-term employee benefits.
Income Taxes
Current tax
Current tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used
to compute the amount are those that are enacted or substantively enacted at the statement of
financial position date.
Deferred tax
Deferred tax is provided using the balance sheet liability method on all temporary differences,
with certain exceptions, at the statement of financial position date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit or loss; and
In respect of taxable temporary differences associated with investments in subsidiaries,
associates and interests in joint ventures, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary differences will not reverse
in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, carryforward benefits
of unused tax credits from unused minimum corporate income tax (MCIT) over the regular
corporate income tax (RCIT) and unused net operating loss carryover (NOLCO), to the extent that
it is probable that future taxable income will be available against which the deductible temporary
differences, and the carryforward benefits of unused tax credits from excess MCIT and unused
NOLCO can be utilized, except:
Where the deferred tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the accounting profit nor future taxable
profit or loss; and
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The carrying amounts of deferred tax assets are reviewed at each statement of financial position
date and reduced to the extent that it is no longer probable that sufficient taxable income will be
available to allow all or part of the deferred tax assets to be utilized. Unrecognized deferred tax
assets are reassessed at each statement of financial position date, and are recognized to the extent
that it has become probable that future taxable income will allow the deferred tax assets to be
recognized.
Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss
in the consolidated statement of comprehensive income. Deferred tax items are recognized in
correlation to the underlying transaction either in other comprehensive income or directly in
equity.
Deferred tax assets and liabilities are measured at the tax rate that is expected to apply to the
period when the asset is realized or the liability is settled, based on tax rates (and tax laws) that
have been enacted or substantively enacted as of the statement of financial position date.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set
off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable
entity and the same taxation authority.
Borrowing Costs
Interest and other finance costs incurred during the construction period on borrowings used to
finance property development are capitalized to the appropriate asset accounts. Capitalization of
borrowing costs commences when the activities to prepare the asset are in progress, and
expenditures and borrowing costs are being incurred. The capitalization of these borrowing costs
ceases when substantially all the activities necessary to prepare the asset for sale or its intended
use are complete. If the carrying amount of the asset exceeds its recoverable amount, an
impairment loss is recorded. Capitalized borrowing cost is based on the applicable weighted
average borrowing rate. Borrowing costs which do not qualify for capitalization are expensed as
incurred.
Interest expense on loans is recognized using the EIR method over the term of the loans.
Leases
The determination of whether an arrangement is, or contains a lease, is based on the substance of
the arrangement at inception date, and requires an assessment of whether the fulfillment of the
arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a
right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
A reassessment is made after inception of the lease only if one of the following applies:
a) there is a change in contractual terms, other than a renewal or extension of the arrangement;
b) a renewal option is exercised or an extension granted, unless that term of the renewal or
extension was initially included in the lease term;
c) there is a change in the determination of whether fulfillment is dependent on a specified asset;
or
d) there is a substantial change to the asset.
Where a reassessment is made, lease accounting shall commence or cease from the date when the
change in circumstances gave rise to the reassessment for scenarios a, c or d above, and at the date
of renewal or extension period for scenario b.
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Group as a lessee
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to
ownership of the leased item, are capitalized at the commencement of the lease at the fair value of
the leased property or, if lower, at the present value of the minimum lease payments. Lease
payments are apportioned between finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
recognized in finance costs in the consolidated statement of income.
A lease is depreciated over the EUL of the asset. However, if there is no reasonable certainty that
the Group will obtain ownership by the end of the lease term, the asset is depreciated over the
shorter of the EUL of the asset and the lease term.
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are
classified as operating leases. Operating lease payments are recognized as an expense in the
consolidated statement of income on a straight-line basis over the lease term.
Group as a lessor
Leases where the Group does not transfer substantially all the risks and benefits of ownership of
the assets are classified as operating leases. Initial direct costs incurred in negotiating operating
leases are added to the carrying amount of the leased asset and recognized over the lease term on
the same basis as the rental income. Contingent rents are recognized as revenue in the period in
which they are earned.
Group companies
As of the statement of financial position date, the assets and liabilities of these subsidiaries are
translated into the presentation currency of the Group at the rate of exchange ruling at the
statement of financial position date and their respective statements of income are translated at the
weighted average exchange rates for the year. The exchange differences arising on the translation
are taken directly to a separate component of equity as Cumulative translation adjustment under
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other comprehensive income. On disposal of a foreign entity, the deferred cumulative amount
recognized in equity relating to that particular foreign operation shall be recognized in the
consolidated statement of income.
Common Stock
Capital stocks are classified as equity and are recorded at par. Proceeds in excess of par value are
recorded as Additional paid-in capital in the consolidated statement of changes in equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as
a deduction, net of tax, from the proceeds.
Retained Earnings
Retained earnings represent the cumulative balance of periodic net income/loss, dividend
distributions, prior period adjustments and effect of changes in accounting policy and capital
adjustments.
Treasury Shares
Treasury shares are recorded at cost and are presented as a deduction from equity. Any
consideration paid or received in connection with treasury shares are recognized directly in equity.
When the shares are retired, the capital stock account is reduced by its par value. The excess of
cost over par value upon retirement is debited to the following accounts in the order given: (a)
additional paid-in capital to the extent of the specific or average additional paid-in capital when
the shares were issued, and (b) retained earnings. When shares are sold, the treasury share account
is credited and reduced by the weighted average cost of the shares sold. The excess of any
consideration over the cost is credited to additional paid-in capital.
Transaction costs incurred such as registration and other regulatory fees, amounts paid to legal,
accounting and other professional advisers, printing costs and stamp duties (net of any related
income tax benefit) in relation to issuing or acquiring the treasury shares are accounted for as
reduction from equity, which is disclosed separately.
No gain or loss is recognized in the consolidated statement of income on the purchase, sale, issue
or cancellation of the Groups own equity instruments.
Diluted EPS amounts are calculated by dividing the consolidated net income attributable to equity
holders of the Parent Company by the weighted average number of ordinary shares outstanding
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during the year plus the weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into ordinary shares.
Segment Reporting
The Groups operating businesses are organized and managed separately according to the nature
of the products and services provided, with each segment representing a strategic business unit
that offers different products and serves different markets. Financial information on business
segments is presented in Note 6 to the consolidated financial statements.
PAS 16, Property, Plant and Equipment, and PAS 41, Agriculture - Bearer Plants (Amendments)
The amendments change the accounting requirements for biological assets that meet the definition
of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants
will no longer be within the scope of PAS 41. Instead, PAS 16 will apply. After initial
recognition, bearer plants will be measured under PAS 16 at accumulated cost (before maturity)
and using either the cost model or revaluation model (after maturity). The amendments also
require that produce that grows on bearer plants will remain in the scope of PAS 41 measured at
fair value less costs to sell. For government grants related to bearer plants, PAS 20, Accounting
for Government Grants and Disclosure of Government Assistance, will apply. The amendments
are retrospectively effective for annual periods beginning on or after January 1, 2016, with early
adoption permitted. These amendments are not expected to have any impact to the Group as the
Group does not have any bearer plants.
PAS 27, Separate Financial Statements - Equity Method in Separate Financial Statements
(Amendments)
The amendments will allow entities to use the equity method to account for investments in
subsidiaries, joint ventures and associates in their separate financial statements. Entities already
applying PFRS and electing to change to the equity method in its separate financial statements will
106
have to apply that change retrospectively. For first-time adopters of PFRS electing to use the
equity method in its separate financial statements, they will be required to apply this method from
the date of transition to PFRS. The amendments are effective for annual periods beginning on or
after January 1, 2016, with early adoption permitted. These amendments will not have any impact
on the Groups consolidated financial statements.
PFRS 10, Consolidated Financial Statements and PAS 28, Investments in Associates and Joint
Ventures - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
These amendments address an acknowledged inconsistency between the requirements in PFRS 10
and those in PAS 28 (2011) in dealing with the sale or contribution of assets between an investor
and its associate or joint venture. The amendments require that a full gain or loss is recognized
when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain
or loss is recognized when a transaction involves assets that do not constitute a business, even if
these assets are housed in a subsidiary. These amendments are effective from annual periods
beginning on or after 1 January 2016.
PFRS 11, Joint Arrangements - Accounting for Acquisitions of Interests in Joint Operations
(Amendments)
The amendments to PFRS 11 require that a joint operator accounting for the acquisition of an
interest in a joint operation, in which the activity of the joint operation constitutes a business must
apply the relevant PFRS 3 principles for business combinations accounting. The amendments also
clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an
additional interest in the same joint operation while joint control is retained. In addition, a scope
exclusion has been added to PFRS 11 to specify that the amendments do not apply when the
parties sharing joint control, including the reporting entity, are under common control of the same
ultimate controlling party.
The amendments apply to both the acquisition of the initial interest in a joint operation and the
acquisition of any additional interests in the same joint operation and are prospectively effective
for annual periods beginning on or after January 1, 2016, with early adoption permitted. These
amendments are not expected to have any impact to the Group.
PFRS 5, Non-current Assets Held for Sale and Discontinued Operations - Changes in Methods of
Disposal
The amendment is applied prospectively and clarifies that changing from a disposal through sale
to a disposal through distribution to owners and vice-versa should not be considered to be a new
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plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption
of the application of the requirements in PFRS 5. The amendment also clarifies that changing the
disposal method does not change the date of classification.
PAS 19, Employee Benefits - regional market issue regarding discount rate
This amendment is applied prospectively and clarifies that market depth of high quality corporate
bonds is assessed based on the currency in which the obligation is denominated, rather than the
country where the obligation is located. When there is no deep market for high quality corporate
bonds in that currency, government bond rates must be used.
PAS 34, Interim Financial Reporting - disclosure of information elsewhere in the interim
financial report
The amendment is applied retrospectively and clarifies that the required interim disclosures must
either be in the interim financial statements or incorporated by cross-reference between the interim
financial statements and wherever they are included within the greater interim financial report
(e.g., in the management commentary or risk report).
PFRS 9 (2013 version) has no mandatory effective date. The mandatory effective date of
January 1, 2018 was eventually set when the final version of PFRS 9 was adopted by the FRSC.
The adoption of the final version of PFRS 9, however, is still for approval by BOA.
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The adoption of PFRS 9 is not expected to have any significant impact on the Groups
consolidated financial statements.
PFRS 9, Financial Instruments (2014 or final version)
In July 2014, the final version of PFRS 9, Financial Instruments, was issued. PFRS 9 reflects all
phases of the financial instruments project and replaces PAS 39, Financial Instruments:
Recognition and Measurement, and all previous versions of PFRS 9. The standard introduces new
requirements for classification and measurement, impairment, and hedge accounting. PFRS 9 is
effective for annual periods beginning on or after January 1, 2018, with early application
permitted. Retrospective application is required, but comparative information is not compulsory.
Early application of previous versions of PFRS 9 is permitted if the date of initial application is
before February 1, 2015.
The adoption of PFRS 9 is not expected to have any significant impact on the Groups
consolidated financial statements.
The following new standard issued by the IASB has not yet been adopted by the FRSC
The preparation of the consolidated financial statements in compliance with PFRS requires the
management to make estimates and assumptions that affect the reported amounts of assets,
liabilities, income and expenses and disclosure of contingent assets and contingent liabilities.
Future events may occur which will cause the assumptions used in arriving at the estimates to
change. The effects of any change in estimates are reflected in the consolidated financial
statements as they become reasonably determinable.
Judgments and estimates are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
Judgments
In the process of applying the Groups accounting policies, management has made the following
judgments, apart from those involving estimations, which have the most significant effect on the
amounts recognized in the consolidated financial statements:
a. Going concern
The Groups management has made an assessment on the Groups ability to continue as a
going concern and is satisfied that the Group has the resources to continue their business for
the foreseeable future. Furthermore, management is not aware of any material uncertainties
that may cast significant doubt upon the Groups ability to continue as a going concern.
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Therefore, the consolidated financial statements continue to be prepared under the going
concern basis.
In addition, the Group classifies financial assets by evaluating, among others, whether the
asset is quoted or not in an active market. Included in the evaluation on whether a financial
asset is quoted in an active market is the determination on whether quoted prices are readily
and regularly available, and whether those prices represent actual and regularly occurring
market transactions on an arms length basis.
Where the fair values of certain financial assets and financial liabilities recorded in the
consolidated statement of financial position cannot be derived from active markets, they are
determined using internal valuation techniques using generally accepted market valuation
models. The inputs to these models are taken from observable market data where possible,
but where this is not feasible, estimates are used in establishing fair values. The judgments
include considerations of liquidity and model inputs such as correlation and volatility for
longer-dated derivatives. The fair values of the Groups derivative financial instruments are
based from quotes obtained from counterparties.
The fair values of the Groups financial instruments are disclosed in Note 5.
d. Classification of leases
Operating lease commitments - Group as lessee
Management exercises judgment in determining whether substantially all the significant risks
and rewards of ownership of the leased assets are transferred to the Group. Lease contracts,
which transfer to the Group substantially all the risks and rewards incidental to ownership of
the leased items, are capitalized. Otherwise, they are considered as operating leases.
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Accordingly, the Group accounted for the lease as operating lease.
Some properties comprise a portion that is held to earn rentals or for capital appreciation and
another portion that is held for use in the production or supply of goods or services or for
administrative purposes. If these portions cannot be sold separately, the property is accounted
for as investment property only if an insignificant portion is held for use in the production or
supply of goods or services or for administrative purposes. Judgment is applied in
determining whether ancillary services are so significant that a property does not qualify as an
investment property. The Group considers each property separately in making its judgment.
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h. Contingencies
The Group is currently involved in various legal proceedings. The estimate of the probable
costs for the resolution of these claims has been developed in consultation with outside
counsel handling the defense in these matters and is based upon an analysis of potential
results. The Group currently does not believe these proceedings will have a material effect on
the Groups financial position. It is possible, however, that future results of operations could
be materially affected by changes in the estimates or in the effectiveness of the strategies
relating to these proceedings.
Estimates
The key assumptions concerning the future and other sources of estimation uncertainty at the
financial position date that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year are discussed below.
The Group did not recognize any impairment loss on AFS financial assets in 2015, 2014 and
2013. As of September 30, 2015 and 2014, the carrying value of AFS financial assets
amounted to =
P40.9 million and =
P21.7 million, respectively (see Note 14).
The Group reviews its finance receivables at each statement of financial position date to assess
whether an impairment loss should be recorded in the consolidated statement of income. In
particular, judgment by management is required in the estimation of the amount and timing of
future cash flows when determining the level of allowance required. Such estimates are based
on assumptions about a number of factors and actual results may differ, resulting in future
changes to the allowance.
In addition to specific allowance against individually significant loans and receivables, the
Group also makes a collective impairment allowance against exposures which, although not
specifically identified as requiring a specific allowance, have a greater risk of default than
when originally granted.
This collective allowance is based on any deterioration in the internal rating of the loan or
investment since it was granted or acquired. These internal ratings take into consideration
112
factors such as any deterioration in risk, industry, and technological obsolescence, as well as
identified structural weaknesses or deterioration in cash flows.
The amount and timing of recorded expenses for any period would differ if the Group made
different judgments or utilized different estimates. An increase in the allowance for
impairment losses on trade and other receivables would increase recorded operating expenses
and decrease current assets.
Provision for impairment losses on receivables (included under Impairment losses in the
consolidated statements of income) amounted to = P5.3 million, =
P13.2 million and
P
=0.2 million in 2015, 2014 and 2013, respectively. Total receivables, net of allowance for
impairment losses, amounted to =P10.8 billion and P
=9.3 billion as of September 30, 2015 and
2014, respectively (see Note 10).
The Group reviews the classification of the inventories and generally provides adjustments for
recoverable values of new, actively sold and slow-moving inventories by reference to
prevailing values of the same inventories in the market.
The amount and timing of recorded expenses for any period would differ if different
judgments were made or different estimates were utilized. An increase in inventory
obsolescence and market decline would increase recorded operating expenses and decrease
current assets.
Inventory written down as expense (included under the Cost of sales in the consolidated
statements of income) amounted to =P 578.6 million, =
P377.6 million and =
P726.1 million in
2015, 2014 and 2013, respectively (see Note 11).
The Group recognized impairment losses on its inventories amounting to = P104.6 million,
P
=103.9 million and = P28.7 million in 2015, 2014 and 2013, respectively. The Groups
inventories, net of inventory obsolescence and market decline, amounted to =
P16.0 billion and
P
=15.1 billion for September 30, 2015 and 2014, respectively (see Note 11).
d. EUL of property, plant and equipment and investment properties, intangible assets with finite
life and biological assets
The Group estimates the useful lives of its property, plant and equipment and investment
properties based on the period over which the assets are expected to be available for use. The
EUL of property, plant and equipment and investment properties are reviewed at least
annually and are updated if expectations differ from previous estimates due to physical wear
and tear and technical or commercial obsolescence on the use of these assets. It is possible
that future results of operations could be materially affected by changes in these estimates
brought about by changes in factors mentioned above. A reduction in the EUL of property,
plant and equipment and investment properties would increase depreciation expense and
decrease noncurrent assets.
The EUL of biological assets is reviewed annually based on expected utilization as anchored
on business plans and strategies that considers market behavior to ensure that the period of
depreciation is consistent with the expected pattern of economic benefits from items of
biological assets.
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The Group estimates the useful lives of intangible assets with finite life based on the expected
pattern of consumption of future economic benefits embodied in the asset.
As of September 30, 2015 and 2014, the carrying amounts of the Groups depreciable assets
follow:
2015 2014
Property, plant and equipment - net (Note 13) P
=29,696,297,832 =24,936,586,545
P
Software costs and customer relationship (Note 16) 1,859,966,330
Biological assets - breeders (Note 15) 444,722,865 455,817,612
Investment properties - net (Note 18) 53,518,151 57,175,938
As of September 30, 2015 and 2014, the Groups biological assets carried at fair values
less estimated costs to sell amounted to P
=1.5 billion and P
=1.6 billion, respectively
(see Note 15). Gains arising from changes in the fair market value of biological assets
amounted to =P109.2 million, = P183.0 million and =P69.9 million in 2015, 2014 and 2013,
respectively (see Note 15).
The factors that the Group considers important which could trigger an impairment review
include the following:
The Group determines an impairment loss whenever the carrying amount of an asset exceeds
its recoverable amount. The recoverable amount has been determined based on value in use
calculations. The cash flows are derived from the budget for the next five years and do not
include restructuring activities that the Group is not yet committed to or significant future
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investments that will enhance the asset base of the cash-generating unit being tested.
The recoverable amount is most sensitive to the discount rate used for the discounted cash
flow model as well as the expected future cash inflows and the growth rate used for
extrapolation purposes.
In the case of goodwill and intangible assets with indefinite lives, at a minimum, such assets
are subject to an annual impairment test and more frequently whenever there is an indication
that such asset may be impaired. This requires an estimation of the value in use of the cash-
generating units to which the goodwill is allocated. Estimating the value in use requires the
Group to make an estimate of the expected future cash flows from the cash-generating unit
and to choose a suitable discount rate in order to calculate the present value of those cash
flows.
In 2015, 2014 and 2013, the Group did not recognize any impairment losses on its property,
plant and equipment (see Note 13) and its other intangible assets (see Note 16). In 2015,
2014, and 2013 the Group recognized impairment losses on its goodwill (included under
Impairment losses on the consolidated statements of income) amounting to nil, P =5.2 million
and nil,respectively (see Note 16).
As of September 30, 2015 and 2014, the balances of the Groups nonfinancial assets, net of
accumulated depreciation, amortization and impairment losses follow:
2015 2014
Property, plant and equipment (Note 13) P
=38,831,973,783 =34,407,755,976
P
Goodwill (Note 16) 14,706,811,446 793,415,185
Intangible assets (Note 16) 7,281,943,040 475,000,000
Biological assets at cost (Note 15) 91,080,091 122,829,660
Investment in joint ventures (Note 17) 494,242,502 441,223,735
Investment properties (Note 18) 53,518,151 57,175,938
As of September 30, 2015 and 2014, the balances of the Groups net pension liability and
other employee benefits follow:
In determining the appropriate discount rate, management considers the interest rates of
government bonds that are denominated in the currency in which the benefits will be paid,
with extrapolated maturities corresponding to the expected duration of the defined benefit
obligation.
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The mortality rate is based on publicly available mortality tables for the specific country and
is modified accordingly with estimates of mortality improvements. Future salary increases
and pension increases are based on expected future inflation rates for the specific country.
Further details about the assumptions used are provided in Note 32.
As of September 30, 2015 and 2014, the Group recognized deferred tax assets amounting to
P
=597.6 million and = P404.4 million, respectively (see Note 33), as the Group believes
sufficient taxable income will allow these deferred tax assets to be utilized.
As of September 30, 2015 and 2014, the Group has certain subsidiaries which are under ITH.
As such, no deferred tax assets were set up on certain gross deductible temporary differences
that are expected to reverse or expire within the ITH period (see Note 36).
As of September 30, 2015 and 2014, the total amount of unrecognized deferred tax assets of
the Group amounted to = P148.7 million and = P47.6 million, respectively (see Note 33).
The Groups principal financial instruments, other than derivative financial instruments, comprise
cash and cash equivalents, financial assets at FVPL, AFS financial assets, and interest-bearing
loans and other borrowings. The main purpose of these financial instruments is to finance the
Groups operations and related capital expenditures. The Group has various other financial assets
and financial liabilities, such as trade receivables and payables which arise directly from its
operations. One of the Groups subsidiaries is a counterparty to derivative contracts. These
derivatives are entered into as a means of reducing or managing their respective foreign exchange
and interest rate exposures, as well as for trading purposes.
The BOD of the Parent Company and its subsidiaries review and approve policies for managing
each of these risks and they are summarized below, together with the related risk management
structure.
The risk management framework encompasses environmental scanning, the identification and
assessment of business risks, development of risk management strategies, design and
implementation of risk management capabilities and appropriate responses, monitoring risks and
risk management performance, and identification of areas and opportunities for improvement in
the risk management process.
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Each BOD has created the board-level Audit Committee (AC) to spearhead the managing and
monitoring of risks.
AC
The AC shall assist the Groups BOD in its fiduciary responsibility for the over-all effectiveness
of risk management systems, and both the internal and external audit functions of the Group.
Furthermore, it is also the ACs purpose to lead in the general evaluation and to provide assistance
in the continuous improvements of risk management, control and governance processes.
a. financial reports comply with established internal policies and procedures, pertinent
accounting and auditing standards and other regulatory requirements;
b. risks are properly identified, evaluated and managed, specifically in the areas of managing
credit, market, liquidity, operational, legal and other risks, and crisis management;
c. audit activities of internal and external auditors are done based on plan, and deviations are
explained through the performance of direct interface functions with the internal and external
auditors; and
d. the Groups BOD is properly assisted in the development of policies that would enhance the
risk management and control systems.
1. Risk-taking personnel. This group includes line personnel who initiate and are directly
accountable for all risks taken.
2. Risk control and compliance. This group includes middle management personnel who
perform the day-to-day compliance check to approved risk policies and risk mitigation
decisions.
3. Support. This group includes back office personnel who support the line personnel.
4. Risk management. This group pertains to the business units Management Committee which
makes risk mitigating decisions within the enterprise-wide risk management framework.
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Enterprise Resource Management (ERM) Framework
The Parent Companys BOD is also responsible for establishing and maintaining a sound risk
management framework and is accountable for risks taken by the Parent Company. The Parent
Companys BOD also shares the responsibility with the ERMG in promoting the risk awareness
program enterprise-wide.
The ERM framework revolves around the following eight interrelated risk management
approaches:
1. Internal Environmental Scanning. It involves the review of the overall prevailing risk profile
of the business unit to determine how risks are viewed and addressed by management. This is
presented during the strategic planning, annual budgeting and mid-year performance reviews
of the Group.
2. Objective Setting. The Groups BOD mandates the business units management to set the
overall annual targets through strategic planning activities, in order to ensure that management
has a process in place to set objectives which are aligned with the Groups goals.
3. Event Identification. It identifies both internal and external events affecting the Groups set
targets, distinguishing between risks and opportunities.
4. Risk Assessment. The identified risks are analyzed relative to the probability and severity of
potential loss which serves as a basis for determining how the risks should be managed. The
risks are further assessed as to which risks are controllable and uncontrollable, risks that
require managements attention, and risks which may materially weaken the Groups earnings
and capital.
5. Risk Response. The Groups BOD, through the oversight role of the ERMG, approves the
business units responses to mitigate risks, either to avoid, self-insure, reduce, transfer or share
risk.
6. Control Activities. Policies and procedures are established and approved by the Groups BOD
and implemented to ensure that the risk responses are effectively carried out enterprise-wide.
7. Information and Communication. Relevant risk management information are identified,
captured and communicated in form and substance that enable all personnel to perform their
risk management roles.
8. Monitoring. The ERMG, Internal Audit Group, Compliance Office and Business Assessment
Team constantly monitor the management of risks through risk limits, audit reviews,
compliance checks, revalidation of risk strategies and performance reviews.
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procurement of performance bonds.
Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation
and cause the other party to incur a financial loss. The Group trades only with recognized and
creditworthy third parties. It is the Groups policy that all customers who wish to trade on credit
terms are subject to credit verification procedures. The Credit and Accounts Receivable
Monitoring Department (CARMD) of the Group continuously provides credit notification and
implements various credit actions, depending on assessed risks, to minimize credit exposure.
Receivable balances of trade customers are being monitored on a regular basis and appropriate
credit treatments are executed for overdue accounts. Likewise, other receivable balances are also
being monitored and subjected to appropriate actions to manage credit risk.
With respect to credit risk arising from the other financial assets of the Group, which comprise
cash and cash equivalents, financial assets at FVPL, AFS financial assets and certain derivative
financial instruments, the Groups exposure to credit risk arises from default of the counterparty
with a maximum exposure equal to the carrying amount of these instruments.
With respect to credit risk arising from financial assets of the Group, which comprises cash
and cash equivalents, receivables, financial assets at FVPL and AFS financial assets, the
Groups maximum exposure to credit risk is equal to its carrying amount as of
September 30, 2015 and 2014, except for the Groups trade receivables as of
September 30, 2015 with carrying value of P =1.32 billion and collateral with fair value
amounting to =P0.05 billion, resulting to net exposure of P=1.27 billion.
The Group holds no other collateral or guarantee that would reduce the maximum exposure to
credit risk.
119
In order to avoid excessive concentrations of risk, identified concentrations of credit risks are
controlled and managed accordingly.
The Groups credit risk exposures as of September 30, 2015 and 2014 before taking into
account any collateral held or other credit enhancements are categorized by geographic
location follows:
2015
Philippines Asia New Zealand United States Others* Total
Loans and receivables:
Cash and cash equivalents
(excluding
cash on hand, see Note 7) P
=14,586,246,064 P
=2,982,435,008 P
=637,419,508 P
= P
= P
=18,206,100,580
Receivables (Note 10):
Trade receivables 4,578,660,481 2,328,449,736 1,127,044,518 23,839,533 14,366,392 8,072,360,660
Due from related parties 1,564,936,668 1,564,936,668
Advances to officers,
employees and
suppliers 649,890,023 412,986,349 1,062,876,372
Interest receivable 17,931,420 17,931,420
Other receivables 28,709,343 86,233,150 176,581 115,119,074
Total loans and receivable 21,426,373,999 5,810,104,243 1,764,464,026 23,839,533 14,542,973 29,039,324,774
Financial assets at FVPL:
Equity securities (Note 8): 401,701,602 401,701,602
AFS financial assets:
Equity securities (Note 14) 40,880,000 40,880,000
P
=21,868,955,601 P
=5,810,104,243 P
=1,764,464,026 P
=23,839,533 P
=14,542,973 P
=29,481,906,376
*Includes Brazil and Mexico.
2014
Philippines Asia United States Others* Total
Loans and receivables:
Cash and cash equivalents (excluding
cash on hand, see Note 7) =
P8,250,268,799 =
P1,775,589,353 =
P =
P =
P10,025,858,152
Receivables (Note 9):
Trade receivables 3,835,384,742 2,657,848,738 12,833,312 10,194,110 6,516,260,902
Due from related parties 1,447,647,173 1,447,647,173
Advances to officers, employees and
suppliers 684,164,665 327,825,430 1,011,990,095
Interest receivable 8,026,469 8,026,469
Other receivables 230,508,793 104,768,271 335,277,064
Total loans and receivable 14,456,000,641 4,866,031,792 12,833,312 10,194,110 19,345,059,855
Financial assets at FVPL:
Equity securities (Note 8): 476,260,026 476,260,026
AFS financial assets:
Equity securities (Note 14) 21,720,000 21,720,000
=
P14,953,980,667 =
P4,866,031,792 =
P12,833,312 =
P10,194,110 =
P19,843,039,881
*Includes Brazil and Mexico.
120
ii. Concentration by industry
The tables below show the industry sector analysis of the Groups financial assets as of
September 30, 2015 and 2014 before taking into account any collateral held or other credit
enhancements.
2015
Financial Tele-
Manufacturing Intermediaries Petrochemicals Communication Mining Others* Total
Loans and receivables:
Cash and cash equivalents
(excluding cash on hand,
see Note 7) = P
P =18,206,100,580 =
P =
P =
P = P
P =18,206,100,580
Receivables (Note 10):
Trade receivables 7,279,822,819 450,809,157 341,728,684 8,072,360,660
Due from related parties 393,739,248 47,311,992 1,123,885,428 1,564,936,668
Advances to officers,
employees and
suppliers 1,004,436,262 58,440,110 1,062,876,372
Interest receivable 159,128 17,772,292 17,931,420
Other receivables 74,924,648 12,851,097 27,343,329 115,119,074
Total loans and receivables 8,753,082,105 18,271,184,864 450,809,157 12,851,097 1,551,397,551 29,039,324,774
Financial assets at FVPL:
Equity securities (Note 8) 400,273 401,301,329 401,701,602
AFS financial assets:
Equity securities (Note 14) 40,880,000 40,880,000
P8,753,082,105 P
= = 18,271,184,864 = 450,809,157
P = 12,851,097
P =400,273
P =1,993,578,880 P
P = 29,481,906,376
*Includes real state, agriculture, automotive, and electrical industries.
2014
Financial Tele-
Manufacturing Intermediaries Petrochemicals Communication Mining Others* Total
Loans and receivables:
Cash and cash equivalents
(excluding cash on hand,
see Note 7) = P
P =10,025,858,152 =
P =
P =
P = P
P =10,025,858,152
Receivables (Note 10):
Trade receivables 5,728,663,120 448,364,902 339,232,880 6,516,260,902
Due from related parties 319,429,680 37,778,902 1,090,438,591 1,447,647,173
Advances to officers,
employees and
suppliers 935,090,459 76,899,636 1,011,990,095
Interest receivable 380,245 7,646,224 8,026,469
Other receivables 220,803,816 153,855 13,567,446 100,751,947 335,277,064
Total loans and receivables 7,204,367,320 10,071,437,133 448,364,902 13,567,446 1,607,323,054 19,345,059,855
Financial assets at FVPL:
Equity securities (Note 8) 646,817 475,613,209 476,260,026
AFS financial assets:
Equity securities (Note 14) 21,720,000 21,720,000
=7,204,367,320 P
P =10,071,437,133 =448,364,902
P =13,567,446
P =646,817
P =2,104,656,263
P =19,843,039,881
P
*Includes real state, agriculture, automotive, and electrical industries.
The tables below show the credit quality by class of financial assets as of September 30, 2015
and 2014, gross of allowance for impairment losses:
2015
Neither Past Due Nor Impaired Past Due or
Substandard Individually
High Grade Standard Grade Grade Impaired Total
Loans and receivables:
Cash and cash equivalents (excluding
cash on hand, see Note 7) P
= 18,206,100,580 =
P =
P =
P P
= 18,206,100,580
Receivables (Note 10):
Trade receivables 5,866,721,181 488,520,367 280,878,532 1,622,249,772 8,258,369,852
Due from related parties 1,564,936,668 1,564,936,668
Advances to officers, employees and
suppliers 624,914,441 289,074,210 77,453,777 91,080,626 1,082,523,054
Interest receivable 17,931,420 17,931,420
Other receivables 45,743,090 19,116,776 219,310,080 284,169,946
Total loans and receivables 26,326,347,380 796,711,353 358,332,309 1,932,640,478 29,414,031,520
Financial assets at FVPL (Note 8):
Equity securities 401,701,602 401,701,602
AFS financial assets:
Equity securities (Note 14) 40,880,000 40,880,000
P
= 26,768,928,982 P
= 796,711,353 P
= 358,332,309 P
= 1,932,640,478 P
= 29,856,613,122
121
2014
Neither Past Due Nor Impaired Past Due or
Substandard Individually
High Grade Standard Grade Grade Impaired Total
Loans and receivables:
Cash and cash equivalents (excluding
cash on hand, see Note 7) =
P10,025,858,152 =
P =
P =
P =
P10,025,858,152
Receivables (Note 10):
Trade receivables 5,237,156,542 532,153,576 144,403,370 790,105,136 6,703,818,624
Due from related parties 1,447,647,173 1,447,647,173
Advances to officers, employees and
suppliers 347,674,299 602,085,823 8,822,306 73,054,349 1,031,636,777
Interest receivable 8,026,469 8,026,469
Other receivables 72,312,328 115,916,485 75,748,013 240,383,014 504,359,840
Total loans and receivables 17,138,674,963 1,250,155,884 228,973,689 1,103,542,499 19,721,347,035
Financial assets at FVPL (Note 8):
Equity securities 476,260,026 476,260,026
AFS financial assets:
Equity securities (Note 14) 21,720,000 21,720,000
=
P17,636,654,989 P
=1,250,155,884 =
P228,973,689 P
=1,103,542,499 =
P20,219,327,061
High grade cash and cash equivalents are short-term placements and working cash fund
placed, invested, or deposited in foreign and local banks belonging to the top ten (10) banks,
including an affiliated bank, in the Philippines in terms of resources and profitability.
Other high grade accounts are accounts considered to be high value. The counterparties have
a very remote likelihood of default and have consistently exhibited good paying habits.
Standard grade accounts are active accounts with minimal to regular instances of payment
default, due to ordinary/common collection issues. These accounts are typically not impaired
as the counterparties generally respond to credit actions and update their payments
accordingly. Substandard grade accounts are accounts which have probability of impairment
based on historical trend. These accounts show propensity to default in payment despite
regular follow-up actions and extended payment terms.
d. Aging analysis
2014
Past Due Nor Impaired Impaired
Less than 30 to 60 60 to 90 Over 90 Financial
30 Days Days Days Days Assets Total
Trade receivables =
P137,298,058 =
P92,711,054 =
P40,910,530 =
P331,627,772 =
P187,557,722 =
P790,105,136
Advances to officers, employees
and suppliers 7,409,140 4,445,031 202,818 41,350,678 19,646,682 73,054,349
Others 42,942,969 8,884,823 192,570 19,279,876 169,082,776 240,383,014
Balances at end of year =
P187,650,167 =
P106,040,908 =
P41,305,918 =
P392,258,326 =
P376,287,180 P
=1,103,542,499
e. Impairment assessment
The Group recognizes impairment losses based on the results of the specific/individual and
collective assessment of its credit exposures. Impairment has taken place when there is a
presence of known difficulties in the servicing of cash flows by counterparties, infringement
122
of the original terms of the contract has happened, or when there is an inability to pay
principal or interest overdue beyond a certain threshold. These and the other factors, either
singly or in tandem with other factors, constitute observable events and/or data that meet the
definition of an objective evidence of impairment.
The two methodologies applied by the Group in assessing and measuring impairment include:
(1) specific/individual assessment; and (2) collective assessment.
Under specific/individual assessment, the Group assesses each individually significant credit
exposure for any objective evidence of impairment, and where such evidence exists,
accordingly calculates the required impairment.
Among the items and factors considered by the Group when assessing and measuring specific
impairment allowances are: (a) the timing of the expected cash flows; (b) the projected
receipts or expected cash flows; (c) the going concern of the counterpartys business; (d) the
ability of the counterparty to repay its obligations during financial crisis; (e) the availability of
other sources of financial support; and (f) the existing realizable value of collateral.
The impairment allowances, if any, are evaluated as the need arises, in view of favorable or
unfavorable developments.
With regard to the collective assessment of impairment, allowances are assessed collectively
for losses on receivables that are not individually significant and for individually significant
receivables when there is no apparent or objective evidence of individual impairment. A
particular portfolio is reviewed on a periodic basis, in order to determine its corresponding
appropriate allowances. The collective assessment evaluates and estimates the impairment of
the portfolio in its entirety even though there is no objective evidence of impairment on an
individual assessment. Impairment losses are estimated by taking into consideration the
following deterministic information: (a) historical losses/write offs; (b) losses which are likely
to occur but has not yet occurred; and (c) the expected receipts and recoveries once impaired.
Liquidity risk
Liquidity risk is the risk of not being able to meet funding obligation such as the repayment of
liabilities or payment of asset purchases as they fall due. The Groups liquidity management
involves maintaining funding capacity to finance capital expenditures and service maturing debts,
and to accommodate any fluctuations in asset and liability levels due to changes in the Groups
business operations or unanticipated events created by customer behavior or capital market
conditions. The Group maintains a level of cash and cash equivalents deemed sufficient to finance
its operations. It also maintains a portfolio of highly marketable and diverse financial assets that
assumed to be easily liquidated in the event of an unforeseen interruption of cash flow. The
Group also has committed lines of credit that it can access to meet liquidity needs. As part of its
liquidity risk management, the Group regularly evaluates its projected and actual cash flows. It
also continuously assesses conditions in the financial markets for opportunities to pursue fund
raising activities. Fund raising activities may include obtaining bank loans and capital market
issues both onshore and offshore.
123
Maturity Profile of Financial Assets and Liabilities
The tables below summarize the maturity profile of the Groups financial assets and liabilities as
of September 30, 2015 and 2014 based on the remaining undiscounted contractual cash flows.
2015
1 to 3 3 to 12 1 to 5
On Demand Months Months Years Total
Financial Assets
Loans and receivables:
Cash and cash equivalents P
= 3,299,290,307 P
= 15,904,834,488 P
= 250,345,829 = P
P = 19,454,470,624
Receivables:
Trade receivables 2,573,738,148 5,498,622,512 8,072,360,660
Due from related parties 836,828,025 728,108,643 1,564,936,668
Advances to officers, employees
and suppliers 712,380,431 215,995,236 134,500,705 1,062,876,372
Interest receivable 20,389 17,911,031 17,931,420
Other receivables 42,835,531 65,866,307 22,644,962 131,346,800
Total loans and receivables 7,465,092,831 21,703,229,574 1,135,600,139 30,303,922,544
Financial assets at FVPL
Equity securities 401,701,602 401,701,602
AFS financial asset:
Equity securities 40,880,000 40,880,000
P
= 7,907,674,433 P
= 21,703,229,574 P
= 1,135,600,139 P P
= = 30,746,504,146
Financial Liabilities
Financial liabilities at amortized cost:
Accounts payable and other accrued
liabilities:
Trade payable and accrued
expenses* P
= 4,099,883,080 P
= 7,930,853,797 P
= 432,028,780 P P
= = 12,462,765,657
Due to related parties 73,127,178 73,127,178
Short-term debt 846,831,629 846,831,629
Trust receipts and acceptances
payable 638,925,460 4,009,242,114 4,648,167,574
Long-term debt 252,754,218 758,262,656 25,461,518,207 26,472,535,081
Derivative liability 151,646,715 151,646,715
P
= 4,173,010,258 P
= 9,669,365,104 P
= 5,199,533,550 P
= 25,613,164,922 P
= 44,655,073,834
*Excludes statutory liabilities
2014
1 to 3 3 to 12 1 to 5
On Demand Months Months Years Total
Financial Assets
Loans and receivables:
Cash and cash equivalents P
=1,444,986,811 P
=8,636,726,908 =
P = P
P = 10,081,713,719
Receivables:
Trade receivables 3,329,329,384 3,186,931,518 6,516,260,902
Due from related parties 1,447,647,173 1,447,647,173
Advances to officers, employees
and suppliers 268,953,399 674,403,930 68,632,766 1,011,990,095
Interest receivable 8,026,469 8,026,469
Other receivables 247,470,102 50,333,552 37,473,410 335,277,064
Total loans and receivables 6,738,386,869 12,556,422,377 106,106,176 19,400,915,422
Financial assets at FVPL
Equity securities 476,260,026 476,260,026
AFS financial assets
Equity securities 21,720,000 21,720,000
P
=7,236,366,895 P
=12,556,422,377 P
=106,106,176 = P
P =19,898,895,448
Forward
124
2014
1 to 3 3 to 12 1 to 5
On Demand Months Months Years Total
Financial Liabilities
Financial liabilities at amortized cost:
Accounts payable and other accrued
liabilities:
Trade payable and accrued
expenses* P
=5,001,928,540 P
=5,773,851,880 P
=151,496,789 = P
P =10,927,277,209
Due to related parties 69,385,015 69,385,015
Short-term debt 4,348,431,109 4,348,431,109
Trust receipts and acceptances
payable 75,291,275 2,255,008,961 2,107,074,035 4,437,374,271
P
=5,146,604,830 P
=12,377,291,950 P
=2,258,570,824 = P
P =19,782,467,604
*Excludes statutory liabilities
Market risk
Market risk is the risk of loss to future earnings, to fair value or future cash flows of a financial
instrument as a result of changes in its price, in turn caused by changes in interest rates, foreign
currency exchange rates, equity prices and other market factors.
The Group has transactional currency exposures. Such exposures arise from sales and purchases
in currencies other than the entities functional currency. As of September 30, 2015, 2014 and
2013, approximately 30.4%, 25.7% and 27.2% of the Groups total sales are denominated in
currencies other than the functional currency. In addition, 16.90% and 50.48% of the Groups
debt is denominated in US Dollars as of September 30, 2015 and 2014, respectively. The Groups
capital expenditures are likewise substantially denominated in US Dollar.
The tables below summarize the Groups exposure to foreign currency risk:
2015
NZ Dollar US Dollar Others* Total
Assets
Cash and cash equivalents P
=637,513,689 P
=7,884,807,309 P
=26,319,675 P
=8,548,640,673
Receivables 1,127,044,518 2,348,582,235 32,689,484 3,508,316,237
1,764,558,207 10,233,389,544 59,009,159 12,056,956,910
Liabilities
Accounts payable and other accrued
liabilities 1,009,707,580 1,009,707,580
Short-term debt 845,285,468 845,285,468
Trust receipts 4,620,725,913 4,620,725,913
Long-term debt 21,869,680,961 21,869,680,961
22,879,388,541 4,620,725,913 845,285,468 28,345,399,922
Net Foreign Currency-Denominated
Assets (Liabilities) (P
=21,114,830,334) P
=5,612,663,631 (P
=786,276,309) (P
=16,288,443,012)
*Other currencies include Singapore Dollar, Thai Baht, Chinese Yuan, Malaysian Ringgit, Indonesian Rupiah and Vietnam Dong
125
2014
NZ Dollar US Dollar Others Total
Assets
Cash and cash equivalents =
P P
=4,162,931,749 =
P P
=4,162,931,749
Receivables 307,058,458 307,058,458
4,469,990,207 4,469,990,207
Liabilities
Accounts payable and other accrued
liabilities 32,292,224 32,292,224
Short-term debt 3,496,301,000 831,689,825 4,327,990,825
Trust receipts 4,412,695,949 4,412,695,949
3,528,593,224 4,412,695,949 831,689,825 8,772,978,998
Net Foreign Currency-Denominated
Assets (Liabilities) (P
=3,528,593,224) P
=57,294,258 (P
=831,689,825) (P
=4,302,988,791)
*Other currencies include Singapore Dollar, Thai Baht, Chinese Yuan, Malaysian Ringgit, Indonesian Rupiah and Vietnam Dong
The following tables set forth the impact of the range of reasonably possible changes in the
US Dollar and Euro - Philippine Peso exchange rate on the Groups income before income tax as
of September 30, 2015 and 2014:
2015
Reasonably possible change in unit of Philippine
peso for every unit of foreign currency US Dollar NZ Dollar
=5.00
P P
=600,413,311 (P
=3,533,543,468)
(5.00) (600,413,311) 3,533,543,468
2014
Reasonably possible change in unit of Philippine
peso for every unit of foreign currency US Dollar NZ Dollar
=5.00
P P6,383,761
= (P
=499,999,870)
(5.00) (6,383,761) 499,999,870
The impact of the range of reasonably possible changes in the exchange rates of the other
currencies against the Philippine Peso on the Groups income before income tax as of
September 30, 2015 and 2014 are deemed immaterial.
The exchange rates used to restate the US dollar-denominated financial assets and liabilities were
P
=46.74 to US$1.00 and = P44.88 to US$1.00 as of September 30, 2015 and 2014, respectively. The
exchange rates used to restate the NZ dollar-denominated financial liabilities were P
=29.90 to
NZ$1.00 and =P34.96 to NZ$1.00 as of September 30, 2015 and 2014, respectively.
The table below shows the effect on equity as a result of a change in the fair value of equity
instruments held as financial assets at FVPL investments due to reasonably possible changes in
equity indices:
2015 2014
Changes in PSEi 12.18% (12.18%) 12.40% (12.40%)
Change in trading gain at equity portfolio (27,469,625) 27,469,625 43,182,845 (43,182,845)
As a percentage of the Parent Companys
trading gain for the year 271.67% (271.67%) 144.79% (144.79%)
126
The Groups investment in golf shares designated as AFS financial assets are susceptible to
market price risk arising from uncertainties about future values of the investment security. The
Groups estimates an increase of 1.00% in 2015 and 2014 would have an impact of approximately
0.41 million and 0.22 million on equity, respectively. An equal change in the opposite direction
would have decreased equity by the same amount.
127
The following tables show information about the Groups financial instruments that are exposed to interest rate risk and presented by maturity profile:
2015
Debt
Issuance
Total Costs Carrying Value
(in Philippine (in Philippine (in Philippine
<1 year >1-<2 years >2-<3 years >3-<4 years >4-<5 years Total Peso) Peso) Peso)
Liabilities:
Foreign currencies:
Floating rate
New Zealand Dollar loans NZ$33,808,466 NZ$33,552,823 NZ$33,552,823 NZ$33,552,823 NZ$750,776,244 NZ$885,243,179 = 22,198,497,235
P = 328,816,274 P
P = 21,869,680,961
Interest rate:
NZ BKBM+1.60%
Fixed rate:
Thailand Baht loans THB657,800,000 THB THB THB THB THB657,800,000 845,285,468 845,285,468
Interest rate:
2.21% to 2.25%
Trust receipt and
128
acceptances payable USD98,860,204 USD USD USD USD USD98,860,204 4,620,725,913 4,620,725,913
Interest rate:
0.993% to 1.057%
= 27,664508,616
P = 328,816,274 P
P = 27,335,692,342
2014
Debt
Total Issuance Costs Carrying Value
(in Philippine (in Philippine (in Philippine
<1 year >1-<2 years >2-<3 years >3-<4 years >4-<5 years Total Peso) Peso) Peso)
Liabilities:
Foreign currencies:
Fixed rate:
New Zealand Dollar Loan NZ$100,000,000 NZ$ NZ$ NZ$ NZ$ NZ$100,000,000 =3,496,301,000
P =
P =3,496,301,000
P
Interest rate:
4.75%
Thailand Baht loans THB600,800,000 THB THB THB THB THB600,800,000 831,689,825 831,689,825
Interest rate:
2.62%
Trust receipt and
acceptances payable USD98,333,057 USD USD USD USD USD98,333,057 4,412,695,949 4,412,695,949
Interest rate:
0.925% to 1.003%
=8,740,686,774
P =
P =8,740,686,774
P
129
5. Fair Value Measurement
The following methods and assumptions were used to estimate the fair value of each asset and
liability for which it is practicable to estimate such value:
Cash and cash equivalents, receivables (except amounts due from and due to related parties),
accounts payable and other accrued liabilities, short-term debt, and trust receipts and
acceptances payable
Carrying amounts approximate their fair values due to the relatively short-term maturities of these
instruments.
Biological assets
Swine livestock are measured at their fair values less costs to sell. The fair values are determined
based on current market prices of livestock of similar age, breed and genetic merit. Costs to sell
include commissions to brokers and dealers, nonrefundable transfer taxes and duties. Costs to sell
exclude transport and other costs necessary to get the biological assets to the market.
Investment properties
Fair value of investment properties are based on cost method. Under this approach, an estimate is
made of the current Cost of Replacement, New of the buildings and other land improvements in
accordance with prevailing market prices for materials, labor, and contractors overhead, profit,
and fees. Adjustments are then made to reflect depreciation resulting from physical deterioration,
functional, and economic obsolescence based on personal inspection of the buildings and other
land improvements and in comparison with similar new properties.
The fair values of the Groups investment properties have been determined by appraisers,
including independent external appraisers, based on the analysis of the buildings and other land
improvements by breaking them down into major components such as foundation, columns,
beams, floorings, wall, roofing, and others using workable units as lineal meter, square meter, and
other appropriate basic unit. Equally given importance are the interior finishes. Bills of quantities
for each building component using the appropriate basic unit are prepared and related to the unit
cost for each component developed based on current market prices.
The Group has determined that the highest and best use of the building and building improvement
classified as investment properties is its current use.
Long-term debt
The fair value of long-term debt is based on the discounted value of future cash flows (interests
and principal) using market rates plus a certain spread.
130
Derivative liability
The fair values of forward exchange derivatives are calculated by reference to the prevailing
interest differential and spot exchange rate as of valuation date, taking into account the remaining
term-to-maturity of the forwards.
2015
Carrying Value Level 1 Level 2 Level 3 Total Fair value
Assets measured
at fair value
Financial assets at FVPL:
Quoted equity
securities P
= 401,701,602 P
= 401,701,602 =
P =
P P
= 401,701,602
AFS financial assets
Quoted equity
securities 40,880,000 40,880,000 40,880,000
Biological assets 1,531,250,635 1,531,250,635 1,531,250,635
Assets for which fair
values are disclosed
Investment
properties 53,518,151 232,236,000 232,236,000
P
= 2,027,350,388 P
= 442,581,602 P
= 1,531,250,635 P
= 232,236,000 P
= 2,206,068,237
Liabilities measured
at fair value
Derivative liabilities P
= 151,646,715 =
P P
= 151,646,715 =
P P
= 151,646,715
Liabilitiess for which fair
values are disclosed
Long-term debt 21,869,680,961 18,783,334,230 18,783,334,230
P
= 22,021,327,676 =
P P
= 151,646,715 P
= 18,783,334,230 P
= 18,934,980,945
2014
Carrying Value Level 1 Level 2 Level 3 Total Fair value
Assets measured at
fair value
Financial assets at
FVPL:
Quoted equity
securities P
=476,260,026 P
=476,260,026 =
P =
P P
=476,260,026
AFS financial assets
Quoted equity
securities 21,720,000 21,720,000 21,720,000
Biological assets 1,611,292,270 1,611,292,270 1,611,292,270
Assets for which fair
values are
disclosed
Investment
properties 57,175,938 232,236,000 232,236,000
P
=2,166,448,234 P
=497,980,026 P
=1,611,292,270 P
=232,236,000 P
=2,341,508,296
131
In 2015 and 2014, there were no transfers between Level 1 and Level 2 fair value measurements.
Non-financial assets determined under Level 3 include investment properties. No transfers
between any level of the fair value hierarchy took place in the equivalent comparative period.
Significant Unobservable
Account Valuation Technique Inputs
Replacement cost and
Investment properties Cost method depreciation for improvements
Significant increases (decreases) in adjustments for replacement cost and depreciation for
improvements would result in a significantly higher (lower) fair value of the properties.
Replacement cost Estimated amount of money needed to replace in like kind and
in new condition an asset or group of assets, taking into
consideration current prices of materials, labor, contractors
overhead, profit and fees, and all other attendant costs
associated with its acquisition and installation in place without
provision for overtime or bonuses for labor, and premiums for
materials.
Depreciation Depreciation as evidenced by the observed condition in
comparison with new units of like kind tempered by
consideration given to extent, character, and utility of the
property which is to be continued in its present use as part of a
going concern but without specific relations to earnings.
The Groups operating segments are organized and managed separately according to the nature of
the products and services provided, with each segment representing a strategic business unit that
offers different products and serves different markets. The Group has four reportable operating
segments as follows:
The branded consumer food products segment manufactures and distributes a diverse mix of
salty snacks, chocolates, candies, biscuits, bakery products, beverages, instant noodles, and
pasta and tomato-based products. This segment also includes the packaging division, which
manufactures BOPP films primarily used in packaging; and its subsidiary, which
manufactures flexible packaging materials for the packaging requirements of various branded
food products. Its revenues are in their peak during the opening of classes in June and
Christmas season.
The agro-industrial products segment engages in hog and poultry farming, manufacturing and
distribution of animal feeds, glucose and soya products, and production and distribution of
animal health products. Its peak season is during summer and before Christmas season.
The commodity food products segment engages in sugar milling and refining, and flour
milling and pasta manufacturing and renewable energy. The peak season for sugar is during
its crop season, which normally starts in November and ends in April while flour and pastas
peak season is before and during the Christmas season.
132
The corporate business segment engages in bonds and securities investment and fund sourcing
activities.
No operating segments have been aggregated to form the above reportable operating business
segments.
Management monitors the operating results of business segments separately for the purpose of
making decisions about resource allocation and performance assessment. The measure presented
to manage segment performance is the segment operating income (loss). Segment operating
income (loss) is based on the same accounting policies as consolidated operating income (loss)
except that intersegment revenues are eliminated only at the consolidation level. Group financing
(including finance costs and revenues), market valuation gain and loss, foreign exchange gains or
losses, other revenues and expenses and income taxes are managed on a group basis and are not
allocated to operating segments. Transfer prices between operating segments are on an arms
length basis in a manner similar to transactions with third parties.
The following tables present the financial information of each of the operating segments in
accordance with PFRS except for Earnings before interest, income taxes and depreciation/
amortization (EBITDA) and Earnings before interest and income taxes (EBIT) as of and for the
period ended September 30, 2015, 2014, and 2013.
133
The Groups business segment information follows:
2015
Branded Commodity Corporate
Consumer Food Agro-Industrial Food Business Eliminations Total
(In Thousands)
Sale of Goods and Services
Third party P91,861,235
= = 8,931,097
P P8,258,698
= P
= =
P = 109,051,030
P
Inter-segment 10,048,310 276,183 6,362,829 (16,687,322)
= 101,909,545
P = 9,207,280
P = 14,621,527
P =
P (16,687,322) = 109,051,030
P
Result
Earnings before interest, income taxes and
depreciation/amortization (EBITDA) = 18,098,890
P = 1,427,416
P = 3,846,103
P (P
= 1,289,015) P
= = 22,083,394
P
Depreciation and amortization (Note 28) (3,613,879) (257,005) (707,520) (131,570) (4,709,974)
Earnings before interest and income tax (EBIT) = 14,485,011
P = 1,170,411
P = 3,138,583
P (1,420,585) =
P = 17,373,420
P
Finance revenue (Note 30) = 112,352
P = 133
P = 1,379
P = 163,316
P =
P 277,180
Finance costs (Notes 20, 22 and 31) (P
= 1,212,848) (P
= 18,500) (P
= 34,407) (P
= 11,798) =
P (1,277,553)
Equity in net income of joint ventures (Note 17) =
P =
P =
P (P
= 206,481) =
P (P
= 206,481)
134
Market valuation gain (loss) on financial assets and derivative financial
instruments at FVPL (Note 8) =
P P
= =
P (P
= 214,624) P
= (P
= 214,624)
Impairment losses (105,058) (4,880) (109,938)
Other expenses* (85,534)
Income before income tax 15,756,470
Provision for income tax (Note 33) (3,251,548)
Net income = 12,504,922
P
Other Information
Total assets 73,041,902 5,256,753 13,575,146 18,873,281 110,747,082
Total liabilities 35,445,559 2,928,789 5,057,425 1,955,680 45,387,453
Capital expenditures (Note 13) 4,600,527 360,406 1,362,035 192,955 6,515,923
Non-cash expenses other than depreciation and amortization:
Impairment losses on:
Receivables (Note 10) = 421
P P
= = 4,880
P P
= P
= = 5,301
P
Inventories (Note 11) 104,637 104,637
= 105,058
P =
P = 4,880
P =
P =
P = 109,938
P
* Include net foreign exchange losses and other revenues (expenses).
2014
Branded Commodity Corporate
Consumer Food Agro-Industrial Food Business Eliminations Total
(In Thousands)
Sale of Goods and Services
Third party =77,233,787
P =8,203,015
P =6,939,495
P =
P =
P =92,376,297
P
Inter-segment 9,350,272 4,152,627 6,007,458 (19,510,357)
=86,584,059
P =12,355,642
P =12,946,953
P =
P (P
=19,510,357) =92,376,297
P
Result
Earnings before interest, income taxes and
depreciation/amortization (EBITDA) =13,999,723
P =1,355,412
P =3,713,909
P (P
=1,064,563) =
P =18,004,481
P
Depreciation and amortization (Note 28) (2,901,342) (288,632) (622,207) (73,129) (3,885,310)
Earnings before interest and income tax (EBIT) =11,098,381
P =1,066,780
P =3,091,702
P (P
=1,137,692) =
P =14,119,171
P
Finance revenue (Note 30) =80,939
P =
P103 =1,766
P =146,053
P =
P 228,861
Finance costs (Notes 20, 22 and 31) (P
=86,234) (P
=9,595) (P
=27,861) (P
=26,720) =
P (150,410)
Equity in net income of joint ventures (Note 17) =
P =
P =
P =14,090
P =
P 14,090
Market valuation gain on financial assets at FVPL (Note 8) =
P =
P =
P =62,526
P =
P 62,526
Impairment losses (122,272)
Other expenses* 75,550
Income before income tax 14,227,516
Provision for income tax (Note 33) (2,572,224)
135
Net income =11,655,292
P
Other Information
Total assets 48,682,573 5,621,741 11,171,001 12,445,892 77,921,207
Total liabilities 10,465,748 2,896,084 4,185,517 4,346,862 21,894,211
Capital expenditures (Note 13) 4,302,565 292,088 2,823,549 278,747 7,696,949
Non-cash expenses other than depreciation and amortization:
Impairment losses on:
Receivables (Note 10) P7,216
= =1,296
P =
P =4,671
P =
P P13,183
=
Inventories (Note 11) 97,608 6,268 103,876
Goodwill (Note 16) 5,213 5,213
=110,037
P =1,296
P =6,268
P =4,671
P =
P =122,272
P
* Include net foreign exchange losses and other revenues (expenses).
2013
Branded Commodity Corporate
Consumer Food Agro-Industrial Food Business Eliminations Total
(In Thousands)
Sale of Goods and Services
Third party =65,400,934
P =7,392,911
P =8,201,371
P =
P =
P =80,995,216
P
Inter-segment 6,653,676 3,524,393 5,178,254 (15,356,323)
=72,054,610
P =10,917,304
P =13,379,625
P =
P (P
=15,356,323) =80,995,216
P
Result
Earnings before interest, income taxes and
depreciation/amortization (EBITDA) =10,129,027
P P967,947
= =3,745,033
P (P
=941,357) =
P =13,900,650
P
Depreciation and amortization (Note 28) (2,642,218) (311,198) (626,118) (42,069) (3,621,603)
Earnings before interest and income tax (EBIT) =7,486,809
P =656,749
P =3,118,915
P (P
=983,426) =
P 10,279,047
Finance revenue (Note 30) =48,067
P =
P173 =2,221
P =479,179
P =
P 529,640
Finance costs (Notes 20, 22 and 31) (P
=41,649) (P
=11,187) (P
=41,999) (P
=171,198) =
P (266,033)
Equity in net income of a joint venture (Note 17) =
P =
P =
P =19,245
P =
P 19,245
Market valuation gain on financial assets at FVPL (Note 8) =
P =
P =
P =473,301
P =
P 473,301
Impairment losses (28,900)
Other expenses* 543,472
136
Income before income tax 11,549,772
Provision for income tax (Note 33) (1,432,442)
Net income =10,117,330
P
Other Information
Total assets P39,343,253
= P4,734,422
= P8,632,824
= =13,834,469
P P
= P66,544,968
=
Total liabilities =10,619,062
P =1,147,858
P =3,546,414
P =401,604
P =
P =15,714,938
P
Capital expenditures (Note 13) =3,640,111
P =250,218
P =1,583,005
P =72,423
P =
P =5,545,757
P
Non-cash expenses other than depreciation and amortization:
Impairment losses on:
Receivables (Note 10) =
P =
P =
P205 =
P =
P =
P205
Inventories (Note 11) 8,341 5,413 14,941 28,695
=8,341
P =5,413
P =15,146
P =
P =
P =28,900
P
* Include net foreign exchange losses and other revenues (expenses).
Inter-segment Revenues
Inter-segment revenues are eliminated at the consolidation level.
Segment Results
Segment results pertain to the net income (loss) of each of the operating segments excluding the
amounts of market valuation gains and losses on financial assets at FVPL, foreign exchange losses
and other revenues and expenses which are not allocated to operating segments.
Segment Assets
Segment assets are resources owned by each of the operating segments excluding significant
inter-segment transactions.
Segment Liabilities
Segment liabilities are obligations incurred by each of the operating segments excluding
significant inter-segment transactions. The Group also reports to the chief operating decision
maker the breakdown of the short-term and long-term debt of each of the operating segments.
Capital Expenditures
The components of capital expenditures reported to the chief operating decision maker are the
additions to investment property and property plant and equipment during the period.
Geographic Information
The Group operates in the Philippines, Thailand, Malaysia, Indonesia, China, Hong Kong,
Singapore, Vietnam, Myanmar and New Zealand.
The following table shows the distribution of the Groups consolidated revenues to external
customers by geographical market, regardless of where the goods were produced:
The Group has no customer which contributes 10% or more of the consolidated revenues of the
Group.
The table below shows the Groups carrying amounts of noncurrent assets per geographic location
excluding noncurrent financial assets, deferred tax assets and pension assets:
137
7. Cash and Cash Equivalents
2015 2014
Cash on hand P
=92,278,861 =50,364,931
P
Cash in banks 2,680,097,754 1,394,733,314
Short-term investments 15,526,002,826 8,631,124,838
P
=18,298,379,441 P
=10,076,223,083
Cash in banks earn interest at the prevailing bank deposit rates. Short-term investments represent
money market placements that are made for varying periods depending on the immediate cash
requirements of the Group, and earn interest ranging from 0.01% to 6.20% and 0.01% to 4.50%
for foreign currency-denominated money market placements in 2015 and 2014, respectively.
Peso-denominated money market placements on the other hand, earn interest ranging from 1.50%
to 2.10% and 1.00% to 1.50% in 2015 and 2014, respectively.
Gains (losses) per class of investment financial assets and derivative financial instrument to fair
value though profit and loss:
In 2013, the Group sold all of its debt securities and significant portion of its equity securities at
FVPL for a total consideration of =P10.7 billion (see Note 35). Gain arising from the sale of FVPL
investments amounted to P=54.5 million presented under Gain on sale of investments in the
consolidated statements of income. Interest income earned from private bonds and government
securities amounted to P
=170.5 million and = P3.7 million, respectively (see Note 30).
138
The Group entered into a foreign currency forwards arrangement with notional amount of
NZ$322.3 million (P=9.6 billion) and recognized change in fair value of the instrument amounting
to =
P151.6 million during the year.
In 2015, the Group recognized commodity swap option as part of the net asset acquired from the
acquisition of NZSFHL. The Group recognized gain amounting to P =5.99 million upon maturity of
the contract in 2015.
The Groups short-term forwards have varying tenors ranging from one to three months and have
a total notional amount of NZ$5.43 million at September 30, 2015. The negative fair values
amounted to NZ$0.07 million as of September 30, 2015.
2015 2014
Net pension liability P
=244,731,643 =262,167,555
P
Derivative liability 151,646,715
P
=396,378,358 =262,167,555
P
10. Receivables
2015 2014
Trade receivables (Note 35) P
=8,258,369,852 =6,703,818,624
P
Due from related parties (Note 35) 1,564,936,668 1,447,647,173
Advances to officers, employees and suppliers 1,082,523,054 1,031,636,777
Interest receivable 17,931,420 8,026,469
Others 284,169,946 504,359,840
11,207,930,940 9,695,488,883
Less allowance for impairment losses 374,706,746 376,287,180
P
=10,833,224,194 =9,319,201,703
P
Others include receivables from URC Retirement Plan amounting to nil and =
P55.9 million as of
September 30, 2015 and 2014, respectively (see Note 32).
139
Allowance for Impairment Losses on Receivables
Changes in allowance for impairment losses on receivables follow:
2015
Collective
Individual Assessment Assessment
Trade Other Trade
Receivables Receivables Receivables Total
Balances at beginning of year P
=173,996,431 P
=188,729,458 P
=13,561,291 P
=376,287,180
Provision for impairment losses 421,123 4,880,205 5,301,328
Accounts written-off (1,969,653) (4,912,109) (6,881,762)
Balances at end of year P
=172,447,901 P
=188,697,554 P
=13,561,291 P
=374,706,746
2014
Collective
Individual Assessment Assessment
Trade Other Trade
Receivables Receivables Receivables Total
Balances at beginning of year =193,050,496
P =188,729,458
P =13,561,291
P =395,341,245
P
Provision for impairment losses 13,183,568 13,183,568
Recovery/accounts written-off (32,237,633) (32,237,633)
Balances at end of year =173,996,431
P =188,729,458
P =13,561,291
P =376,287,180
P
Allowance for impairment losses on other receivables includes impairment losses on advances to
officers, employees and suppliers and other receivables, amounting to P
=19.6 million and
P
=169.1 million respectively, as of September 30, 2015 and 2014.
11. Inventories
2015 2014
At cost:
Raw materials P
=7,389,936,987 =8,157,810,158
P
Finished goods 4,053,655,599 2,992,767,154
11,443,592,586 11,150,577,312
At NRV:
Goods in-process 848,547,316 720,606,320
Containers and packaging materials 1,762,664,661 1,610,001,186
Spare parts and supplies 1,979,809,334 1,647,838,019
4,591,021,311 3,978,445,525
P
=16,034,613,897 =
P 15,129,022,837
Under the terms of the agreements covering liabilities under trust receipts totaling =
P4.6 billion and
P
=4.4 billion as of September 30, 2015 and 2014, respectively, certain inventories which
approximate the trust receipts payable, have been released to the Group in trust for the banks. The
Group is accountable to these banks for the trusteed merchandise or their sales proceeds.
Inventory obsolescence, market decline and mark down amounted to = P578.6 million,
P
=377.6 million and =
P726.1 million in 2015, 2014 and 2013, respectively.
140
The Group recognized impairment losses on its inventories amounting to = P104.6 million,
P
=103.9 million and =P28.7 million in 2015, 2014 and 2013, respectively. The Groups inventories,
net of inventory obsolescence and market decline, amounted to =P16.0 billion and =
P15.1 billion as
of September 30, 2015 and 2014, respectively.
The Groups raw materials used, which include raw materials and container and packaging
materials inventory, (presented under Cost of sales in the consolidated statements of income),
amounted to =P53.3 billion, =
P46.8 billion and P
=43.8 billion in 2015, 2014, and 2013, respectively
(see Note 25).
Deposit held in escrow pertains to the NZ$100.0 million initial deposit for the purchase of New
Zealand Snack Food Holdings Limited (NZSFHL) as specified under the terms of the Sale and
Purchase Agreement (SPA) (see Note 16). Interest income on this account amounted to
P
=23.7 million and =P20.5 million in 2015 and 2014, respectively (see Note 30). Subject to the
terms and conditions of the SPA, the deposit was released to the seller in 2015.
141
13. Property, Plant and Equipment
2015
Land Buildings and Machinery and
Land Improvements Improvements Equipment Sub-total
Cost
Balances at beginning of year = 2,839,698,936
P = 1,550,446,218
P = 10,702,230,833
P = 46,538,294,659
P = 61,630,670,646
P
Additions (Note 6) 10,856,863 105,449,452 650,915,292 3,209,917,277 3,977,138,884
Additions from acquisition of a subsidiary 230,058,094 431,466,610 1,358,419,691 1,880,984,976 3,900,929,371
Disposals, reclassifications and other adjustments (94,776,154) (579,005,547) 789,183,975 4,019,953,025 4,135,355,299
Balances at end of year 2,985,837,739 1,508,356,733 13,500,749,791 55,649,149,937 73,644,094,200
Accumulated Depreciation and Amortization
Balances at beginning of year 407,788,336 4,200,340,910 31,225,556,704 35,833,685,950
Depreciation and amortization (Note 6) 56,728,809 571,958,750 3,658,824,517 4,287,512,076
Disposals, reclassifications and other adjustments 8,412,242 461,245,667 2,417,640,985 2,887,298,894
Balances at end of year 472,929,387 5,233,545,327 37,302,022,206 43,008,496,920
Net Book Value = 2,985,837,739
P = 1,035,427,346
P = 8,267,204,464
P = 18,347,127,731
P = 30,635,597,280
P
142
2015
2014
143
Disposals, reclassifications and other adjustments (449,037,223) 288,393,432 (2,423,574,712) 410,922,173 (324,239,080)
Balances at end of year 1,826,578,391 2,679,073,019 4,142,359,354 2,489,111,141 72,767,792,551
Accumulated Depreciation and Amortization
Balances at beginning of year 1,470,171,400 1,207,580,338 35,214,682,798
Depreciation and amortization (Note 6) 127,834,024 235,297,142 3,881,652,509
Disposals, reclassifications and other adjustments (307,109,018) (207,423,261) (736,298,732)
Balances at end of year 1,290,896,406 1,235,454,219 38,360,036,575
Net Book Value =535,681,985
P =1,443,618,800
P =4,142,359,354
P =2,489,111,141
P =34,407,755,976
P
The Group did not recognize any impairment losses on its property, plant and equipment in 2015,
2014 and 2013.
Borrowing Costs
No borrowing costs have been capitalized as property, plant and equipment under construction in
2015 and 2014.
Depreciation
The breakdown of consolidated depreciation and amortization of property, plant and equipment
follows (see Note 28):
Collateral
As of September 30, 2015 and 2014, the Group has no property and equipment that are pledged as
collateral.
As of September 30, 2015 and 2014, this account consist of equity securities with the following
movement:
2015 2014
Balance at beginning of year P
=21,720,000 =21,720,000
P
Fair value changes during the year 19,160,000
Balance at end of year P
=40,880,000 =21,720,000
P
In 2015 and 2014, the Group recognized unrealized gains on market revaluation of AFS financial
assets amounting to P
=19.2 million and nil, respectively, presented as components of Other
comprehensive income in Equity (Note 24).
In 2013, the Group sold all of its debt securities and significant portion of its equity securities for a
total consideration of P
=4.7 billion. Gain arising from the sale of AFS financial assets amounted to
P
=680.7 million presented under Gain on sale of investments in the consolidated statements of
income. The Group recognized interest income of = P58.1 million and P =36.7 million from private
and government bonds, respectively.
144
15. Biological Assets
2014
Swine (At Fair Value Less
Estimated Costs to Sell) Poultry (At Cost)
Breeder Commercial Sub-total Breeder Commercial Sub-total Total
Cost
Balances at beginning of year =
P464,201,910 =P1,001,731,932 =P1,465,933,842 =
P185,254,463 =
P79,303,351 =
P264,557,814 =P1,730,491,656
Additions 162,192,202 2,781,511,798 2,943,704,000 168,931,820 56,633,538 225,565,358 3,169,269,358
Disposal (169,709,436) (2,726,636,231) (2,896,345,667) (224,060,712) (88,628,526) (312,689,238) (3,209,034,905)
Balances at end of year 456,684,676 1,056,607,499 1,513,292,175 130,125,571 47,308,363 177,433,934 1,690,726,109
Accumulated Depreciation
Balances at beginning of year 74,135,733 74,135,733 92,295,459 92,295,459 166,431,192
Depreciation 49,757,535 49,757,535 104,620,603 104,620,603 154,378,138
Disposal (38,905,717) (38,905,717) (142,311,788) (142,311,788) (181,217,505)
Balances at end of year 84,987,551 84,987,551 54,604,274 54,604,274 139,591,825
Gains arising from changes in fair value
less estimated costs to sell 8,599,190 174,388,456 182,987,646 182,987,646
Net Book Value at End of Year =
P380,296,315 =
P1,230,995,955 =
P1,611,292,270 =
P75,521,297 =
P47,308,363 =
P122,829,660 =
P1,734,121,930
Total biological assets shown in the consolidated statements of financial position follow:
2015 2014
Current portion P
=1,177,607,861 =1,278,304,318
P
Noncurrent portion 444,722,865 455,817,612
P
=1,622,330,726 =1,734,121,930
P
The Group has about 250,361 and 259,117 heads of swine as of September 30, 2015 and 2014,
respectively, and about 486,619 and 466,342 heads of poultry as of September 30, 2015 and 2014,
respectively.
145
16. Goodwill and Intangible Assets
2015 2014
Cost
Balances at beginning of year P
=1,041,554,889 =1,046,767,480
P
Additions due to acquisition of a subsidiary 13,913,396,261
Impairment write-down (5,212,591)
Balances at end of year 14,954,951,150 1,041,554,889
Accumulated Impairment Losses
Balances at beginning and end of year 248,139,704 248,139,704
Net Book Value at End of Year P
=14,706,811,446 =793,415,185
P
Acquisition of Griffins
On July , URC NZ FinCo, a wholly-owned subsidiary of URCICL, entered into a Sale and
Purchase Agreement with Pacific Equity Partners (PEP) for the acquisition of 100% equity interest
in New Zealand Snack Foods Holding Limited (NZSFHL), which is the holding company of
Griffins Food Limited, the leading snack food company in New Zealand, subject to the approval
of New Zealands Overseas Investment Office (OIO) as required by Overseas Investment Act
2005 and Overseas Investment Regulation of 2005. The total consideration of the acquisition is
NZ$233.7 million (approximately = P8.2 billion), including the initial deposit of
NZ$100.0 million (P =3.5 billion) and the balance upon completion (see Note 12).
On October 29, 2014, New Zealands OIO granted its consent on the application for the
acquisition of NZSFHL. On November 14, 2014, following the approval from OIO, the
transaction was completed and the remaining balance of the consideration was settled.
The Group engaged the services of a third party valuer to conduct the final purchase price
allocation.
The fair values of the identifiable assets and liabilities of NZSFHL at the date of acquisition
follow:
146
In 2015, after the acquisition had been finalized, the Group settled the external debt amounting to
P
=16.4 billion.
Goodwill arising from the acquisition of NZ Group is allocated entirely to the operations of
Griffins. None of the goodwill recognized is expected to be deductible for income tax purposes.
From the date of acquisition, the NZ Group has contributed gross revenues of P =7.8 billion and net
income amounting to = P621.7 million to the Group. If the business combination had taken place at
the beginning of the year, total revenues and net income attributable to equity holders of the Parent
Company in 2015 would have been = P110.3 billion and =
P10.8 billion, respectively.
The Groups goodwill at September 30, 2014 pertains to: (a) the acquisition of Advanson in
December 2007 and (b) the excess of the acquisition cost over the fair values of the net assets
acquired by HCFCL and UABCL in 2000. The goodwill arising from the acquisitions of HCFCL,
UABCL, and Advanson was translated at the applicable year-end exchange rate.
2015
Trademark/ Product Software Customer
Brands Formulation Costs Relationship Total
Cost
Balances at beginning of year P
= 251,524,581 P
= 425,000,000 =
P =
P P
= 676,524,581
Additions from acquisition
of a subsidiary 4,946,976,710 33,033,717 1,885,972,100 6,865,982,527
5,198,501,291 425,000,000 33,033,717 1,885,972,100 7,542,507,108
2014
Product Software Customer
Trademark Formulation Costs Relationship Total
Cost
Balances at beginning and end of year P
=251,524,581 P
=425,000,000 =
P =
P P
=676,524,581
Trademarks and product formulation were acquired from General Milling Corporation in 2008.
Total intangibles assets acquired from the acquisition of NZSFHL composed of brands of
P
=4.9 billion, customer relationships of P
=1.9 billion and software costs of =
P0.03 billion.
The Group performed its annual impairment test on its goodwill and other intangible assets with
indefinite useful lives as of September 30, 2015. The recoverable amounts of goodwill and other
intangible assets were determined based on value in use calculations using cash flow projections
from financial budgets approved by management covering a five-year period. The pre-tax
discount rate applied to the cash flow is at 9%. The following assumptions were also used in
computing value in use:
Growth rate estimates - growth rates were based on experiences and strategies developed for the
various subsidiaries. The prospect for the industry was also considered in estimating the growth
147
rates.
Discount rates - discount rates were estimated based on the industry weighted average cost of
capital, which includes the cost of equity and debt after considering the gearing ratio.
2015 2014
Acquisition Cost
Balances at beginning of year P
=361,500,000 =1,250,000
P
Additional investments 276,500,000 360,250,000
Balances at end of year 638,000,000 361,500,000
Accumulated Equity in Net Earnings
Balances at beginning of year 79,723,735 84,134,000
Equity in net income (losses) during the year (206,481,238) 14,089,730
Dividends received (16,999,995) (18,499,995)
Balances at end of year (143,757,498) 79,723,735
Net Book Value at End of Year P
=494,242,502 =441,223,735
P
Calbee-URC, Inc.
On January 17, 2014, the Parent Company entered into a joint venture agreement with Calbee,
Inc., a corporation duly organized in Japan to form Calbee-URC, Inc. (CURCI), a corporation duly
incorporated and organized in the Philippines to manufacture and distribute food products under
the Calbee Jack n Jill brand name, which is under exclusive license to CURCI in the
Philippines.
In 2015, the Parent Company made an additional subscription to the unissued authorized capital
stock of DURBI consisting of 9,975,000 common shares for a total cost of =
P276.50 million.
The Parent Companys percentage of ownership in its joint ventues and its related equity in the net
assets are summarized below:
148
Summarized financial information in respect of the Groups joint ventures as of
September 30, 2015 and 2014 are presented below.
The summarized financial information presented above represents amounts shown in the joint
ventures financial statements prepared in accordance with PFRS.
Investments in Subsidiaries
As of September 30, 2015 and 2014, the Parent Company has the following percentage of
ownership of shares in its wholly owned and partially owned subsidiaries as follows:
Effective Percentages
Country of of Ownership
Subsidiaries Incorporation 2015 2014
CCPI Philippines 100.00 100.00
CFC Corporation - do - 100.00 100.00
Bio-Resource Power Generation Corporation - do - 100.00 100.00
NURC (Note 23) - do - 51.00 65.00
URCPL British Virgin Islands 100.00 100.00
URCICL and Subsidiaries* - do - 100.00 100.00
URCL Cayman Islands 100.00 100.00
URCCCL China 100.00 100.00
*Subsidiaries are located in Thailand, Singapore, Malaysia, Vietnam, Indonesia, China, Hongkong, Myanmar, British Virgin
Islands and New Zealand
2015 2014
(In Thousands)
Current assets P
=952,961 =1,083,215
P
Noncurrent assets 658,997 323,974
Current liabilities 1,172,619 907,181
Noncurrent liabilities 19,948 921,191
Revenue 3,552,587 2,433,507
Costs and expenses (3,131,944) (2,018,550)
Net income 304,454 299,157
149
The percentage of equity interest held by non-controlling interest in a subsidiary with material
non-controlling interest follows:
Country of incorporation
Name of Subsidiary and operation 2015 2014
NURC Philippines 49% 35%
The accumulated non-controlling interest of the above subsidiary as of September 30, 2015 and
2014 amounted to =
P94.7 million and =P77.6 million, respectively.
The profit or loss allocated to non-controlling interest of the above subsidiary for the year ended
September 30, 2015, 2014 and 2013 amounted to P =121.6 million, P
=96.6 million and = P72.8 million,
respectively.
2015 2014
Cost
Balances at beginning and end of year P
=107,947,364 =107,947,364
P
Accumulated Depreciation
Balances at beginning of year 50,771,426 47,113,639
Depreciation (Note 27 and 28) 3,657,787 3,657,787
Balances at end of year 54,429,213 50,771,426
Net Book Value at End of Year P
=53,518,151 =57,175,938
P
The investment properties consist of building, plant, and other land improvements which are made
available for lease to certain related parties (see Note 35).
The aggregate fair value of the Groups investment properties amounted to P =232.2 million as of
September 30, 2015 and 2014. The fair values of investment properties have been determined by
qualified independent appraisers. The fair value represents the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. The current use of the investment properties represents its highest and best
use.
Total rental income earned from investment properties (included under Other income in the
consolidated statements of income) amounted to P
=52.9 million, P
=52.8 million and =P59.3 million in
2015, 2014 and 2013, respectively.
Direct operating expenses (included under General and administrative expenses in the
consolidated statements of income) arising from investment properties amounted to P
=0.9 million
in 2015, 2014 and 2013.
Collateral
As of September 30, 2015 and 2014, the Group has no investment properties that are pledged as
collateral.
150
19. Other Noncurrent Assets
Interest is based on prevailing market rates. Accrued interest payable on the Groups short-term
debt (included under Accounts payable and other accrued liabilities in the consolidated
statements of financial position) amounted to P=1.1 million and =
P33.4 million as of
September 30, 2015 and 2014, respectively (see Note 21). Interest expense from the short-term
debt amounted to P =43.2 million, P
=83.9 million and P
=81.3 million in 2015, 2014 and 2013,
respectively (see Note 31).
Trade payables are noninterest-bearing and are normally settled on 30-60 day terms. Trade
payables arise from purchases of inventories which include raw materials and indirect materials
(i.e. packaging materials) and supplies, for use in manufacturing and other operations.
Customers deposits represent downpayments for the sale of goods or performance of services
which will be applied against accounts receivables upon delivery of goods or rendering of
services.
151
As of September 30, 2015 and 2014, others include withholding taxes payable amounting to
P
=122.7 million and P
=130.4 million, respectively.
2015 2014
Advertising and promotions P
=2,860,517,046 =2,647,344,022
P
Freight and handling costs 348,473,883 283,175,644
Interest payable 220,122,308 34,275,977
Utilities 216,544,045 215,938,805
Contracted services 39,602,308 61,878,175
Others 592,404,394 310,279,005
P
=4,277,663,984 =3,552,891,628
P
Others include accrual for professional and legal fees and other benefits.
Unamortized debt
Principal issuance costs Total
URC NZ FinCo Loan =12,559,785,840
P =185,815,524 P
P =12,373,970,316
URC Oceania Loan 9,638,711,395 143,000,750 9,495,710,645
=22,198,497,235
P =328,816,274 P
P =21,869,680,961
For the URZ NZ Finco and URC Oceania loans, the Group is required to maintain consolidated
debt to equity ratio of not greater than 2.5 to 1.0.
152
The notes contain negative covenants that, among others, prohibit merger or consolidation with
other entities if it is not the surviving entity, nor shall it create or form another corporation or
subsidiary when a material adverse effect will result. The notes also contain affirmative covenants
which include among others maintenance of a debt to equity ratio of not greater than 2.0 to 1.0 and
interest coverage ratio of not lesser than 2.0 to 1.0.
On February 28, 2013, URC redeemed the loan under Section 3.07 of the Loan Agreement
Redemption Due to Taxation. Total payment amounted to P=3.1 billion, including interest.
The Group has complied with all of its debt covenants as of September 30, 2015 and 2014.
23. Equity
The details of the Parent Companys common stock as of September 30, 2015, 2014 and 2013
follow:
As of September 30, 2015 and 2014, the paid-up capital of the Group consists of the following:
Capital Management
The primary objective of the Groups capital management is to ensure that it maintains healthy
capital ratios in order to support its business and maximize shareholder value. The Group
manages its capital structure and makes adjustments to these ratios in light of changes in economic
conditions and the risk characteristics of its activities. In order to maintain or adjust the capital
structure, the Group may adjust the amount of dividend payment to shareholders, return capital
structure or issue capital securities. No changes have been made in the objective, policies and
processes as they have been applied in previous years.
The Group monitors its use of capital structure using a debt-to-capital ratio which is gross debt
divided by total capital. The Group includes within gross debt all interest-bearing loans and
borrowings, while capital represents total equity.
153
Following is a computation of the Groups debt-to-capital ratio as of September 30, 2015 and
2014:
The Groups policy is to not to exceed a debt-to-capital ratio at 2:1 level. The Group considers its
total equity as capital.
Retained Earnings
Accumulated equity in net earnings of the subsidiaries and associates
A portion of the Groups retained earnings corresponding to the net earnings of the subsidiaries
and accumulated equity in net earnings of the associates and joint ventures amounting to P=36.4
billion and P
=31.5 billion as of September 30, 2015 and 2014, respectively, is not available for
dividend declaration. The accumulated equity in net earnings becomes available for dividends
upon receipt of the Parent Company from the investees.
Dividends
Details of the Groups dividend declarations follow:
Parent Company
NURC
Dividend per
Year Date of declaration share Total dividends Date of record Date of payment
2015 November 30, 2014 0.42 P
=79,114,249 November 30, 2014 February 28, 2015
2015 December 15, 2014 1.53 289,000,000 September 30, 2014 February 28, 2015
2014 December 11, 2013 1.06 200,000,000 September 30, 2013 February 28, 2014
2013 December 07, 2012 0.85 160,000,000 December 31, 2012 February 1, 2013
154
CCPI
In September 2015, the BOD of CCPI approved the declaration of cash dividends to the
stockholders amounting to P
=376.1 million payable on February 26, 2015.
There were no dividend decleration and dividend payments to stockholders of CCPI in 2014.
In October 2012, the BOD of CCPI approved the declaration of property dividends to the
stockholders amounting to =
P614.2 million. The dividends were distributed in full on
October 29, 2012.
The Group intends to maintain an annual cash dividend payment ratio of 50.0% of the Groups
consolidated net income from the preceding fiscal year, subject to the requirements of the
applicable laws and regulations and the absence of circumstances which may restrict the payment
of such dividends. The BOD may, at any time, modify such dividend payment ratio.
On February 11, 2013, the BOD approved the reversal of the previously appropriated retained
earnings amounting to =
P5.0 billion. On the same date, the BOD approved the appropriation of
retained earnings amounting to =
P6.0 billion for the purposes of the Groups plant expansion. On
September 18, 2013, the BOD approved the reversal of the previously appropriated retained
earnings amounting to =
P6.0 billion.
Treasury Shares
On June 14, 2012, the Parent Companys BOD approved the sale of 120 million common shares
previously held as treasury shares through a placement to institutional investors at a selling price
of =
P62 per share, with a total gross selling proceeds amounting to =
P7.4 billion. On June 19, 2012,
the Parent Company received the net cash proceeds amounting to P =7.3 billion, net of the
transactions costs amounting to =P95.2 million. The proceeds of the said sale will be used for
potential acquisition and general corporate purposes. CLSA Limited acted as a sole book-runner
and sole placing agent for the sale.
The Parent Company has outstanding treasury shares of 46.1 million as of September 30, 2015,
2014 and 2013. The Parent Company is restricted from declaring an equivalent amount of the
treasury shares from the unappropriated retained earnings as dividends.
Equity Reserve
In December 2014, URC entered into a share purchase agreement with Nissin Foods (Asia) Pte.,
Ltd. to sell 14.0% of its equity interest in NURC for a total consideration of =
P506.7 million. As a
result of the sale, the equity interest of URC changed from 65.0% to 51.0%. The excess of the
consideration received over the carrying amount of the equity transferred to NCI amounting to
P
=481.1 million is presented under Equity Reserve in the consolidated statements of changes in
equity.
155
In August 2012, the Parent Company has acquired 23.0 million common shares of URCICL from
International Horizons Investment Ltd for P=7.2 billion. The acquisition of shares represents the
remaining 23.00% interest in URCICL. As a result of the acquisition, the Parent Company now
holds 100.00% interest in URCICL. The Group recognized equity reserve from the acquisition
amounting to about =P5.6 billion included under Equity Reserve in the consolidated statements of
changes in equity.
156
Record of Registration of Securities with SEC
Summarized below is the Parent Companys track record of registration of securities under the Securities Registration Code.
157
July 21, 1995 20.00% stock dividend 247,970,907 247,970,907
(Forward)
Authorized Issued and
Date of Type of No. of shares Par Offer number of Outstanding
offering offering offered value price Shares Shares
February 7, 2006 New share offering for common
shares:
a. Primary shares 282,400,000 =1.00
P =17.00
P 282,400,000
b. Secondary shares 352,382,600
c. Over-allotment shares 95,217,400
158
December 8, 2009 Acquisition of Parent Company's
to January 27, 2011 shares under the share buy-back
Program (91,032,800)
The table below provides information regarding the number of stockholders of the Parent Company as of September 30, 2015, 2014 and 2013:
The breakdown and movement of other comprehensive income attributable to equity holders of
the Parent Company follows:
The Group does not recognize income tax on cumulative translation adjustments.
159
Overhead costs are broken down as follows:
160
28. Depreciation and Amortization
The breakdown of consolidated depreciation and amortization on property, plant and equipment,
investment in properties and intangible assets follows:
161
31. Finance Costs
The Group has a funded, noncontributory defined benefit retirement plan covering all its
employees. The pension funds are being administered and managed through JG Summit Multi-
Employer Retirement Plan (The Plan), with Robinsons Bank Corporation (RBC) as Trustee. The
plan provides for retirement, separation, disability and death benefits to its members. The Group,
however, reserves the right to discontinue, suspend or change the rates and amounts of its
contributions at any time on account of business necessity or adverse economic conditions.
The latest actuarial valuation was made on September 30, 2015.
Under the existing regulatory framework, Republic Act 7641 requires a provision for retirement
pay to qualified private sector employees in the absence of any retirement plan in the entity,
provided however that the employees retirement benefits under any collective bargaining and
other agreements shall not be less than those provided under law. The law does not require
minimum funding of the plan.
162
Changes in net defined benefit liability of funded funds of the Group are as follows:
2015
Net benefit cost in consolidated statements
of income Remeasurements in other comprehensive income
Return on plan Actuarial changes Actuarial changes Actuarial changes
assets (excluding arising from changes arising from arising from changes
Current Net interest Benefits amount included in in experience demographic in financial Contribution
1 October 2014 service cost cost (Note 31) Subtotal paid net interest cost) adjustments assumptions assumptions Subtotal by employer 30 September 2015
Present value of
defined benefit
obligation =
P2,211,764,369 =
P129,583,209 =
P109,142,294 =
P238,725,503 (P
= 168,459,862) =
P (P
= 107,975,034) (P
= 6,919,028) =
P67,228,334 (P
= 47,665,728) =
P =
P2,234,364,282
Fair value of
plan assets (1,949,596,814) (96,149,154) (96,149,154) 168,459,862 55,995,796 55,995,796 (168,342,329) (1,989,632,639)
= 262,167,555 P
P = 129,583,209 P12,993,140
= = 142,576,349
P =
P = 55,995,796
P (P
= 107,975,034) (P
= 6,919,028) = 67,228,334
P P8,330,068
= (P
= 168,342,329) = 244,731,643
P
2014
Net benefit cost in consolidated statements
of income Remeasurements in other comprehensive income
Return on plan Actuarial changes Actuarial changes Actuarial changes
assets (excluding arising from changes arising from arising from changes
163
Current Net interest Benefits amount included in in experience demographic in financial Contribution
1 October 2013 service cost cost (Note 31) Subtotal paid net interest cost) adjustments assumptions assumptions Subtotal by employer 30 September 2014
Present value of
defined benefit
obligation =
P2,030,171,549 =
P124,817,974 =
P92,773,981 =
P217,591,955 (P
=92,798,368) =
P =
P119,294,178 =
P (P
=62,494,945) =
P56,799,233 =
P =
P2,211,764,369
Fair value of
plan assets (1,425,753,998) (65,089,271) (65,089,271) 92,798,368 31,917,779 31,917,779 (583,469,692) (1,949,596,814)
=
P604,417,551 = P124,817,974 =
P27,684,710 =
P152,502,684 =
P =
P31,917,779 =
P119,294,178 =
P (P
=62,494,945) =
P88,717,012 (P
= 583,469,692) =P262,167,555
The fair value of net plan assets of the Group by each classes as at the end of the reporting period
are as follows:
2015 2014
Assets
Cash and cash equivalents P
=183,797,082 =176,249,924
P
Short-term notes receivable (Note 35) 1,600,894,571 1,626,914,603
Held-to-maturity investments 109,173,647 108,734,216
Available-for-sale investments 1,379,042
Interest receivable 2,825,431 2,163,953
Land 91,448,525 91,448,525
1,989,518,298 2,005,511,221
Liabilities
Accrued trust and management fees 24,521 24,431
Due to related party (Notes 10 and 35) 55,889,976
Unrealized loss from AFS (138,862)
(114,341) 55,914,407
P
=1,989,632,639 P=1,949,596,814
The costs of defined benefit pension plan as well as the present value of the pension obligation are
determined using actuarial valuations. The actuarial valuation involves making various
assumptions. The principal assumptions used in determining pension for defined benefit plans are
as follows:
The overall expected rate of retun on assets is determined based on the market expectation
prevailing on that date, applicable to the period over which the obligation is to be settled.
The sensitivity analysis below has been determined based on reasonably possible changes of each
significant assumption on the defined benefit obligation as of the reporting period, assuming all
other assumptions were held constant:
164
Shown below is the maturity analysis of the Groups expected (undiscounted) benefit payments:
2015 2014
Less than one year P
=548,053,504 =416,879
P
More than one year to five years 757,817,463 3,231,477
More than five years to 10 years 1,059,630,321 13,483,093
More than 10 years to 15 years 1,209,908,229 40,346,387
More than 15 years to 20 years 1,199,775,962 59,047,261
More than 20 years 2,557,591,721 337,379,267
Shown below is the average duration of the defined benefit obligation at the end of the reporting
period:
2015 2014
(Years)
Parent Company 15 16
NURC 21 21
CCPI 26 28
Components of the Groups net deferred tax assets and liabilities follow:
165
Net deferred tax assets Net deferred tax liabilities
2015 2014 2015 2014
fair value less
estimated point-of-sale
costs of swine stocks
Foreign subsidiaries =
P =
P =34,595,592 P
P =33,215,172
Borrowing costs 9,726,558 12,032,759
174,923,619 144,464,347 2,478,138,580 464,546,355
Net deferred tax assets (liabilities) =597,598,936
P =404,393,056 (P
P =2,409,483,361) (P
=463,982,054)
As of September 30, 2015 and 2014, the Groups subsidiaries did not recognize deferred tax assets
amounting to =P148.7 million and =P47.6 million, respectively, since management believes that
future taxable income will not be available to allow all or part of the deferred tax assets to be
utilized. The temporary difference wherein no deferred tax assets were recognized were from the
unrealized foreign exchange losess of the Groups subsidiaries.
Reconciliation between the Groups statutory income tax rate and the effective income tax rate
follows:
2015 2014 2013
Statutory income tax rate 30.00% 30.00% 30.00%
Tax effects of:
Nondeductible interest expense 1.01 0.08 0.12
Equity in net income of a joint venture (0.39) 0.03 0.05
Income exempt from tax (0.24) (0.32)
Market valuation gain on financial assets
at FVPL 0.14 (0.13) (0.18)
Interest income subjected to final tax (0.27) (0.28) (0.31)
Net income of subsidiaries for which
no tax was provided (12.17) (12.91) (19.68)
Others 2.56 1.29 2.72
Effective income tax rate 20.64% 18.08% 12.40%
RA No. 9337
RA No. 9337 was enacted into law which amended various provisions in the existing 1997
National Internal Revenue Code. Among the reforms introduced by the said RA were the
reduction in the regular corporate income tax rate from 35% to 30% beginning January 1, 2009;
and the reduction of nondeductible interest expense from 42% of interest income subjected to final
tax to 33% beginning January 1, 2009.
Entertainment, Amusement and Recreation (EAR) Expenses
Revenue Regulation No. 10-2002 defines expenses to be classified as EAR expenses and sets a
limit for the amount that is deductible for tax purposes. EAR expenses are limited to 0.5% of net
sales for sellers of goods or properties or 1% of net revenue for sellers of services. For sellers of
both goods or properties and services, an apportionment formula is used in determining the ceiling
on such expenses. EAR expenses amounted to = P40.0 million, =
P36.4 million and =P33.5 million in
2015, 2014 and 2013, respectively.
MCIT
An MCIT of 2% on modified gross income is computed and compared with the RCIT. Any
excess of the MCIT over RCIT is deferred and can be used as a tax credit against future income
tax liability for the next three years. In 2013, CFC Corporation has excess MCIT over RCIT
amounting to P =0.4 million for which deferred tax asset was recognized.
166
34. Earnings Per Share
The following reflects the income and share data used in the basic/dilutive EPS computations:
The weighted average number of common shares takes into account the treasury shares at year
end. There have been no other transactions involving ordinary shares or potential ordinary shares
between the reporting date and the date of completion of these consolidated financial statements.
The Group, in the regular conduct of its business, has entered into transactions with JGSHI, its
ultimate parent, and other related parties principally consisting of sales, purchases, advances and
reimbursement of expenses, regular banking transactions, leases and, management and
administrative service agreements. Transactions with related parties are generally settled in cash.
The amounts and related volumes and changes are presentedin the summary below.
167
Intercompany transactions are eliminated in the accompanying consolidated financial statements. Related party transactions not eliminated are as
follows:
2015
Outstanding Balance in Statement
of Financial Position
168
Entity under common control
On demand; Unsecured;
Due from related parties Advances 311,061,811 684,907,451 non-interest bearing no impairment
On demand; Unsecured;
Sales 714,682,700 37,657,484 non-interest bearing no impairment
Rental income 32,219,041
Engineering services 9,241,013
Interest-bearing at
prevailing market rate; Unsecured;
Cash and cash equivalents Cash in bank (35,281,944) 121,049,551 due and demandable no impairment
Interest-bearing at
prevailing market rate; Unsecured;
Money market placements 204,438,784 2,139,934,132 due and demandable no impairment
169
Engineering services 9,457,541
Interest-bearing at
prevailing market rate; Unsecured;
Cash and cash equivalents Cash in bank 10,094,953 159,289,558 due and demandable no impairment
Interest-bearing at
prevailing market rate; Unsecured;
Money market placements 25,694,057 1,935,495,348 due and demandable no impairment
(a) The Group maintains savings and current accounts and time deposits with an entity under
common control which is a local commercial bank. Cash and cash equivalents earns interest
at the prevailing bank deposit rates.
(b) In 2013, the Group sold majority of its debt and equity securities classified as financial assets
at FVPL and AFS financial assets to JG Summit Philippines Limited, Inc. for a total
consideration of =
P15.2 billion. Realized gain arising from these transactions amounted to
P
=717.2 million (see Notes 8 and 14).
(c) As of September 30, 2015 and 2014, the Group has advances from stockholders amounting to
P
=230.2 million and P
=232.0 million, respectively.
Category/ Volume/
Year Transaction Amount Balance Terms Conditions
Due from retirement On demand; Unsecured;
plan (Note 32) 2015 Advances =
P = non-interestbearing
P Not impaired
2014 -do- 55,889,976 55,889,976 -do- -do-
2013 -do- 118,110,859 492,021,167 -do- -do-
The Groups plan assets also include amounts due from JGSHI totaling =
P1.6 billion (see Note 32).
170
Compensation of Key Management Personnel
The compensation of the Groups key management personnel by benefit type follows:
There are no agreements between the Group and any of its directors and key officers providing for
benefits upon termination of employment, except for such benefits to which they may be entitled
under the Groups pension plans.
Certain operations of the Parent Company and consolidated subsidiaries are registered with the
BOI as preferred pioneer and nonpioneer activities. As registered enterprises, these entities are
subject to some requirements and are entitled to certain tax and non-tax incentives which are
considered in the computation of the provision for income tax.
Cogeneration
On September 26, 2014, Cogeneration was registered with the BOI as a Renewable Energy (RE)
developer of Bagasse-fired power plant.
Under the terms of the registration and subject to certain requirements, the Parent Company is
entitled to the following fiscal and non-fiscal incentives: (a) ITH for a period of seven (7) years at
which the RE Plant generated the first kilowatt-hour energy after commissioning or testing, or two
months from date of commissioning, whichever is earlier; (b) duty-free importation of RE
machinery, equipment, and materials including control and communication equipment; (c) tax
exemption of carbon credits; (d) special realty tax rates on equipment and machinery, (e) NOLCO
during the first three years from the start of commercial operation shall be carried over as a
deduction from the gross income as defined in the National Internal Revenue Code (NIRC) for the
next seven (7) years immediately following the year of such loss; (f) after availment of the ITH,
the enterprise shall pay a corporate tax of 10% on its taxable income as defined in the NIRC,
provided that it shall pass on the savings to the end users in the form of lower power rates; (g) the
plant, machinery, and equipment that are reasonably needed and actually used for the exploration,
development, and utilization of RE resources may be depreciated using a rate not exceeding twice
the rate which would have been used had the annual allowance been computed in accordance with
the rules and regulations prescribed by the Department of Finance and the provisions of the
NIRC; (h) the sale of fuel or power generated by the enterprise from renewable sources of energy
such as biomass as well as its purchases of local supply of goods, properties, and services needed
for the development, construction, and installation of its plant facilities, and the whole process of
exploration and development of RE sources up to its conversion into power shall be subject to
zero percent VAT pursuant to NIRC; (i) tax credit equivalent to 100% of the value of VAT and
custom duties that would have been paid on the purchase of RE machinery, equipment, materials
and parts had these items been imported shall be given to the enterprise that purchases machinery,
equipment, materials and parts from a domestic manufacturer.
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Distillery
On August 28, 2013, Distillery was registered with the BOI as a manufacturer of
bio-ethanol (fuel grade ethanol).
Under the terms of the registration and subject to certain requirements, the Parent Company is
entitled to the following fiscal and non-fiscal incentives: (a) ITH for a period of seven (7) years
from March 2014 or date of commissioning, whichever is earlier; (b) duty-free importation of RE
machinery, equipment, and materials including control and communication equipment; (c) tax
exemption of carbon credits; (d) special realty tax rates on equipment and machinery, (e) NOLCO
during the first three years from the start of commercial operation shall be carried over as a
deduction from the gross income as defined in the NIRC for the next seven (7) years immediately
following the year of such loss; (f) after availment of the ITH, the enterprise shall pay a corporate
tax of 10% on its taxable income as defined in the NIRC, provided that it shall pass on the savings
to the end users in the form of lower power rates; (g) the plant, machinery, and equipment that are
reasonably needed and actually used for the exploration, development, and utilization of RE
resources may be depreciated using a rate not exceeding twice the rate which would have been
used had the annual allowance been computed in accordance with the rules and regulations
prescribed by the Department of Finance and the provisions of the NIRC. The enterprise that
applies for accelerated depreciation shall no longer be eligible to avail of the ITH; (h) the sale of
fuel or power generated by the enterprise from renewable sources of energy such as biomass as
well as its purchases of local supply of goods, properties, and services needed for the
development, construction, and installation of its plant facilities, and the whole process of
exploration and development of RE sources up to its conversion into power shall be subject to
zero percent VAT pursuant to NIRC; (i) tax credit equivalent to 100% of the value of VAT and
custom duties that would have been paid on the purchase of RE machinery, equipment, materials
and parts had these items been imported shall be given to the enterprise that purchases machinery,
equipment, materials and parts from a domestic manufacturer.
Under the terms of the registration and subject to certain requirements, RF - Poultry is entitled to
the following fiscal and non-fiscal incentives: (a) ITH for a period of three (3) years from October
2008 (as an expanding producer of parent stock day-old chicks) and for a period of four (4) years
from October 2009 (as a new producer of table eggs and its by-products); (b) additional deduction
from taxable income on wages subject to certain terms and conditions; (c) employment of foreign
nationals; (d) tax credit equivalent to the national internal revenue taxes and duties paid on raw
materials and supplies and semi-manufactured products used in producing its export product and
forming part thereof for a period of ten (10) years from start of commercial operations;
(e) simplification of customs procedures for the importation of equipment, spare parts, raw
materials and supplies; (f) access to Customs Bonded Manufacturing Warehouse (CBMW)
subject to Custom rules and regulations, provided firm exports at least 70% of production output;
(g) exemption from wharfage dues, any export tax, duty, impost and fees for a period of ten (10)
years from date of registration; (h) importation of consigned equipment for a period of ten (10)
years from the date of registration, subject to the posting of re-export bond; (i) exemption from
taxes and duties on imported spare parts and consumable supplies for export producers with
CBMW exporting at least 70% of production; (j) tax and duty exemption on the imported
breeding stocks and genetic materials within ten (10) years from the date of registration; (k) tax
credit on tax and duty portion of domestic breeding stocks and genetic materials within ten (10)
years from the date of registration.
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Robina Farms (RF) - Hogs
On January 30, 2008, RF - Hogs was registered with the BOI as an expanding producer of finisher
hogs in RF 11, Antipolo City and RF 12, Bulacan on a non-pioneer status. Under the terms of the
registration and subject to certain requirements, RF - Hogs is entitled to the following fiscal and
non-fiscal incentives: (a) ITH for a period of three (3) years from October 2009 but only from the
sales generated from the registered projects; (b) additional deduction from taxable income on
wages subject to certain terms and conditions; (c) employment of foreign nationals; (d) tax credit
equivalent to the national internal revenue taxes and duties paid on raw materials and supplies and
semi-manufactured products used in producing its export product and forming part thereof for a
period of ten (10) years from start of commercial operations; (e) simplification of customs
procedures for the importation of equipment, spare parts, raw materials and supplies; (f) access to
Customs Bonded Manufacturing Warehouse (CBMW) subject to Custom rules and regulations,
provided firm exports at least 70% of production output; (g) exemption from wharfage dues, any
export tax, duty, impost and fees for a period of ten (10) years from date of registration; (h)
importation of consigned equipment for a period of ten (10) years from the date of registration,
subject to the posting of re-export bond; (i) exemption from taxes and duties on imported spare
parts and consumable supplies for export producers with CBMW exporting at least 70% of
production; (j) tax and duty exemption on the imported breeding stocks and genetic materials
within ten (10) years from the date of registration; (k) tax credit on tax and duty portion of
domestic breeding stocks and genetic materials within ten (10) years from the date of registration.
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Others
The Group has various contingent liabilities arising in the ordinary conduct of business which are
either pending decision by the courts, under arbitration or being contested, the outcome of which
are not presently determinable. In the opinion of management and its legal counsel, the eventual
liability under these lawsuits or claims, if any, will not have a material or adverse effect on the
Groups financial position and results of operations. The information usually required by
PAS 37, Provisions, Contingent Liabilities and Contingent Assets, is not disclosed on the grounds
that it can be expected to prejudice the outcome of these lawsuits, claims, arbitration and
assessments.
The Groups noncash activities pertain to the movement of the cumulative translation adjustment
account and the depreciation of biological assets (breeders) that are capitalized as part of the cost
of new born biological assets (sucklings).
The following non-adjusting events happened subsequent to the respective reporting dates of the
Parent Company and its subsidiaries:
The accompanying consolidated financial statements of the Group were authorized for issue by the
AC and the BOD on January 8, 2016.
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