results of operations - Aboitiz

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RESULTS OF OPERATIONS The increase in the Food Group’s contribution to AEV’s income came from higher margins in the flour business, as well as increases in sales volumes in its swine and feeds businesses. PILMICO FOODS CORPORATION FOOD 26 ABOITIZ EQUITY VENTURES ANNUAL REPORT 2006
RESULTS OF OPERATIONS FOOD Pilmico Foods Corporation (PFC) posted a 34% increase in income contribution to AEV, turning in π510 million in 2006. This represents 13% of the total income from AEV’s business segments. The increase in the Food Group’s contribution came from higher margins in the flour business, as well as increases in sales volumes in its swine and feeds businesses. Despite the high volatility of raw material prices and increasing freight costs, the Group was able to effectively manage margins and turn in a respectable profit. In August 2006, Fil-Am Foods, Inc. completed the π33-million expansion of its breeder capacity at its Breeder Farm 1 in Aranguren, Tarlac using modular American swine breeding equipment. Fil-Am Foods currently grows hogs out-to-market size in a combination of rented and contract-growing “offsite” farms spread around Central Luzon. The company intends to increase its owned-farm capacities with the additional investment of π62 million. This new farm in Cutcut 2, Tarlac, is expected to start producing prime hogs by the last quarter of 2007. Plans are also underway for the construction of a π500-million feed mill in Iligan, in Mindanao to address the growing demand in the Visayas and Mindanao areas. Fil-Am Foods currently grows hogs in both rented and contract-growing “offsite” farms spread around Central Luzon. We are pleased with the overall performance of the company and look forward to continued growth in the coming years. We believe the company and its various businesses are well positioned to take advantage of opportunities that arise as the country’s economy picks up. We have both the financial and managerial resources necessary to exploit growth when it comes. We would like to thank all the team members that make up AEV for their contributions to the company’s success and their unwavering commitment to achieve the group’s goals. To our shareholders, partners and other stakeholders, thank you too for your continued trust and confidence. On November 28, 2006, PFC sold its 50% stake in Pilmico-Mauri Foods Corporation (Pilmico-Mauri) for π100 million to ABF Overseas Limited (ABF Overseas). The divestment has allowed PFC to further concentrate on growing its flour milling, animal feed and swine businesses. Erramon I. Aboitiz EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER Food ABOITIZ EQUITY VENTURES ANNUAL REPORT 2006 27
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