URC And Subs_17Q_Q3FY09 _3_ RTD317 Subs 17q Q3fy09 Disclosure Statement

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UNIVERSAL ROBINA
CORPORATION
110 E. RODRIGUEZ, JR. AVENUE, BAGUMBAYAN, QUEZON CITY, PHILIPPINES 1600, P.O. Box 3542 MM 2800.
TEL. 635.0751 TO 85; 671.2935 TO 42

P.O. BOX 99.AC CUBAO, QUEZON CITY

14 August 2009

Securities and Exchange Commission
Attention:
Corporation and Finance Department
SEC Building, EDSA
Mandaluyong City
Philippine Stock Exchange
Attention:
Ms. Janet A. Encarnacion
Head, Disclosure Department
4F PSE Center, Exchange Road
Ortigas Center, Pasig City
Subject:

URC POSTS NET INCOME OF PHP 2.238 BILLION FOR FIRST THREE
QUARTERS OF FISCAL YEAR 2009

Gentlemen:
Universal Robina Corporation's core earnings before tax, which is operating profit after
equity earnings, net finance costs and other income-net reached Php 2.782 billion .in the first three
quarters of fiscal year 2009, up 3% from the same period last year.
URC's unaudited consolidated net income for the first three quarters of the 2009 fiscal year
(October 2008 to June 2009) reached Php 2.238 billion, compared to the Php 1.054 billion in net
income reported in the same period last year. This 112.3% increase was caused by the strong increase
in our operating income, reversal of foreign exchange losses, and reduction of mark -to-market losses
in our bond holdings experienced over the first two quarters, as the global economy began recovering
and as bond prices normalized.
URC's consolidated net sales and services for the first three quarters of the 2009 fiscal year
amounted to Php 37.632 billion, a 16.2% growth from Php 32.392 billion in the same period last
year.
The largest contributor to the group's sales revenue, URC's branded consumer foods
segment, including the packaging division, increased sales of goods and services by Php 3.831
billion, or 15.2%, to Php 29.053 billion in the first three quarters of fiscal 2009 from the Php 25.222
billion recorded in the same period last year. This increase was attributed mainly to the stellar
performance of our International operations and the resilient growth of our Philippine business.
Net sales of URC's agro-industrial group amounted to Php 4.317 billion for the first three
quarters of fiscal 2009, or 10.4% higher than last year.

A]GSummit1m

Company
..

URC's commodity foods group booked gross sales of Php 6.624 billion for the first three

quartersof fiscal 2009 against Php 5.851 billion in the same period last year, or an increaseof 13.2%.
Total net sales of URC's commodity foods group increased 30.7% to Php 4.262 billion in,the first
three quarters of fiscal 2009, versus Php 3.260 billion in the same period last year.
URC's operating profit improved to Php 3.140 billion, or an increase of 15.7% vs. the same
period last year. This was due to significantly better profitability for our branded consumer foods
units, with our international operations now in the black, and with the expansion of gross margins as
input prices normalized.
Our balance sheet remains healthy. As of the 3rd quarter of fiscal 2009, we have a net debt of
approximately Php 4.291 billion, with a net gearing ratio (net debt over equity) of 0.13.
Attached is the company's Form 17-Q which contains the unaudited financial statements and
management's discussion and analysis of the same.
The above disclosure is being submitted in compliance with the disclosure rules of the
Securities and Exchange Commission and the Philippine Stock Exchange.

Very Truly Yours,

B.1/Sebastian
Senior Vice President
Corporate Information Officer

SECURITIES AND EXCHANGE COMMISSION

SEC FORM 17-Q

QUARTERLY REPORT PURSUANT TO SECTION 17 OF THE SECURITIES
REGULATION CODE AND SRC RULE 17(2)(b) THEREUNDER

For the quarterly period ended June 30, 2009

Commission identification number 9170

BIR Tax Identification No. 000-400-016-000

Universal Robina Corporation
Exact name of issuer as specified in its charter

Quezon City, Philippines
Province, country or other jurisdiction of incorporation or organization

Industry Classification Code: __________ (SEC Use Only)

110 E. Rodriguez Ave., Bagumbayan, Quezon City
Address of issuer’s principal office

671-2935; 635-0751; 671-3954
Issuer’s telephone number, including area code

Not applicable
Former name, former address and former fiscal year, if changed since last report

10.

Securities registered pursuant to Sections 8 and 12 of the Code, or Sections 4 and 8 of the
RSA
Number of Shares of
Common Stock Outstanding and
Amount of Debt Outstanding

Title of Each Class
Common stock, P1.00
Par value

11.

1110
Postal Code

2,152,534,733 shares

Are any or all of the securities listed on the Philippine Stock Exchange?
Yes [ / ]

No [

]

-1-

If yes, state the name of such Stock Exchange and the class/es of securities listed therein
Common stock

Philippine Stock Exchange

12.

Indicate by check mark whether the registrant:
(a)

has filed all reports required to be filed by Section 17 of the Code and SRC Rule 17
thereunder or Sections 11 of the RSA and RSA Rule 11(a)-1 thereunder, and Sections
26 and 141 of the Corporation Code of the Philippines, during the preceding twelve
(12) months (or for such shorter period the registrant was required to file such
reports)
Yes [ / ]

(b)

No [

]

has been subject to such filing requirements for the past ninety (90) days.
Yes [ / ]

No [

]

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

The unaudited consolidated financial statements are filed as part of this Form 17-Q (pages 12 to
56).

Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations

Business Overview
Universal Robina Corporation (URC) is one of the largest branded food product companies in the
Philippines and has a growing presence in other Asian markets. It was founded in 1954 when Mr.
John Gokongwei, Jr. established Universal Corn Products, Inc., a cornstarch manufacturing plant
in Pasig. The Company is involved in a wide range of food-related businesses, including the
manufacture and distribution of branded consumer foods, production of hogs and day-old chicks,
manufacture and distribution of branded and unbranded animal and fish feeds, glucose and
veterinary compounds, flour milling, and sugar milling and refining. The Company is a dominant
player with leading market shares in savory snacks, candies and chocolates, and is a significant
player in biscuits, with leading positions in cookies and pretzels. URC is also the largest player in
the RTD tea market, and is a respectable 2nd player in the coffee business.
The Company operates its food business through operating divisions and wholly-owned or
majority-owned subsidiaries that are organized into three business segments: branded consumer
foods, agro-industrial products and commodity food products.
The branded consumer foods group (BCFG), the Company’s largest segment, consists of three
main divisions: snack foods, beverage and grocery divisions, although the Company conducts
some of its branded consumer foods operations through its wholly-owned or majority-owned
-2-

subsidiaries and joint venture companies (i.e. Hunt-URC and Nissin-URC). The Company has a
strong brand portfolio created and supported through continuous product innovation, extensive
marketing and experienced management. Its brands are household names in the Philippines and a
growing number of consumers across Asia are purchasing the Company’s branded consumer food
products. This segment also includes the packaging division which manufactures BOPP films
primarily used in packaging.
The Company’s agro-industrial group (AIG) operates three divisions, which is engaged in hog and
poultry farming (Robina Farms or “RF”), the manufacture and distribution of animal and fish
feeds, glucose and soya products (Unversal Corn Products or “UCP”), and the production and
distribution of animal health products (Robichem).
The Company’s commodity food group (CFG) engages in sugar-milling and refining through its
Sugar divisions: URSUMCO, CARSUMCO, SONEDCO and PASSI; and flour-milling and pasta
manufacturing and marketing through URC Flour division. The group supplies all the flour and
sugar needs of the BCFG.
The Company is a core subsidiary of JG Summit Holding, Inc. (JGSHI), one of the largest
conglomerates listed in the Philippine Stock Exchange based on total net sales. JGSHI has
substantial interests in property development, hotel management, banking and financial services,
telecommunications, petrochemicals, air transportation and business interests in other sectors,
including power generation and insurance.
The following table summarizes the sale of goods and services of URC for the nine months ended
June 30, 2009 and June 30, 2008:
Nine months ended June 30

In millions
BCFG
Domestic
International
Packaging
BCFG Total

2009

2008

=19,701
P
8,539
28,240
813
29,053

=17,489
P
6,603
24,092
1,130
25,222

4,317

3,911

4,262
=37,632
P

3,259
=32,392
P

AIG
CFG
Total

Results of Operations
Nine Months Ended June 30, 2009 versus June 30, 2008
URC generated a consolidated sale of goods and services of P
=37.632 billion for the nine months
ended June 30, 2009, 16.2% higher than the revenues posted in the same period last year. Sale of
goods and services performance by business segment follows:
Sale of goods and services in URC’s BCFG, excluding packaging division, increased by P
=4.148
billion, or 17.2%, to P
=28.240 billion for the nine months of fiscal 2009 from P
=24.092 billion
registered in the same period of last year. This increase was due to a 12.6% increase in net sales
-3-

from BCFG’s domestic operations which was largely driven by the strong performance of its
snackfoods which posted a 14.7% growth on the back of price increases implemented at the end of
last fiscal year and in the first quarter of the current period coupled by increase in volume.
Beverage sales value grew by 3.2% due to higher selling price and increased sales volume of
coffee and juice products. Sales of grocery products improved by 13.1% to P
=2.186 billion due to
strong Noodles sales. Export and food service also posted a 36.3% growth in sales value.
BCFG International sales significantly increased by 29.3% to P
=8.539 billion for the nine months
of fiscal 2009 from P
=6.603 billion in the same period last year. In US dollar amount, sales
registered an increase of 14.8% from US$155 million posted for the nine months of fiscal 2008 to
US$178 million recorded in the same period of this year due to considerable increase in sales
volume by 33.3%. This was supported by higher revenues from Singapore, Indonesia, Hong Kong
and Vietnam.
Sale of goods and services of BCFG, excluding packaging division, accounted for 75.0% of total
URC consolidated sale of goods and services for the nine months ended June 30, 2009.
Sales in URC’s packaging division went down by 28.1% to P
=813 million for the nine months of
fiscal 2009 from P
=1.130 billion posted in the same period last year due to decrease in sales volume
and commodity prices worldwide.
Sale of goods and services in URC’s AIG amounted to P
=4.317 billion for the nine months of fiscal
2009, a 10.4% increase from P
=3.911 billion recorded in the same period last year. URC’s feed
business grew by 11.7% on the back of higher prices with slight increase in volume as hog and
poultry raisers contended with the rising feed costs in the first quarter of this year. Farm business
grew by 9.3% due to higher sales volume and prices of hogs and increase in sales of commercial
table eggs and broiler this year.
Sale of goods and services in URC’s CFG amounted to P
=4.262 billion for the nine months of fiscal
2009 or up 30.8% from P
=3.259 billion reported in the same period last year. This was primarily
due to increase in sales volume of sugar as a result of better performance by SONEDCO this year
against last year coupled with higher volume and average selling prices of flour.
URC’s cost of sales consists primarily of raw and packaging materials costs, manufacturing costs
and direct labor costs. Cost of sales increased by P
=4.087 billion, or 16.6%, to P
=28.656 billion for
the nine months of fiscal 2009 from P
=24.569 billion reported in the same period last year. Cost of
sales went up due to increases in sales volume coupled with significant increases in costs of major
raw materials during the first quarter of fiscal 2009.
URC’s gross profit for the nine months of fiscal 2009 amounted to P
=8.976 billion, an increase of
=1.152 billion or 14.7% from P
P
=7.824 billion posted in the same period last year. Gross profit
margin is still down by 30 basis points versus same period last year but has improved over the
first half of the year as the Company took advantage of lower input costs.
URC’s selling and distribution costs, and general and administrative expenses consist primarily of
compensation benefits, advertising and promotion costs, freight and other selling expenses,
depreciation, repairs and maintenance expenses and other administrative expenses. Selling and
distribution costs, and general and administrative expenses increased by P
=727 million or 14.2% to
=5.835 billion for the nine months of fiscal 2009 from P
P
=5.108 billion registered in the same period
of fiscal 2008. This increase resulted primarily from the following factors:
•

25.8% or P
=433 million increase in advertising and promotion costs to P
=2.111 billion for
the nine months of fiscal 2009 from P
=1.678 billion in the same period last year. This is to
-4-

support the new SKUs launched and boost up sales of existing products in light of
increasing market competition.
•

9.0% or P
=107 million increase in freight and delivery charges to P
=1.291 billion for the
nine months of fiscal 2009 from P
=1.184 billion in the same period last year. This was due
to increase in trucking and shipping costs associated with higher fuel prices and increased
volume.

•

33.9% or P
=85 million increase in repairs and maintenance expense to P
=336 million for the
nine months of fiscal 2009 from P
=251 million in the same period last year which was
substantially due to computer maintenance costs.

•

5.5% or P
=70 million increase in compensation and benefits to P
=1.339 billion for the nine
months of fiscal 2009 from P
=1.269 billion in the same period last year due to annual
salary adjustments.

As a result of the above factors, operating income increased by P
=425 million, or 15.7% to
P3.140 billion for the nine months of fiscal 2009 from P
=
=2.715 billion reported in the same period
of fiscal 2008. The increase specifically came from BCFG’s stellar performance with
International operations remaining in the black which covered up the decline in operating income
of AIG and CFG due to contraction in margins.
URC’s finance revenue consists of interest income from investments in financial instruments,
money market placements, savings and dollar deposits and dividend income from investment in
equity securities. Finance revenue decreased by P
=50 million or 5.5% to P
=864 million for the nine
months of fiscal 2009 from P
=914 million in the same period of fiscal 2008 due to lower level of
financial assets during the period.
Market valuation loss on financial instruments at FVPL decreased by P
=854 million or 66.6% to
=428 million for the nine months of fiscal 2009 from P
P
=1.282 billion in the same period of fiscal
2008 due to recovery in the market values of investments in bonds and equity securities in the third
quarter of fiscal 2009 which reduced the significant losses reported in the 1st half of this year.
Equity in net income of a joint venture amounted to P
=23 million for the nine months of fiscal 2009
and 2008 due to stable net income of Hunt-Universal Robina Corporation.
URC’s finance costs consist mainly of interest expense which increased by P
=335 million or 34.6%,
to P
=1.304 billion for the nine months of fiscal 2009 from P
=969 million recorded in the same period
of fiscal 2008 due to increase in financial debt and interest accretion of available-for-sale
investments.
Foreign exchange gain - net amounted to P
=146 million for the nine months of fiscal 2009, 223.7%
increase from P
=118 million foreign exchange loss reported in the same period last year due to
effects of realized foreign exchange and currency translation gains.
Other income - net consists of gain (loss) on sale of fixed assets and investments, amortization of
bond issue costs, rental income, and miscellaneous income and expenses. Other income - net
doubled from P
=29 million for the nine months of 2008 to P
=58 million in the same period this year
due to gain on bond re-acquisition this year.
The Company recognized provision for income tax of P
=170 million for the nine months of fiscal
2009, 34.1% decrease from P
=258 million in the same period last year due to lower taxable income
of domestic companies.
-5-

URC's unaudited net income for the nine months of fiscal 2009 amounted to P
=2.238 billion, higher
by P
=1.184 billion or 112.3% from P
=1.054 billion of the same period last year, due to higher
operating income, decrease in mark-to-market loss in bond and equity holdings as a result of
recovery of market prices during the third quarter of this year, foreign exchange gains and lower
taxable income.
URC’s unaudited core earnings before tax (operating profit after equity earnings, net finance costs
and other income - net) for the nine months of fiscal 2009 amounted to P
=2.782 billion, an increase
of 2.6% from P
=2.712 billion reported in the same period last year.
Net income attributable to equity holders of the parent increased by P
=1.027 billion or 97.9% to
=2.075 billion for the nine months of fiscal 2009 from P
P
=1.048 billion in the same period last year
as a result of the factors discussed above.
Minority interest represents primarily the share in the net income (loss) attributable to minority
shareholders of the following subsidiaries of URC: URC International, URC’s direct subsidiary in
which it holds approximately 77.0% economic interest and Nissin- URC, URC’s 65.0%-owned
subsidiary. Minority interest in net income of subsidiaries increased from P
=6 million for the nine
months of fiscal 2008 to P
=163 million for the same period this year due to net income reported by
URC International on the back of surging profits in Thailand, Vietnam, Malaysia, Singapore and
Hong Kong.
URC reported an EBITDA (operating income plus depreciation and amortization) of P
=5.360
billion for the nine months of fiscal 2009, 13.4% higher than P
=4.725 billion recorded in the same
period of fiscal 2008.
The Company is not aware of any material off-balance sheet transactions, arrangements and
obligations (including contingent obligations), and other relationship of the Company with
unconsolidated entities or other persons created during the reporting period that would have a
significant impact on the Company’s operations and/or financial condition.

Financial Position
June 30, 2009 vs. September 30, 2008
URC’s financial position remained to be strong with a current ratio of 2.2:1 as of June 30, 2009.
Financial debt to equity ratio of 0.62:1 for the period is within comfortable level. Book value per
share increased to P
=15.46 as at June 30, 2009 from P
=14.65 as at September 30, 2008. Total
outstanding common shares as of June 30, 2009 increased by 3 million shares to 2.153 billion
shares from 2.150 billion shares as at September 30, 2008.
The Company’s cash requirements have been sourced through cash flow from operations. Net
cash provided by operating activities for the nine months ended June 30, 2009 was P
=4.666 billion.
Net cash used in investing activities for the period amounted to P
=3.479 billion mainly due to
acquisition of property, plant and equipment. Net cash provided by financing activities amounted
to P
=1.076 billion mainly from the issuance in March 2009 of fixed term Peso notes for working
capital requirement of the company, net of payment of short-term borrowings and cash dividends.
As of June 30, 2009, the Company is not aware of any events that will trigger direct or contingent
financial obligation that is material to the Company, including any default or acceleration of an
obligation.

-6-

Material Changes in Fiscal 2009 Financial Statements
(Increase/Decrease of 5% or more versus FY 2008)
Income Statements - Nine months ended June 30, 2009 versus same period in fiscal 2008
16.2% increase in sale of goods and services was due to the following:
Sale of goods and services in URC’s BCFG, excluding packaging division, increased by P
=4.148
billion, or 17.2%, to P
=28.240 billion for the nine months of fiscal 2009 from P
=24.092 billion
registered in the same period of last year. This increase was due to a 12.6% increase in net sales
from BCFG’s domestic operations which was largely driven by the strong performance of its
snackfoods which posted a 14.7% growth on the back of price increases implemented at the end of
last fiscal year and in the first quarter of the current period coupled by increase in volume.
Beverage sales value grew by 3.2% due to higher selling price and increased sales volume of
coffee and juice products. Sales of grocery products improved by 13.1% to P
=2.186 billion due to
strong Noodles sales. Export and food service also posted a 36.3% growth in sales value.
BCFG International sales significantly increased by 29.3% to P
=8.539 billion for the nine months
of fiscal 2009 from P
=6.603 billion in the same period last year. In US dollar amount, sales
registered an increase of 14.8% from US$155 million posted for the nine months of fiscal 2008 to
US$178 million recorded in the same period of this year due to considerable increase in sales
volume by 33.3%. This was supported by higher revenues from Singapore, Indonesia, Hong Kong
and Vietnam.
Sale of goods and services of BCFG, excluding packaging division, accounted for 75.0% of total
URC consolidated sale of goods and services for the nine months ended June 30, 2009.
Sales in URC’s packaging division went down by 28.1% to P
=813 million for the nine months of
fiscal 2009 from P
=1.130 billion posted in the same period last year due to decrease in sales volume
and commodity prices worldwide.
Sale of goods and services in URC’s AIG amounted to P
=4.317 billion for the nine months of fiscal
2009, a 10.4% increase from P
=3.911 billion recorded in the same period last year. URC’s feed
business grew by 11.7% on the back of higher prices with slight increase in volume as hog and
poultry raisers contended with the rising feed costs in the first quarter of this year. Farm business
grew by 9.3% due to higher sales volume and prices of hogs and increase in sales of commercial
table eggs and broiler this year.
Sale of goods and services in URC’s CFG amounted to P
=4.262 billion for the nine months of fiscal
2009 or up 30.8% from P
=3.259 billion reported in the same period last year. This was primarily
due to increase in sales volume of sugar as a result of better performance by SONEDCO this year
against last year coupled with higher volume and average selling prices of flour.
16.6% increase in cost of sales
Due to increase in sales volume and cost of major raw materials in the first quarter of fiscal 2009.
17.0% increase in selling and distribution costs
Due to increase in advertising and promotions costs, freight and delivery charges and personnelrelated expenses.
5.4% increase in general and administrative expenses
Due to increase in computer maintenance costs and technical expenses.

-7-

5.5% decrease in finance revenue
Due to lower level of financial assets during the period.
66.6% decrease in mark-to-market loss on financial instruments at FVPL
Due to recovery in market values of investments in bonds and equity securities during the third
quarter of fiscal 2009.
34.6% increase in finance costs
Due to increase in level of financial debt during the period.
100.0% increase in impairment loss
Due to impairment of net assets of the disposal group held for sale.
223.7% increase in foreign exchange gain - net
Due to realized gain on settled foreign currency denominated short-term liabilities.
100.0% increase in other income - net
Due to gain in bond re-acquisition this year.
34.1% decrease in provision for income tax
Due to lower taxable income during the period.
2,598.4% increase in minority interest
Due to net income reported by URC International this period against net loss posted in the same
period last year.
Balance sheets – June 30, 2009 versus September 30, 2008
102.1 % increase in cash and cash equivalents
Due to proceeds from notes issuance.
7.8% decrease in inventories
Due to decrease in raw materials, both on hand and in-transit.
14.9% decrease in other current assets
Due to decrease in current portion of input tax and prepaid advertising costs.
42.4% decrease in assets of disposal group held for sale
Due to impairment of certain portion of assets, net of effect of foreign currency translation.
5.8% increase in property, plant and equipment
Due to acquisition of machineries and equipment as a result of business expansion.
7.4% decrease in investment in a joint venture
Due to dividends received during the period from HURC.
8.9% increase in other noncurrent assets
Due to increase in noncurrent portion of input tax and miscellaneous deposits.
14.6% decrease in short-term debt
Due to maturity and payment of loans, net of availments.

-8-

8.5% increase in accounts payable and accrued expenses
Due to increase in accrued advertising and promotion expenses, contracted services and interest
expense.
37.4% decrease in trust receipts and acceptances payable
Due to payment during the period.
33.0% increase in income tax payable
Due to provision for income tax during the period, net of applicable creditable withholding taxes.
90.2 % decrease in liabilities associated with assets held for sale
Due to adjustment of certain portion of liabilities associated with impairment of the assets held for
sale, net of effect of foreign currency translation.
30.9% increase in long-term debt, including current portion
Due to issuance of fixed term peso notes for working capital requirements, net of amortization
payment.
33.3% increase in deferred income tax - net
Due to reversal of deferred income tax for realized forex loss.
8.0% increase in retained earnings
Due to net income, net of cash dividends paid.
100.0% decrease in deposits for stock subscriptions
Due to application of deposit for the issuance of shares as approved by the SEC.
32.0% decrease in unrealized loss on AFS
Due to increase in market values of available-for-sale investments.
24.7% increase in equity attributable to minority interests
Due to net income reported by URC International this year against net loss last year and higher net
income of NURC this year.
The Company’s key performance indicators are employed across all businesses. Comparisons are
then made against internal target and previous period’s performance. The Company and its
significant subsidiaries’ top five (5) key performance indicators are as follows: (in Million Pesos)

Universal Robina Corporation (Consolidated)
YTD June 2009

YTD June 2008

Index

Revenue
EBIT
EBITDA
Net Income

=37,632
P
3,140
5.360
2,238

P
=32,392
2,715
4,725
1,054

116
116
113
212

Total assets

61,005

61,167

100

-9-

URC International
YTD June 2009
Revenue
EBIT
EBITDA
Net Income (Loss)
Total assets

=8,420
P
717
1,320
587
13,925

YTD June 2008
P
=
6,423
(78)
443
(55)
11,368

Index
131
1,119
298
1,267
122

Nissin - URC
YTD June 2009

Index

P
=936
90
115
71
697

YTD June 2008
P
=
855
72
97
59
693

URC Philippines, Limited
YTD June 2009

YTD June 2008

Index

P
=–
–
–
(919)
16,854

–
–
–
8
84

Revenue
EBIT
EBITDA
Net Income
Total assets

Revenue
EBIT
EBITDA
Net Loss
Total assets

P
=–
–
–
(77)
14,157

Universal Robina (Cayman), Ltd.
YTD June 2009
Revenue
EBIT
EBITDA
Net Income
Total assets

P
=–
–
–
1,025
8,741

- 10 -

YTD June 2008
P
=
–
–
–
744
7,004

109
125
119
120
101

Index
–
–
–
138
125

- 11 -

UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousand Pesos)
Unaudited
June 30
2009

Audited
September 30
2008

P4,477,761
=
5,919,253
6,483,868
6,334,713
7,164,927
882,071
31,262,593
113,652
31,376,245

=2,215,628
P
5,979,185
6,304,843
6,175,874
7,774,455
1,036,364
29,486,349
197,417
29,683,766

25,746,611
1,380,496
1,644,687
243,811
86,156
76,304
450,487
29,628,552
=61,004,797
P

24,327,344
1,443,260
1,646,763
243,811
93,057
79,003
413,631
28,246,869
=57,930,635
P

P6,890,602
=
5,387,082
1,879,558
27,603
28,176
14,213,021

=8,069,508
P
4,964,942
3,000,776
20,762
48,032
16,104,020

856
14,213,877

8,727
16,112,747

ASSETS
Current Assets
Cash and cash equivalents (Note 6)
Financial assets at fair value through profit and loss (Note 7)
Available-for-sale investments (Note 8)
Receivables - net (Note 9)
Inventories (Note 10)
Other current assets (Note 11)
Assets of disposal group classified as held for sale
Total Current Assets
Noncurrent Assets
Property, plant and equipment - net (Note 12)
Biological assets
Intangible assets (Note 13)
Net pension assets
Investments in a joint venture (Note 14)
Investment properties (Note 15)
Other noncurrent assets (Note 16)
Total Noncurrent Assets

LIABILITIES AND EQUITY
Current Liabilities
Short-term debt (Note 17)
Accounts payable and other accrued liabilities (Note 18)
Trust receipts and acceptances payable (Note 10)
Income tax payable
Current portion of long-term debt (Note 19)
Liabilities directly associated with assets of disposal group
classified as held for sale
Total Current Liabilities

(Forward)

- 12 -

Noncurrent Liabilities
Long-term debt - net of current portion (Note 19)
Deferred tax liabilities - net
Total Noncurrent Liabilities
Total Liabilities
Equity
Equity attributable to equity holders of the parent
Paid-up capital (Note 20)
Retained earnings (Note 20)
Deposits for future stock subscriptions (Note 20)
Cumulative translation adjustments
Unrealized loss on available-for-sale investments
(Note 8)
Treasury shares (Note 20)
Equity attributable to minority interests
Total Equity

See accompanying Notes to Unaudited Consolidated Financial Statements.

- 13 -

Unaudited
June 30
2009

Audited
September 30
2008

=12,373,636
P
324,896
12,698,532
26,912,409

=9,429,770
P
243,688
9,673,458
25,786,205

13,455,557
20,735,391
–
576,686

13,429,514
19,198,256
26,043
575,324

(561,606)
(934,713)
33,271,315
821,073
34,092,388
=61,004,797
P

(826,240)
(916,666)
31,486,231
658,199
32,144,430
=57,930,635
P

UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(In Thousand Pesos, Except Per Share Amount)
Quarters ended June 30

Nine Months ended June 30

2009

2008

2009

2008

=11,945,493
P

=11,238,429
P

=37,631,809
P

=32,392,483
P

COST OF SALES

8,919,835

8,579,410

28,656,084

24,568,822

GROSS PROFIT

3,025,658

2,659,019

8,975,725

7,823,661

(1,520,945)

(1,316,563)

(4,546,736)

(3,885,572)

(426,646)

(433,410)

(1,288,611)

(1,222,988)

1,078,067

909,046

3,140,378

2,715,101

FINANCE REVENUE

257,262

282,146

864,302

913,775

MARKET VALUATION GAIN (LOSS) ON
FINANCIAL INSTRUMENTS AT FAIR VALUE
THROUGH PROFIT OR LOSS (Note 7)

723,900

(508,881)

(427,655)

SALE OF GOODS AND SERVICES

SELLING AND DISTRIBUTION COSTS
GENERAL AND ADMINISTRATIVE EXPENSES
OPERATING INCOME

4,393

EQUITY IN NET INCOME OF A JOINT VENTURE

(496,163)

FINANCE COSTS

(969,041)

232,117

152,694

146,147

(118,231)

21,367

814

58,147

29,018

1,820,943

556,964

2,407,883

1,312,295

63,723

271

169,739

258,293

= 1,757,220
P

=556,693
P

=2,238,144
P

P
=1,054,002

= 1,673,244
P
83,976
= 1,757,220
P

=553,795
P
2,898
=556,693
P

=2,075,270
P
162,874
=2,238,144
P

=1,047,966
P
6,036
=1,054,002
P

=0.78
P

=0.25
P

=0.97
P

=0.48
P

OTHER INCOME – NET

PROVISION FOR INCOME TAX

ATTRIBUTABLE TO
Equity holders of the parent
Minority interests

(1,304,386)

23,458

–

FOREIGN EXCHANGE GAIN (LOSS) – NET

NET INCOME

(281,797)

23,099

–

IMPAIRMENT LOSS

INCOME BEFORE INCOME TAX

2,942

(1,281,785)

BASIC/DILUTED EARNINGS PER SHARE
ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT (Note 21)

See accompanying Notes to Unaudited Consolidated Financial Statements.

- 14 -

(92,149)

–

UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In Thousand Pesos, except Number of Shares)
Nine Months Ended June 30

CAPITAL STOCK - =
P1 par value (Note 20)
Preferred stock
Authorized - 2,000,000 shares
Issued - none
Common stock
Authorized - 2,998,000,000 shares in 2009 and 2008
Issued - 2,221,851,481 shares in 2009 and 2008
Additional issuance
Balance at end of period
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year
Additional issuance
Balance at end of period
PAID-UP CAPITAL
RETAINED EARNINGS (Note 20)
Appropriated
Balance at beginning of year
Balance at end of period
Unappropriated
Balance at beginning of year
Cash dividends
Net income
Balance at end of period
Balance at end of period
DEPOSITS FOR FUTURE STOCK SUBSCRIPTIONS
Balance at beginning of year
Application of deposit
Balance at end of period
CUMULATIVE TRANSLATION ADJUSTMENTS
Balance at beginning of year
Adjustments
Balance at end of period
UNREALIZED LOSS ON AVAILABLE-FOR-SALE
INVESTMENTS (Note 12)
Balance at beginning of year
Changes in fair value
Balance at end of period
(Forward)

- 15 -

2009

2008

P
= 2,221,852
5,787
2,227,639

=2,221,852
P
–
2,221,852

11,207,662
20,256
11,227,918
13,455,557

11,207,662
–
11,207,662
13,429,514

3,000,000
3,000,000

16,198,256
(538,134)
2,075,269
17,735,391
20,735,391

17,300,464
(1,480,499)
1.047,966
16,867,931
19,867,931

26,043
(26,043)
–

26,043
–
26,043

575,324
1,362
576,686

544,387
66,673
611,060

(826,240)
264,634
(561,606)

–
–
–

Nine Months Ended June 30

TREASURY SHARES (Note 20)
Balance at beginning of year
Acquisition
Balance at end of period
EQUITY ATTRIBUTABLE TO MINORITY INTERESTS
Balance at beginning of year
Adjustments
Balance at end of period
See accompanying Notes to Unaudited Consolidated Financial Statements.

- 16 -

2009

2008

=(916,666)
P
(18,047)
(934,713)

P–
=
(692,552)
(692,552)

658,199
162,874
821,073
=34,092,388
P

695,295
6,036
701,331
=33,943,327
P

UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousand Pesos)
Nine Months Ended June 30

2009

2008

P
=
2,407,883

=1,312,295
P

2,219,630

2,010,364

427,655
1,304,386
(864,302)
92,149

1,281,785
969,041
(913,775)
–

28,924
(23,740)
(23,099)
(20,819)
1,571
–
–
5,550,238

30,761
(48,944)
(23,458)
(3,710)
5,217
58,011
4,677,587

44,361
609,527
154,293

(1,028,153)
(5,473,262)
(203,311)

CASH FLOWS FROM OPERATING
ACTIVITIES
Income before income tax
Adjustments for:
Depreciation and amortization
Market valuation loss on financial instruments
at fair value through profit and loss
Finance cost
Finance revenue
Impairment loss on asset held for disposal
Loss arising from changes in fair value less
estimated point-of-sale cost of swine stocks
Net unrealized foreign exchange gain
Equity in net income of a joint venture
Gain on bond re-acquisition
Loss (gain) on sale of financial assets at FVPL
Gain on sale of property and equipment
Pension expense
Operating income before changes in working capital
Decrease (increase) in:
Receivables
Inventories
Other current assets
Increase (decrease) in:
Accounts payable and other accrued liabilities
Trust receipts and acceptances payable
Cash generated from operations
Interest paid
Interest received
Income taxes paid
Net cash provided by operating activities
(Forward)

- 17 -

(103,005)
(1,121,218)
5,134,196
(1,196,130)
809,196
(81,689)
4,665,573

623,378
3,530,495
2,126,734
(829,638)
1,058,318
(192,239)
2,163,175

Nine Months Ended June 30
2009
2008
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
Proceeds from sale of property and equipment
Disposal (acquisition) of financial assets at
fair value through profit or loss - net
Dividends received from a joint venture
Decrease (increase) in:
Biological assets
Other assets
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Net availments (payments) of:
Short-term borrowings
Long – term debt
Cash dividends paid
Acquisition of company’s shares
Net cash provided by (used in) financing activities
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS AT END OF
YEAR
See accompanying Notes to Unaudited Consolidated Financial Statements.

- 18 -

=(3,459,453)
P
–

=(3,101,365)
P
86,299

(46,595)
30,000

2,292,556
25,000

33,841
(36,856)
(3,479,063)

(294,563)
(552,027)
(1,544,100)

(1,088,163)
2,719,967
(538,134)
(18,047)
1,075,623

4,250,226
(6,110,411)
(1,480,499)
(692,552)
(4,033,236)

2,262,133

(3,414,161)

2,215,628

5,055,486

=4,477,761
P

=1,641,325
P

UNIVERSAL ROBINA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(In Thousand Pesos, Except Per Share Amount)

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. The registered office address of
the Parent Company is 110 E. Rodriguez Avenue, Bagumbayan, Quezon City, Philippines.
The Parent Company is a majority owned subsidiary of JG Summit Holdings, Inc. (“the
ultimate parent” 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 agroindustrial 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 manufacture and marketing of pasta. 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., which manufactures polyethylene terephthalate (PET) bottles and
printed flexible packaging materials. The Parent Company’s packaging division is included in
the branded consumer food segment.
Certain operations of the Parent Company and a certain consolidated subsidiary 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 a
certain subsidiary are entitled to certain fiscal and non-fiscal incentives, including among
others, an income tax holiday (ITH) for a period of four (4) years to six (6) years from
respective start dates of commercial operations. The Group is also subject to certain
regulations with respect to, among others, product composition, packaging, labeling,
advertising and safety.

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) investments 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 point-of-sale costs.

- 19 -

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
(except certain consolidated foreign subsidiaries), is the Philippine Peso.
These interim consolidated financial statements followed the same accounting policies by
which the most recent annual audited consolidated financial statements have been prepared.
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:

Subsidiaries
CFC Clubhouse, Incorporated
CFC Clubhouse Property, Inc.
URC Confectionary Corporation
CFC Corporation
South Luzon Greenland, Inc.
Bio-Resource Power Generation Corporation
(formerly Universal Robina Sugar Milling
Corporation)
Southern Negros Development Corporation
(SONEDCO)
Nissin – URC
URC Philippines, Limited (URCPL)
URC Asean Brands Co., Ltd.
Hong Kong China Foods Co., Ltd.
URC International Co. Ltd. (URCICL)
Universal Robina (Cayman), Ltd. (URCL)
Shanghai Peggy Foods Co., Ltd.
Tianjin Pacific Foods Manufacturing Co., Ltd.
URC China Commercial Co. Ltd.
Xiamen Tongan Pacific Food Co., Ltd.
Panyu Peggy Foods Co., Ltd.
URC Hong Kong Company Limited (formerly
Hong Kong Peggy Snack Foods Co., Limited)
PT URC Indonesia
URC Snack Foods (Malaysia) Sdn. Bhd.
(formerly Pacific World Sdn. Bhd.)
Ricellent Sdn. Bhd.
URC Foods (Singapore) Pte. Ltd. (formerly
Pan Pacific Snacks Pte. Ltd.)
Acesfood Network Pte. Ltd.
Advanson International Pte. Ltd.
URC (Thailand) Co., Ltd. (formerly
Thai Peggy Foods Co. Ltd.)
URC Vietnam Co., Ltd.

Country of
Incorporation
Philippines
- do - do - do - do -

Effective Percentage of
Ownership
2008
2009
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00

- do -

100.00

- do - do British Virgin Islands
- do - do - do Cayman Islands
China
- do - do - do - do -

94.00
65.00
100.00
77.00
77.00
77.00
100.00
100.00
100.00
100.00
100.00
90.00

Hong Kong
Indonesia

100.00
100.00

- do Malaysia

91.52
54.03

Singapore
- do - do -

100.00
96.08
100.00

Thailand
Vietnam

100.00
100.00

The consolidated financial statements are prepared using uniform accounting policies for like
transactions and other events in similar circumstances. All significant intercompany
transactions and balances, including intercompany profits and unrealized profits and losses,
are eliminated in the consolidation.

- 20 -

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the
Group obtains control, and continue to be consolidated until the date that such control ceases.
Acquisitions of subsidiaries are accounted for using the purchase method. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the
acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair value at the acquisition date,
irrespective of the extent of any minority interest.
Any excess of the cost of the business combination over the Group’s interest in the net fair
value of the identifiable assets, liabilities and contingent liabilities represents goodwill. Any
excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities over the cost of business combination is recognized in the consolidated
statement of income on the date of acquisition.
Minority interests represent the portion of income or loss and net assets not held by the Group
and are presented separately in the consolidated statement of income and within equity in the
consolidated balance sheet, separately from the parent shareholders’ equity. Acquisitions of
minority interests are accounted for using the parent entity extension method, whereby, the
difference between the consideration and the book value of the share of the net assets acquired
is recognized as goodwill.
New Accounting Standards, Interpretations, and Amendments to Existing Standards Effective
Subsequent to September 30, 2008
The Group will adopt the following standards enumerated below when these become effective.
Except as otherwise indicated, the Group does not expect the adoption of these new and
amended PFRS to have significant impact on its financial statements.
•

PFRS 1, First-time Adoption of PFRS – Cost of an Investment in a Subsidiary, Jointly
Controlled Entity or Associate, (effective for annual periods beginning on or after
January 1, 2009)
The amended PFRS 1 allows an entity, in its separate financial statements, to determine
the cost of investments in subsidiaries, jointly controlled entities or associates (in its
opening PFRS financial statements) as one of the following amounts: a) cost determined in
accordance with PAS 27; b) at the fair value of the investment at the date of transition to
PFRS, determined in accordance with PAS 39; or c) previous carrying amount (as
determined under generally accepted accounting principles) of the investment at the date of
transition to PFRS.

•

PFRS 2, Share-based Payment – Vesting Condition and Cancellations, (effective for
annual periods beginning on or after January 1, 2009)
The standard has been revised to clarify the definition of a vesting condition and
prescribes the treatment for an award that is effectively cancelled. It defines a vesting
condition as a condition that includes an explicit or implicit requirement to provide
services. It further requires non-vesting conditions to be treated in a similar fashion to
market conditions. Failure to satisfy a non-vesting condition that is within the control of
either the entity or the counterparty is accounted for as cancellation. However, failure to
satisfy a non-vesting condition that is beyond the control of either party does not give rise
to a cancellation.

- 21 -

•

PFRS 8, Operating Segments, (effective for annual periods beginning on or after January
1, 2009)
PFRS 8 will replace PAS 14, Segment Reporting, and adopts a full management approach
to identifying, measuring and disclosing the results of an entity’s operating segments. The
information reported would be that which management uses internally for evaluating the
performance of operating segments and allocating resources to those segments. Such
information may be different from that reported in the consolidated balance sheet and
consolidated statement of income and the Group will provide explanations and
reconciliations of the differences. This Standard is only applicable to an entity that has
debt or equity instruments that are traded in a public market or that files (or is in the
process of filing) its financial statements with a securities commission or similar party.
The Group is in the process of assessing the impact of this Standard to its current manner
of reporting segment information.

•

Amendments to PAS 1, Presentation of Financial Statements, (effective for annual
periods beginning on or after January 1, 2009)
This Amendment introduces a new statement of comprehensive income that combines all
items of income and expenses recognized in the profit or loss together with ‘other
comprehensive income’ (OCI). Entities may choose to present all items in one statement,
or to present two linked statements, a separate statement of income and a statement of
comprehensive income. This Amendment also requires additional requirements in the
presentation of the balance sheet and owner’s equity as well as additional disclosures to be
included in the financial statements. The Group will assess and evaluate the options
available under the amendment to PAS 1, and will comply with such changes once
effective.

•

PAS 23, Borrowing Costs, (effective for annual periods beginning on or after January 1,
2009)
The standard has been revised to require capitalization of borrowing costs when such
costs relate to a qualifying asset. A qualifying asset is an asset that necessarily takes a
substantial period of time to get ready for its intended use or sale. In accordance with the
transitional requirements in the standard, the Group will adopt this as a prospective
change. Accordingly, borrowing costs will be capitalized on qualifying assets with a
commencement date after January 1, 2009. No changes will be made for borrowing costs
incurred to this date that have been expensed.

•

Amendments to PAS 27, Consolidated and Separate Financial Statements – Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or Associate, (effective for annual
periods beginning on or after July 1, 2009)
Amendments to PAS 27 will be effective on January 1, 2009 which has changes in respect
of the holding companies separate financial statements including (a) the deletion of ‘cost
method’, making the distinction between pre- and post-acquisition profits no longer
required; and (b) in cases of reorganizations where a new parent is inserted above an
existing parent of the group (subject to meeting specific requirements), the cost of the
subsidiary is the previous carrying amount of its share of equity items in the subsidiary
rather than its fair value. All dividends will be recognized in profit or loss. However, the
payment of such dividends requires the entity to consider whether there is an indicator of
impairment. The Group does not expect significant changes in its

- 22 -

accounting policies when it adopts the foregoing accounting changes effective January 1,
2009.
•

Amendments to PAS 32, Financial Instruments: Presentation and PAS 1 Presentation of
Financial Statements – Puttable Financial Instruments and Obligation Arising on
Liquidation, (effective for annual periods beginning on or after January 1, 2009)
These amendments specify, among others, that puttable financial instruments will be
classified as equity if they have all of the following specified features: (a) The instrument
entitles the holder to require the entity to repurchase or redeem the instrument (either on an
ongoing basis or on liquidation) for a pro rata share of the entity’s net assets, (b) The
instrument is in the most subordinate class of instruments, with no priority over other
claims to the assets of the entity on liquidation,(c) All instruments in the subordinate class
have identical features (d) The instrument does not include any contractual obligation to
pay cash or financial assets other than the holder’s right to a pro rata share of the entity’s
net assets, and (e) The total expected cash flows attributable to the instrument over its life
are based substantially on the profit or loss, a change in recognized net assets, or a change
in the fair value of the recognized and unrecognized net assets of the entity over the life of
the instrument.

Significant Accounting Policies
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 duty. 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.
Rendering of services
Revenue derived from tolling activities, whereby raw sugar from traders and planters is
converted into refined sugar, is recognized as revenue when the related services have been
rendered.
Dividend income
Dividend income is recognized when the shareholder’s 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 on-going leases.
Interest income
Interest is recognized as it accrues (using the effective interest rate 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).

- 23 -

Cash and Cash Equivalents
Cash includes cash on hand and in banks. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash with original maturities of
three (3) months or less from dates of placement, and that are subject to an insignificant risk
of changes in value.
Recognition of Financial Instruments
Date of recognition
Financial instruments within the scope of PAS 39, Financial Instruments: Recognition and
Measurement, are recognized in the consolidated balance sheet when the Group becomes a
party to the contractual provisions of the instrument. Purchases or sales of financial assets
that require delivery of assets within the time frame established by regulation or convention in
the marketplace are recognized on the settlement date. Derivatives are recognized on trade
date basis.
Initial recognition of financial instruments
Financial instruments are recognized initially at fair value. Except for financial instruments
fair value through profit or loss valued at fair value through profit or loss (FVPL), the initial
measurement of financial assets includes transaction costs. The Group classifies its financial
assets into the following categories: financial assets at FVPL, held-to-maturity (HTM)
investments, AFS investments, and loans and receivables. The Group classifies its financial
liabilities into financial liabilities at FVPL and other financial liabilities. 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.
Reclassification of financial assets
A financial asset is reclassified out of the FVPL category when the following conditions are
met:
•
•

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.
Determination of fair value
The fair value for financial instruments traded in active markets at the balance sheet date is
based on their quoted market price or dealer price quotations (bid price for long positions and
ask price for short positions), without any deduction for transaction costs. When current bid
and ask prices are not available, the price of the most recent transaction provides evidence of
the current fair value as long as there has not been a significant change in economic
circumstances since the time of the transaction.
For all other financial instruments not listed in an active market, the fair value is determined
by using appropriate valuation techniques. Valuation techniques include net present value
techniques, comparison to similar instruments for which market observable prices exist,
options pricing models and other relevant valuation models.

- 24 -

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.
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 instruments, or those designated upon initial
recognition when any of the following criteria are met:
•
•
•

the designation eliminates or significantly reduces the inconsistent treatment that would
otherwise arise from measuring the assets or liabilities or recognizing gains or losses on
them on a different basis; or
the assets and liabilities are part of a group of financial assets, financial liabilities or both
which are managed and their performance are evaluated on a fair value basis, in
accordance with a documented risk management or investment strategy; or
the financial instrument contains an embedded derivative, unless the embedded derivative
does not significantly modify the cash flows or it is clear, with little or no analysis, that it
would not be separately recorded.

Financial assets and financial liabilities at FVPL are recorded in the consolidated balance
sheet 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 Group’s financial assets at FVPL consist of private bonds and equity securities
(Note 7).
Derivatives recorded at FVPL
The Parent Company is counterparty to certain derivative contracts, such as currency
forwards. 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. Such
derivative financial instruments are initially recorded at fair value on the date at which the
derivative contract is entered into and are subsequently remeasured at fair value. Any gains or
losses arising from changes in fair values of derivatives (except those accounted for as
accounting hedges) are taken directly to the consolidated statement of income. Derivatives are
carried as assets when the fair value is positive and as liabilities when the fair value is
negative.
The fair values of the Group’s derivative instruments are calculated by using certain standard
valuation methodologies and quotes obtained from third parties.
The Group assesses the existence of an embedded derivative on the date it first becomes a
party to the contract, and performs re-assessment where there is a change to the contract that
significantly modifies the cash flows.

- 25 -

The Group has identified certain derivatives that are embedded in host contracts (such as debt
instruments). These embedded derivatives include foreign currency denominated derivatives in
purchase orders. Embedded derivatives are bifurcated from their host contracts and carried at
fair value with fair value changes being reported through profit or loss, when the entire hybrid
contracts (composed of both the host contract and the embedded derivative) are not accounted
for as financial instruments at FVPL, and when their economic risks and characteristics are
not closely related to those of their respective host contracts.
Loans and receivables
Loans and receivables are nonderivative financial assets with fixed or determinable payments
and fixed maturities that are not quoted in an active market. After initial measurement, loans
and receivables are subsequently carried at amortized cost using the effective interest rate
(EIR) method less any allowance for impairment. Amortized cost is calculated taking into
account any discount or premium on acquisition and includes fees that are an integral part of
the EIR and transaction costs. The amortization is included under the Interest income account
in the consolidated statement of income. Gains and losses are recognized in the consolidated
statement of income when the loans and receivables are derecognized or impaired, as well as
through the amortization process.
This accounting policy applies primarily to the Group’s trade and other receivables (Note 8).
AFS investments
AFS investments are those nonderivative investments which are designated as such or do not
qualify to be classified or designated as financial assets at FVPL, HTM investments or loans
and receivables. They are purchased and held indefinitely, and may be sold in response to
liquidity requirements or changes in market conditions.
After initial measurement, AFS investments 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
income. The unrealized gains and losses arising from the fair valuation of AFS investments
are excluded, net of tax, from reported earnings and are reported under the Equity section of
the consolidated balance sheet, if any.
When the security is disposed of, the cumulative gain or loss previously recognized in equity is
recognized in the consolidated statement of income. Interest earned on holding AFS
investments are reported as interest income using the EIR. Where the Group holds more than
one (1) investment in the same security these are deemed to be disposed of on a first-in, firstout basis. Dividends earned on holding AFS investments 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 in the consolidated statement of
income.
Other financial liabilities
Issued financial instruments or their components, which are not designated at FVPL are
classified as other financial liabilities where the substance of the contractual arrangement
results in the Group having an obligation either to deliver cash or another financial asset to the
holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or
another financial asset for a fixed number of own equity shares. 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

- 26 -

the instrument as a whole the amount separately determined as the fair value of the liability
component on the date of issue.
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.
This accounting policy applies primarily to the Group’s short-term and long-term debt,
accounts payable and other accrued liabilities and other obligations that meet the above
definition (other than liabilities covered by other accounting standards, such as income tax
payable).
Classification of Financial Instruments Between Debt and Equity
A financial instrument is classified as debt if it provides for a contractual obligation to:
•
•
•

deliver cash or another financial asset to another entity; or
exchange financial assets or financial liabilities with another entity under conditions that
are potentially unfavorable to the Group; or
satisfy the obligation other than by the exchange of a fixed amount of cash or another
financial asset for a fixed number of own equity shares.

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.
Impairment of Financial Assets
The Group assesses at each balance sheet date whether there is objective evidence that a
financial asset or group of financial assets is impaired. A financial asset or a group of
financial assets is deemed to be impaired if, and only if, there is objective evidence of
impairment as a result of one (1) or more events that has occurred after the initial recognition
of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the
estimated future cash flows of the financial asset or the group of financial assets that can be
reliably 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.
Financial assets carried at amortized cost
If there is objective evidence that an impairment loss on financial assets carried at amortized
cost (i.e. receivables) has been incurred, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash flows
discounted at the asset’s original EIR. The carrying amount of the asset is reduced through
the use of an allowance account. The loss is recognized in the consolidated statement of
income. The asset, together with the associated allowance accounts, is written off when there
is no realistic prospect of future recovery.

- 27 -

The Group first assesses whether objective evidence of impairment exists individually for
financial assets that are individually significant, and individually or collectively for financial
assets that are not individually significant. If it is determined that no objective evidence of
impairment exists for an individually assessed financial asset, whether significant or not, the
asset is included in a group of financial assets with similar credit risk characteristics and that
group of financial assets is collectively assessed for impairment. Those characteristics are
relevant to the estimation of future cash flows for groups of such assets by being indicative of
the debtor’s ability to pay all amounts due according to the contractual terms of the assets
being evaluated. Assets that are individually assessed for impairment and for which an
impairment loss is or continues to be recognized are not included in a collective assessment of
impairment.
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. Any subsequent reversal of an impairment
loss is recognized in the consolidated statement of income to the extent that the carrying value
of the asset does not exceed its amortized cost at the reversal date.
The Group performs a regular review of the age and status of these accounts, designed to
identify accounts 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.
AFS investments
The Group assesses at each balance sheet date whether there is objective evidence that a
financial asset or group of financial assets is impaired. In case of equity investments classified
as AFS investments, this would include a significant or prolonged decline in the fair value of
the investments below its cost. Where there is evidence of impairment, the cumulative loss
which is measured as the difference between the acquisition cost and the current fair value,
less any impairment loss on that financial asset previously recognized in the consolidated
statement of income is removed from equity and recognized in the consolidated statement of
income. Impairment losses on equity investments are not reversed through the consolidated
statement of income. Increases in fair value after impairment are recognized directly in equity.
In the case of debt instruments classified as AFS investments, impairment is assessed based on
the same criteria as financial assets carried at amortized cost. Interest continues to be accrued
at the original EIR on the reduced carrying amount of the asset and is recorded under Interest
Income account 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 the consolidated statement of income.
Derecognition of Financial Instruments
Financial assets
A financial asset (or, where applicable a part of a financial asset or part of a group of
financial assets) is derecognized where:
•
•

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 “passthrough” arrangement; or

- 28 -

•

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 Group’s 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.
Financial Guarantee Contracts
In the ordinary course of business, the Parent Company gives financial guarantees. Financial
guarantees are initially recognized in the financial statements at fair value, and the initial fair
value is amortized over the life of the financial guarantee. The guarantee liability is
subsequently carried at the higher of this amortized amount and the present value of any
expected payment (when a payment under the guaranty has become probable).
Offsetting Financial Instruments
Financial assets and financial liabilities are offset and the net amount is reported in the
consolidated balance sheet if, and only if, there is a currently enforceable legal right to offset
the recognized amounts and there is an intention to settle on a net basis, or to realize the asset
and settle the liability simultaneously. This is not generally the case with master netting
agreements; thus, the related assets and liabilities are presented gross in the consolidated
balance sheet.
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.
Costs incurred in bringing each product to its present location and conditions are accounted
for as follows:
Finished goods, work-in-process, raw materials, containers and packaging materials
Cost is determined using the average method. Finished goods and work-in-process include
direct materials and labor, and a proportion of manufacturing overhead costs based on actual
goods processed and produced, but excluding borrowing costs.
Materials in-transit
Cost is determined using the specific identification basis.

- 29 -

Spare parts and supplies
Cost is determined using the average method.
Assets Held for Sale
The Group classifies assets as held for sale (disposal group) when their carrying amount will
be recovered principally through a sale transaction rather than through continuing use. For
this to be the case, the asset must be available for immediate sale in its present condition
subject only to terms that are usual and customary for sales of such assets and its sale must be
highly probable. For the sale to be highly probable, the appropriate level of management must
be committed to a plan to sell the asset and an active program to locate a buyer and complete
the plan must have been initiated. Furthermore, the asset must be actively marketed for sale at
a price that is reasonable in relation to its current fair value. In addition, the sale should be
expected to qualify for recognition as a completed sale within one (1) year from the date of
classification.
The related results of operations and cash flows of the disposal group that qualify as
discontinued operations are separated from the results of those that would be recovered
principally through continuing use, and prior years’ consolidated statement of income and
consolidated statement of cash flows are re-presented. The results of operations and cash
flows of the disposal group that qualify as discontinued operations are presented in the
consolidated statement of income and consolidated statement of cash flows as items associated
with discontinued operations.
Property, Plant and Equipment
Property, plant and equipment, except land, are carried at cost less accumulated depreciation
and amortization and impairment losses, if any. The 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 (ARO) relating to property, plant and equipment installed/constructed on leased
properties, if any.
Land is stated at cost less any impairment in value.
Subsequent costs are capitalized as part of the Property, plant and equipment account, 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. All other repairs and maintenance
are charged against current operations as incurred.
Foreign exchange differentials arising from the acquisition of property, plant and equipment
are charged against current operations and are no longer capitalized.
Construction in-progress are transferred to the related Property, Plant and Equipment account
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.
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 estimated useful lives (EUL) of the assets regardless of utilization.

- 30 -

The EUL of property, plant and equipment of the Group follow:
Land improvements
Buildings and improvements
Machinery and equipment
Transportation equipment
Furniture, fixtures and equipment

20 years
10-30 years
10 years
5 years
5 years

Leasehold improvements are amortized over the shorter of their EUL or the corresponding
lease terms.
Major spare parts and stand-by equipment items that the Group expects to use over more than
one (1) 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 asset (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.
The assets’ residual values, useful lives and methods of depreciation and amortization are
reviewed and adjusted, if appropriate, at each financial year-end.
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.
The Group’s investment properties are depreciated using the straight-line method over their
EUL as follows:
Land improvements
Buildings and building improvements

10 years
10 to 30 years

Investment properties are derecognized when either they have been disposed of or when the
investment properties 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.

- 31 -

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.
Biological Assets
The biological assets of the Group are divided into two (2) major categories with subcategories as follows:
Swine livestock

Poultry livestock

Breeders (livestock bearer)
Sucklings (breeders’ offspring)
Weanlings (comes from sucklings intended to be breeders or to be
sold as fatteners)
Fatteners/finishers (comes from weanlings unfit to become
breeders; intended for the production of meat)
Breeders (livestock bearer)
Chicks (breeders’ offspring intended to be sold as breeders)

A biological asset shall be measured on initial recognition and at each balance sheet date at its
fair value less estimated point-of-sale costs, except for a biological asset where fair value is
not clearly determinable. Agricultural produce harvested from an entity’s biological assets
shall be measured at its fair value less estimated point-of-sale costs.
The Group is unable to measure fair values reliably for its poultry livestock breeders in the
absence of: (a) an 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 point-of-sale costs.
Agricultural produce is the harvested product of the Group’s biological asset. A harvest
occurs when agricultural produce is either detached from the bearer biological asset or when
the asset’s life processes of the agricultural produce ceases. A gain or loss arising on initial
recognition of agricultural produce at fair value less estimated point-of-sale cost shall be
included 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.
Biological assets at cost
The cost of an item of biological asset comprises its purchase price and any costs attributable
in bringing the biological asset to its location and conditions intended by management.
Depreciation is computed using the straight-line method over the 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 (2) to
three (3) years.

- 32 -

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).
Biological assets carried at fair values less estimated point-of-sale costs
Swine livestock are measured at their fair values less point-of-sale costs. The fair values are
determined based on current market prices of livestock of similar age, breed and genetic merit.
Point-of-sale costs include commissions to brokers and dealers, nonrefundable transfer taxes
and duties. Point-of-sale costs exclude transport and other costs necessary to get the
biological assets to the market.
A gain or loss on initial recognition of a biological asset at fair value less estimated point-ofsale costs and from a change in fair value less estimated point-of-sale costs of a biological
asset shall be included in the consolidated statement of income in the period in which it arises.
Investments in a Joint Venture
The Group also has a 50% interest in Hunt-Universal Robina Corporation (HURC), a joint
venture which is a jointly controlled entity. A joint venture is a contractual arrangement
whereby two (2) or more parties undertake an economic activity that is subject to joint control,
and a jointly controlled entity is a joint venture that involves the establishment of a separate
entity in which each venturer has an interest.
The Group’s investments in a joint venture are accounted for using the equity method of
accounting. Under the equity method, joint venture is carried in the consolidated balance sheet
at cost plus post-acquisition changes in the Group’s share of net assets of the joint venture.
The consolidated statement of income reflects the share of 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 consolidated
statement of changes in equity. Profits and losses arising from transactions between the
Group and the joint venture are eliminated to the extent of the interest in the joint venture.
The investee companies’ accounting policies conform to those used by the Group for like
transactions and events in similar circumstances.
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 Group’s 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. Each unit or group of units to
which the goodwill is so allocated:
•
•

represents the lowest level within the Group at which the goodwill is monitored for
internal management purposes; and
is not larger than a segment based on either the Group’s primary or secondary reporting
format determined in accordance with PAS 14, Segment Reporting.

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).

- 33 -

If the acquirer’s 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.
Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. 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 finite life are assessed
at the individual asset level. Intangible assets with finite life are amortized over their useful
lives. Periods and method of amortization for intangible assets with finite useful lives are
reviewed annually or earlier when an indicator of impairment exists.
The EUL of intangible assets are assessed to be either finite or indefinite.
Intangible assets with finite lives are amortized over the 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 financial year-end. 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.
A summary of the policies applied to the Group’s intangible assets follow:

Useful lives
Amortization method used
Internally generated or acquired

Product
Formulation
Indefinite
No amortization
Acquired

Trademarks
Indefinite Finite (4 years)
Straight-line
No amortization
amortization
Acquired
Acquired

Impairment of Nonfinancial Assets
This accounting policy applies primarily to the Group’s property, plant and equipment,
investment properties, investment in a joint venture, and intangible assets with finite lives.
The Group assesses at each reporting 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 asset’s (or cash-generating unit’s) fair value
less costs to sell and its value in use and is determined for an individual asset, unless the asset
- 34 -

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 cashgenerating 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 account in the consolidated
statement of income.
For assets excluding goodwill, 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 asset’s 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, 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 expense is adjusted in future years to allocate the asset’s revised
carrying amount, less any residual value, on a systematic basis over its remaining life.
The following criteria are also applied in assessing impairment of specific assets:
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
operation within that unit are 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.
Biological assets at cost
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.
Intangible assets
Intangible assets with indefinite useful lives are tested for impairment annually as of year-end
either individually or at the cash-generating level, as appropriate.
Investment in a joint venture
After application of the equity method, the Group determines whether it is necessary to
recognize an additional impairment loss of the Group’s investments in a joint venture. If this
is the case, the Group calculates the amount of impairment as being the difference between the
- 35 -

fair value of the associate and the acquisition cost and recognizes the amount in the
consolidated statement of income.
Short-term and Long-term Debt
All loans and borrowings are initially recognized at the fair value of the consideration received
less directly attributable debt issuance costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at
amortized cost using the EIR method. Amortized cost is calculated by taking into account any
issue costs, and any discount or premium on settlement.
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.
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 balance sheet.
When a loan is paid, the related unamortized debt issuance costs at the date of repayment are
charged against current operations (see accounting policy on Financial Instruments).
Treasury Shares
Treasury shares are recorded at cost and are presented as a deduction from 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. No gain or loss is recognized in the
consolidated statement of income on the purchase, sale, issue or cancellation of the Group’s
own equity instruments.
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
balance sheet 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 an interest expense 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.
Pension Costs
Pension cost is actuarially determined using the projected unit credit method. This method
reflects services rendered by employees up to the date of valuation and incorporates
assumptions concerning employees’ projected salaries. Actuarial valuations are conducted
with sufficient regularity, with option to accelerate when significant changes to underlying
- 36 -

assumptions occur. Pension cost includes current service cost, interest cost, expected return
on any plan assets, actuarial gains and losses and the effect of any curtailments or settlements.
Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are credited to or charged against income when the net cumulative unrecognized
actuarial gains and losses at the end of the previous period exceed 10% of the higher of the
present value of the defined benefit obligation and the fair value of plan assets at that date.
The excess actuarial gains or losses are recognized over the average remaining working lives
of the employees participating in the plan.
The asset or liability recognized in the consolidated balance sheet in respect of defined benefit
pension plans is the present value of the defined benefit obligation as of the balance sheet date
less the fair value of plan assets, together with adjustments for unrecognized actuarial gains or
losses and past service costs. The value of any asset is restricted to the sum of any past
service cost not yet recognized and the present value of the any economic benefits available in
the form of refunds from the plan or reductions in the future contributions to the plan. The
defined benefit obligation is calculated annually by an independent actuary using the projected
unit credit method. The present value of the defined benefit obligation is determined by
discounting the estimated future cash inflows using risk-free interest rates that have terms to
maturity approximating the terms of the related pension liability.
Past service costs, if any, are recognized immediately in the consolidated statement of income,
unless the changes to the pension plan are conditional on the employees remaining in service
for a specified period of time (the vesting period). In this case, past service costs are
amortized on a straight-line basis over the vesting period.
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 substantially enacted at the balance
sheet date.
Deferred tax
Deferred tax is provided using the balance sheet liability method on all temporary differences,
with certain exceptions, at the balance sheet 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, with certain
exceptions. Deferred tax assets are recognized for all deductible temporary differences with
certain exceptions, and carryforward benefits of unused tax credits from excess minimum
corporate income tax (MCIT) over regular corporate income tax and unused net operating loss
carryover (NOLCO), to the extent that it is probable that taxable income will be available
against which the deductible temporary differences and carryforward benefits of unused tax
credits from excess MCIT and unused NOLCO can be utilized.
Deferred tax assets are not recognized when they arise from the initial recognition of an asset
or liability in a transaction that is not a business combination and, at the time of transaction,
affects neither the accounting income nor taxable income or loss. Deferred tax liabilities are
not provided on nontaxable temporary differences associated with investments in domestic
subsidiaries, associates and interests in joint ventures. With respect to investments in foreign
subsidiaries, associates and interests in joint ventures, deferred tax liabilities are recognized

- 37 -

except where the timing of the reversal of the temporary differences can be controlled and it is
probable that the temporary difference will not reverse in the foreseeable future.
The carrying amounts of deferred tax assets are reviewed at each balance sheet 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 balance sheet date, and are recognized to the extent that it has
become probable that future taxable income will allow the deferred tax asset to be recognized.
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 balance sheet date.
Income tax relating to items recognized directly in equity is recognized in equity and not in the
consolidated statement of income.
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.
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. A reassessment is made after inception of the lease only if
one (1) 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 any of the scenarios above, and
at the date of renewal or extension period for scenario b.
Group as a lessee
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.

- 38 -

Borrowing Costs
Borrowing costs are generally expensed as incurred. 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.
Interest expense on loans is recognized using the EIR method over the term of the loans.
Foreign Currency Translation/Transactions
The functional and presentation currency of the Parent Company and its Philippine
subsidiaries (except for certain consolidated foreign subsidiaries), is the Philippine Peso.
Each entity in the Group determines its own functional currency and items included in the
consolidated financial statements of each entity are measured using that functional currency.
Transactions in foreign currencies are initially recorded in the functional currency rate ruling
at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency rate of exchange ruling at the balance
sheet date. All differences are taken to the consolidated statement of income with the
exception of differences on foreign currency borrowings that provide a hedge against a net
investment in a foreign entity. These are taken directly to equity until the disposal of the net
investment, at which time they are recognized in the consolidated statement of income. Tax
charges and credits attributable to exchange differences on those borrowings are also dealt
with in equity. Nonmonetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate as at the date of initial transaction.
Nonmonetary items measured at fair value in a foreign currency are translated using the
exchange rates at the date when the fair value was determined.
The functional currencies of the Group’s consolidated foreign subsidiaries follow:
Subsidiaries
URCPL
URC Asean Brands Co. Ltd.
Hong Kong China Foods Co. Ltd.
URCICL
URCL.
Shanghai Peggy Foods Co., Ltd.
Tianjin Pacific Foods Manufacturing Co., Ltd.
URC China Commercial Co. Ltd.
Xiamen Tongan Pacific Food Co., Ltd.
Panyu Peggy Foods Co., Ltd.
URC Hong Kong Company Limited (formerly Hong Kong Peggy
Snacks Foods Co., Limited)
PT URC Indonesia
URC Snack Foods (Malaysia) Sdn. Bhd.
(formerly Pacific World Sdn. Bhd.)
Ricellent Sdn. Bhd.
URC Foods (Singapore) Pte. Ltd. (formerly Pan
Pacific Snacks Pte. Ltd.)
Acesfood Network Pte. Ltd.
Advanson International Pte. Ltd.
URC (Thailand) Co., Ltd. (formerly Thai Peggy Foods Co. Ltd.)
URC Vietnam Co., Ltd.

- 39 -

Country of
Incorporation
British Virgin Islands
- do - do - do Cayman Islands
China
- do - do - do - do -

Functional
Currency
US Dollar
- do - do - do - do Chinese Yuan
- do - do - do - do -

Hong Kong
Indonesia

HK Dollar
Indonesian Rupiah

Malaysia
- do -

Malaysian Ringgit
- do -

Singapore
- do - do Thailand
Vietnam

Singapore Dollar
- do - do Thai Baht
Vietnam Dong

As of reporting 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 balance sheet 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 except for URCPL and URCL which are considered integral part of the
parent company. Exchange differences of these subsidiaries are recognized in the consolidated
statement of 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.
Earnings Per Share (EPS)
Basic EPS is computed by dividing net income applicable to common stock (net income less
dividends on preferred stock) by the weighted average number of common shares issued and
outstanding during the year, adjusted for any subsequent stock dividends declared.
Diluted EPS amounts are calculated by dividing the net profit attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding 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 Group’s 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 5 to the consolidated financial statements.
Subsequent Events
Any post year-end event up to the date of approval of the BOD of the consolidated financial
statements that provides additional information about the Group’s position at the balance sheet
date (adjusting event) is reflected in the consolidated financial statements. Any post year-end
event that is not an adjusting event is disclosed in the notes to the consolidated financial
statements, when material.

3. Significant Accounting Judgments and Estimates
The preparation of the consolidated financial statements in compliance with PFRS requires the
Group 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 Group’s 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:

- 40 -

Classification of financial instruments
The Group exercises judgment in classifying a financial instrument, or its component parts, on
initial recognition as either a financial asset, a financial liability or an equity instrument in
accordance with the substance of the contractual arrangement and the definitions of a financial
asset, a financial liability or an equity instrument. The substance of a financial instrument,
rather than its legal form, governs its classification in the consolidated balance sheet.
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 arm’s length basis.
Determination of fair values of financial instruments
The Group carries certain financial assets and liabilities at fair value, which requires extensive
use of accounting judgment and estimates. While significant components of fair value
measurement were determined using verifiable objective evidence (i.e. foreign exchange rates,
interest rates, volatility rates), the amount of changes in fair value would differ if the Group
utilized different valuation methodologies and assumptions. Any changes in fair value of these
financial assets and liabilities would affect profit and loss and equity.
Where the fair values of certain financial assets and financial liabilities recorded in the
consolidated balance sheet 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.
Classification of leases
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.
Distinction between investment properties and owner-occupied properties
The Group determines whether a property qualifies as an investment property. In making its
judgment, the Group considers whether the property generates cash flows largely independent
of the other assets held by an entity. Owner-occupied properties generate cash flows that are
attributable not only to property but also to the other assets used in the production or supply
process.
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.
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
- 41 -

Group currently does not believe these proceedings will have a material effect on the Group’s
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
Estimation of allowance for impairment losses on trade and other receivables
The Group maintains allowances for impairment losses on trade receivables at a level
considered adequate to provide for potential uncollectible receivables. The level of this
allowance is evaluated by the management on the basis of factors that affect the collectibility
of the accounts. These factors include, but are not limited to, the length of relationship with
the customer, the customer’s payment behavior and known market factors. The Group
reviews the age and status of receivables, and identifies accounts that are to be provided with
allowances on a continuous basis. The Group provides full allowance for trade receivables
that it deems uncollectible.
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 receivables would increase recorded operating expenses and
decrease current assets.
Determination of NRV of inventories
The Group, in determining the NRV, considers any adjustment necessary for obsolescence
which is generally provided 100% for nonmoving items for more than one (1) year. The
Group adjusts the cost of inventory to the recoverable value at a level considered adequate to
reflect market decline in the value of the recorded inventories. 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.
EUL of property, plant and equipment and investment properties
The Group estimated 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.
Fair values less estimated point-of-sale costs of biological assets
The fair values of swine are determined based on current market prices of livestock of similar
age, breed and genetic merit. Point-of-sale costs include commissions to brokers and dealers,
nonrefundable transfer taxes and duties. Point-of-sale costs exclude transport and other costs
necessary to get the biological assets to the market. The fair values are reviewed and updated
if expectations differ from previous estimates due to changes brought by both physical change
and price changes in the market. It is possible that future results of operations could be

- 42 -

materially affected by changes in these estimates brought about by the changes in factors
mentioned.
Impairment of nonfinancial assets
The Group assesses the impairment of assets whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The factors that the
Group considers important which could trigger an impairment review include the following:
•
•
•

significant underperformance relative to expected historical or projected future operating
results;
significant changes in the manner of use of the acquired assets or the strategy for overall
business; and
significant negative industry or economic trends.

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 cashgenerating 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 determining the present value of estimated future cash flows expected to be generated from
the continued use of the assets, the Group is required to make estimates and assumptions that
can materially affect the consolidated financial statements.
Estimation of pension and other benefits costs
The determination of the obligation and cost of retirement and other employee benefits is
dependent on the selection of certain assumptions used in calculating such amounts. Those
assumptions include, among others, discount rates, expected returns on plan assets and salary
increase rates. Actual results that differ from the Group’s assumptions are accumulated and
amortized over future periods and therefore, generally affect the recognized expense and
recorded obligation in such future periods.
While the Group believes that the assumptions are reasonable and appropriate, significant
differences between actual experiences and assumptions may materially affect the cost of
employee benefits and related obligations.
The Group also estimates other employee benefits obligation and expense, including the cost
of paid leaves based on historical leave availments of employees, subject to the Group’s
policy. These estimates may vary depending on the future changes in salaries and actual
experiences during the year.
Recognition of deferred tax assets
The Group reviews the carrying amounts of deferred taxes at each balance sheet date and
reduces deferred tax assets 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.

- 43 -

4. Financial Risk Management Objective and Policies
The Group’s principal financial instruments, other than derivatives, comprise cash and cash
equivalents, financial assets at FVPL, AFS investments, and interest-bearing loans and other
borrowings. The main purpose of these financial instruments is to finance the Group’s
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.
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.
Risk Management Structure
The Group’s risk management structure is closely aligned with that of the ultimate Parent
Company. The BOD of the Parent Company and the respective BOD of each subsidiary are
ultimately responsible for the oversight of the Group’s risk management processes that involve
identifying, measuring, analyzing, monitoring and controlling risks.
Each BOD has created the board-level AC to spearhead the managing and monitoring of risks.
Audit Committed (AC)
The AC shall assist the Group’s 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 AC’s purpose to lead in the general evaluation and to
provide assistance in the continuous improvements of risk management, control and
governance processes.
The AC also aims to ensure that:
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 Group’s BOD is properly assisted in the development of policies that would enhance
the risk management and control systems
Enterprise Risk Management Group (ERMG)
The ERMG was created to be primarily responsible for the execution of the enterprise risk
management framework. The ERMG’s main concerns include:
a.
b.
c.
d.

recommending risk policies, strategies, principles, framework and limits;
managing fundamental risk issues and monitoring of relevant risk decisions;
providing support to management in implementing the risk policies and strategies; and
developing a risk awareness program.

Compliance with the principles of good corporate governance is also one (1) of the primary
objectives of the BOD. To assist the BOD in achieving this purpose, the BOD has designated
a Compliance Officer who shall be responsible for monitoring the actual compliance with the
provisions and requirements of the Corporate Governance Manual and other requirements on
- 44 -

good corporate governance, identifying and monitoring control compliance risks, determining
violations, and recommending penalties on such infringements for further review and approval
of the BOD, among others.
Risk Management Policies
The main risks arising from the use of financial instruments are foreign currency risk, equity
price risk, interest rate risk, credit risk and liquidity risk. The Group’s policies for managing
the aforementioned risks are summarized below.
Foreign currency risk
Foreign currency risk arises on financial instruments that are denominated in a foreign
currency other than the functional currency in which they are measured.
The Group has transactional currency exposures. Such exposures arise from sales and
purchases in currencies other than the entities’ functional currency. The Group does not have
any foreign currency hedging arrangements.
Equity price risk
Equity price risk is the risk that the fair values of equities decrease as a result of changes in
the levels of equity indices and the value of individual stocks.
Interest rate risk
The Group’s exposure to market risk for changes in interest rates relates primarily to the
Group’s short-term and long-term debt obligations. The Group’s policy is to manage its
interest cost using a mix of fixed and variable rate debt.
Credit risk
The Group trades only with recognized and creditworthy third parties. It is the Group’s policy
that all customers who wish to trade on credit terms are subject to credit verification
procedures. The Credit and Collection Department 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 and certain derivative investments, the
Group’s exposure to credit risk arises from default of the counterparty with a maximum
exposure equal to the carrying amount of these instruments. The Group has a counterparty
credit risk management policy which allocates investment limits based on counterparty credit
ratings and credit risk profile.
Liquidity risk
The Group’s 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 Group’s 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. 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.

- 45 -

Fair Value Measurement
The following methods and assumptions were used to estimate the fair value of each class of
financial instrument for which it is practicable to estimate such value:
Cash and cash equivalents, receivables, accounts payable and other accrued liabilities and
trust receipts and acceptances payable
Carrying amounts approximate their fair values due to the relatively short-term maturity of
these instruments.
Due from and due to related parties
Carrying amounts of due from and due to related parties which are payable and due on
demand approximate their fair values.
Financial assets at FVPL and AFS investments
Fair values of debt securities are generally based upon quoted market prices. If the market
prices are not readily available, fair values are estimated using either values obtained from
independent parties offering pricing services or adjusted quoted market prices of comparable
investments or using the discounted cash flow methodology.
Fair value of quoted equity securities are based on quoted prices published in markets. Fair
values of unquoted equity investments approximate carrying amounts (cost less allowance for
impairment) due to the unpredictable nature of future cash flows and lack of suitable methods
of arriving at reliable fair value.
Derivative financial instruments
The fair value of forward exchange contracts is calculated by reference to current forward
exchange rates for contracts with similar maturity profiles. The fair value of forward
exchange derivatives embedded in nonfinancial contracts is 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.
Long-term debt
The fair value is determined using the discounted cash flow methodology, with reference to the
Group’s current incremental lending rates for similar types of loans.

5. Business Segment Information
The industry segments where the Group operates are as follows:
a. The branded consumer food products segment - manufactures and distributes a diverse mix
of snack foods, instant coffee products, instant noodles, chocolates, soft and hard candies,
biscuits, tomato-based products and ready-to-drink beverages. This segment also includes
the packaging division which manufactures BOPP films primarily used in packaging. In
2006, the Group, through its wholly owned subsidiary, CFC Clubhouse Property, Inc.
began operations of its PET bottle manufacturing and flexible packaging plants to supply
the packaging requirement of PET bottle products and various branded food products. Its
revenues are in their peak during the opening of classes in June and Christmas season.
b. The agro-industrial products segment engages in hog and poultry farming, manufactures
and distributes animal and fish feeds and soya products, and manufactures and distributes
animal health products. Its peak season is during summer and before Christmas season.

- 46 -

c. The commodity food products segment engages in sugar milling and refining, and flour
milling and pasta manufacturing and marketing. The peak season for sugar is during its
crop season, which normally starts in September and ends in May of the following year.
d. The corporate business segment engages in bonds and securities investment and fund
sourcing activities.
Management monitors the operating results of its business units separately for the purpose of
making decisions about resource allocation and performance assessment. Segment
performance is evaluated based on operating profit or loss which in certain respects is
measured differently from operating profit or loss in the consolidated financial statements.
Group financing (including finance costs and revenue), market valuation gain (loss), foreign
exchange loss and income taxes are managed on a group basis and are not allocated to
operating segments. Transfer prices between operating segments are on an arm’s length basis
in a manner similar to transactions with third parties.
The Group’s business segment information follows:
Segment Result

Sale of Goods and Services
June 30
2008

2009
BCFG
AIG
CFG
Corporate Businesses

P
= 29,052,878
4,316,725
4,262,206
–
= 37,631,809
P

=25,221,988
P
3,910,788
3,259,707
–
=32,392,483
P

BCFG
AIG
CFG
Corporate Businesses

P
= 30,880,328
4,848,665
8,127,849
17,147,955
= 61,004,797
P

2008

P
=2,623,425
160,444
835,864
(479,355)
P
=3,140,378

P
=1,537,587
275,954
1,310,010
(408,450)
=2,715,101
P

Total Liabilities

Total Assets
2009

2009

June 30
2008
=28,401,514
P
5,432,393
10,643,072
16,689,784
=61,166,763
P

2009

2008

P
=8,238,547
1,119,648
2,467,159
15,087,055
P
= 26,912,409

P
=8,579,428
1,424,497
4,396,288
12,823,223
=27,223,436
P

6. Cash and Cash Equivalents
This account consists of:
Unaudited
June 30,
2009
=202,039
P
2,323,645
1,952,077
=4,477,761
P

Cash on hand
Cash in banks
Short-term investments

- 47 -

Audited
September 30,
2008
=108,577
P
729,054
1,377,997
=2,215,628
P

Cash in banks earns interest at the respective bank deposit rates. Money market placements
are made for varying periods depending on the immediate cash requirements of the Group, and
earn interest ranging from 1.8% to 5.4% and 3.2% to 5.4%, in June 30, 2009 and September
30, 2008, respectively.

7. Financial Assets at Fair Value Through Profit or Loss
This account consists of:

Investments held-for-trading
Derivative assets

Unaudited
June 30,
2009
=5,913,818
P
5,435
=5,919,253
P

Audited
September 30,
2008
=5,968,488
P
10,697
=5,979,185
P

Unaudited
June 30,
2009
=4,400,284
P
1,513,534
=5,913,818
P

Audited
September 30,
2008
=4,343,134
P
1,625,354
=5,968,488
P

Investments that are held-for-trading consist of:

Private bonds
Equity securities

The above investments consist of quoted debt and equity securities issued by certain domestic
and foreign entities.
Net market valuation loss of financial assets at FVPL amounted to P
=427.6 million and
=1.3 billion for the nine months of fiscal 2009 and 2008, respectively.
P

8. Available-for-Sale Investments
This account consists of:
Unaudited
June 30,
2009
=4,137,019
P
2,346,849
=6,483,868
P

Private bonds
Government securities

Audited
September 30,
2008
=4,080,460
P
2,224,383
=6,304,843
P

As of June 30, 2009 and September 30, 2008, net unrealized loss on market valuation
amounted to =
P561.6 million and P
=826.2 million, respectively, which are shown as a separate
component of equity in the consolidated balance sheets.

- 48 -

9. Receivables
This account consists of:

Trade receivables
Due from related parties
Advances to officers, employees and suppliers
Interest receivable
Others
Less allowance for impairment loss

Unaudited
June 30,
2009
= 4,500,489
P
485,015
472,717
197,921
908,961
6,565,103
230,390
= 6,334,713
P

Audited
September 30,
2008
=4,613,930
P
448,125
477,809
142,815
717,508
6,400,187
224,313
=6,175,874
P

The aging analysis of the Group’s receivables follows:

Trade receivables
Due from related parties
Advances to officers,
employees and suppliers
Interest receivable
Others

Neither past
due nor
impaired
=1,690,407
P
485,015
236,365
197,446
424,743
=3,033,976
P

Neither past
due nor
impaired
=740,790
P
448,125
238,911
142,472
347,521
=1,917,819
P

- 49 -

Past due but not impaired
Less than 90
Over 90
days
days
=1,788,430
P
=791,262
P
–
–

Past
due and
impaired
=230,390
P
–

Unaudited
June 30,
2009
= 4,500,489
P
485,015

9,499
–
50,572
=851,333
P

–
–
–
=230,390
P

472,717
197,921
908,961
= 6,565,103
P

Past due but not impaired
Less than 90
Over 90
days
days
=2,457,452 P
P
=1,191,375
–
–

Past
due and
impaired
=224,313
P
–

Audited
September
30, 2008
= 4,613,930
P
448,125

–
–
–
=224,313
P

477,809
142,815
717,508
= 6,400,187
P

226,853
475
433,646
=2,449,404
P

229,297
343
331,345
=3,018,437
P

9,601
–
38,642
=1,239,618
P

10. Inventories
This account consists of:
Unaudited
June 30,
2009

Audited
September 30,
2008

P2,334,608
=
1,765,825
4,100,433

=2,545,062
P
1,751,043
4,296,105

146,458
807,606
1,354,842
2,308,906
755,588
=7,164,927
P

135,328
996,109
1,128,048
2,259,485
1,218,865
=7,774,455
P

At cost:
Raw materials
Finished goods
At NRV:
Goods in-process
Containers and packaging materials
Spare parts and supplies
Materials in-transit

Under the terms of the agreements covering liabilities under trust receipts totaling P
=1.9 billion
and P
=3.0 billion as of June 30, 2009 and September 30, 2008, respectively, certain inventories
have been released to the Group in trust for the banks. The Parent Company is accountable to
these banks for the trusted merchandise or their sales proceeds.

11. Other Current Assets
This account consists of:

Input value-added tax
Prepaid expenses
Others

Unaudited
June 30,
2009
=696,264
P
185,578
229
=882,071
P

Audited
September 30,
2008
=792,558
P
229,977
13,829
=1,036,364
P

Unaudited
June 30,
2009
=69,728
P
20,991
20,682
18,861
6,642
48,674
=185,578
P

Audited
September 30,
2008
=65,883
P
2,433
4,665
110,986
8,553
37,457
=229,977
P

The prepaid expenses account includes prepayments for:

Insurance
Rentals
Taxes
Advertising
Computer maintenance
Others

- 50 -

12. Property, Plant and Equipment
This account consists of:

Acquisition Costs
Land Improvements
Building and Improvements
Machinery and Equipment
Transportation Equipment
Furniture, Fixtures and Equipment
Accumulated Depreciation
Net Book Value
Land
Equipment In-transit
Construction In-progress

Unaudited
June 30,
2009

Audited
September 30,
2008

P1,547,705
=
8,892,796
32,979,764
2,075,078
1,899,812
47,395,155
25,149,414
22,245,741
1,571,708
891,451
1,037,711
= 25,746,611
P

=1,718,786
P
8,154,087
30,553,185
2,020,866
1,835,983
44,282,907
22,934,558
21,348,349
1,498,315
283,316
1,197,364
=24,327,344
P

Unaudited
June 30,
2009

Audited
September 30,
2008

=1,891,603
P
–
1,891,603

=1,399,024
P
492,579
1,891,603

244,840
2,076
246,916
=1,644,687
P

242,072
2,768
244,840
=1,646,763
P

13. Intangible Assets
Movements in this account follow:

Cost
Balance at beginning of year
Additions
Balance at end of year
Accumulated Depreciation
Balance at beginning of year
Depreciation
Balance at end of year
Net Book Value

Intangible assets consist of goodwill, trademark and product formulation.

- 51 -

14. Investment in a Joint Venture
This account consists of:

Acquisition Cost
Balance at beginning of year
Disposal
Balance at end of year
Accumulated Equity in Net Earnings
Balance at beginning of year
Equity in net income during the year
Dividends received
Disposal
Balance at end of year
Net Book Value at End of Year

Unaudited
June 30,
2009

Audited
September 30,
2008

= 1,250
P
–
1,250

=1,250
P
–
1,250

91,807
23,099
(30,000)
–
84,906
=86,156
P

88,623
28,184
(25,000)
–
91,807
=93,057
P

The Parent Company has an equity interest in Hunt-Universal Robina Corporation (HURC), a
domestic joint venture. HURC manufactures and distributes food products under the “Hunt’s”
brand name, which is under exclusive license to HURC in the Philippines.

15. Investment Properties
Movements in this account follow:

Cost
Balance at beginning and end of year
Accumulated Depreciation
Balance at beginning of year
Depreciation
Balance at end of year
Net Book Value

Unaudited
June 30,
2009

Audited
September 30,
2008

=107,947
P

28,944
2,699
31,643
=76,304
P

25,346
3,598
28,944
=79,003
P

The investment properties consist of land and building which are made available for lease to
others.

- 52 -

16. Other Noncurrent Assets
This account consists of:

Input value-added tax
Miscellaneous deposits
Others

Unaudited
June 30,
2009
=182,436
P
98,845
169,206
=450,487
P

Audited
September 30,
2008
=171,457
P
83,144
159,030
=413,631
P

Unaudited
June 30,
2009

Audited
September 30,
2008

=1,707,768
P

=1,123,000
P

5,182,834
=6,890,602
P

6,946,508
=8,069,508
P

17. Short-term Debt
This account consists of:

Parent Company
Philippine Peso - with interest rate of 6.75% in
2009 and 2008
Subsidiaries
Foreign Currencies - with interest rates ranging
from 1.92% to 3.25% per annum in 2009 and
3.39% to 5.46% per annum in 2008

Interest is based on prevailing market rates and repriced quarterly.

18. Accounts Payable and Other Accrued Liabilities
This account consists of:
Unaudited
June 30,
2009
=3,009,299
P
1,531,244
286,171
103,493
25,025
431,850
=5,387,082
P

Trade payables
Accrued expenses
Due to related parties
Customers’ deposits
Derivative liabilities
Others

Audited
September 30,
2008
=3,307,225
P
1,105,489
127,615
80,397
40,421
303,795
=4,964,942
P

Other payables include advances from stockholders amounting to P
=238.1 million and P
=107.6
million as of June 30, 2009 and September 30, 2008, respectively, as well as withholding tax
payable amounting to P
=97.3 million and P
=65.6 million as of June 30, 2009 and September 30,
2008, respectively.
- 53 -

The Accrued expenses account includes accruals for:
Unaudited
June 30,
2009
=695,751
P
317,034
119,636
398,823
=1,531,244
P

Advertising and promotions
Interest payable
Freight and handling costs
Others

Audited
September 30,
2008
=425,096
P
208,776
125,711
345,906
=1,105,489
P

19. Long-term Debt
This consists of:
Maturities

Parent Company:
Foreign currencies
HypoVereinsbank term
loan facilities
Philippine Peso
URC corporate note
Subsidiaries:
Foreign currencies
URCPL US$200 million
guaranteed notes
Philippine Peso
Philippine Sugar Corp.
restructured loan

Interest Rates

EURIBOR/
Various dates
USD LIBOR +
through
2009
0.75%

Unaudited
June 30,
2009

Audited
September 30,
2008

= 21,291
P

=62,441
P

2014

8.75%

3,000,000
3,021,291

–
62,441

2012

8.25%

9,385,350

9,410,000

2013

7.50%

39,991
9,425,341
12,446,632
44,820
12,401,812
28,176
=12,373,636
P

46,395
9,456,395
9,518,836
41,034
9,477,802
48,032
=9,429,770
P

Debt issuance costs
Less current portion

Repayments of the long-term debt follow:

Due within:
1 year
2 years
3 years
4 years
5 years and thereafter

- 54 -

Unaudited
June 30,
2009

Audited
September 30,
2008

P41,838
=
22,254
9,370,421
10,778
3,001,341
= 12,446,632
P

=48,032
P
27,699
7,401
9,417,969
17,735
=9,518,836
P

The exchange rates used to restate the foreign currency borrowings were P
=48.13 to US$1.00
and P
=47.05 to US$1.00 as of June 30, 2009 and September 30, 2008, respectively.

20. Equity
The details of the Parent Company’s common stock follow:
June 30,
2009
2,998,000,000
=1.00
P

Authorized shares
Par value per share
Issued:
Balance at beginning of year
Issuance of common shares of stock
during the year
Balance at end of year
Less treasury shares
Outstanding Shares

September 30,
2008
2,998,000,000
=1.00
P

2,221,851,481 2,221,851,481
–
5,787,452
2,227,638,933 2,221,851,481
72,104,200
75,104,200
2,152,534,733 2,149,747,281

On November 13, 2007, the Group’s BOD approved the creation and implementation of a
share buy-back program alloting up to P
=2.5 billion to reacquire a portion of the Company’s
issued and outstanding common shares, representing approximately 7.63% of current market
capitalization.
Cumulative Redeemable Preferred Shares
The Group’s authorized preferred shares of stock are 12% cumulative, nonparticipating, and
nonvoting. In case of dissolution and liquidation of the Parent Company, the holders of the
preferred shares shall be entitled to be paid an amount equal to the par value of the shares or
ratably insofar as the assets of the Parent Company may warrant, plus accrued and unpaid
dividends thereon, if any, before the holders of the common shares of stock can be paid their
liquidating dividends. The authorized preferred stock is 2,000,000 shares at par value of P
=1.0
per share. There have been no issuances of preferred stock as of June 30, 2009 and
September 30, 2008.
Deposits for Future Stock Subscriptions
On August 3, 2001, the Parent Company’s BOD approved the issuance of 55,659,008 shares
to JGSHI, Robinson’s Supermarket Corporation and a certain stockholder in exchange for two
(2) parcels of land and certain marketable securities which were valued at P
=250.5 million.
This was reflected as Deposits for Future Stock Subscriptions in the consolidated balance
sheets pending approval of the Philippine SEC. On June 19, 2003, the Philippine SEC
approved the issuance of 49,871,556 shares for the two (2) parcels of land.
On April 2009, the Philippine SEC approved the issuance of 5,787,452 shares for the certain
marketable securities.
Retained Earnings
A portion of the unappropriated retained earnings representing the undistributed earnings of
the investee companies is not available for dividend declaration until received in the form of
dividends and is restricted to the extent of the cost of treasury shares.

- 55 -

21. Earnings Per Share
Basic earnings per share (EPS) is calculated by dividing the net income for the year
attributable to common shareholders by the weighted average number of common shares
outstanding during the year (adjusted for any stock dividends).
The following reflects the income and share data used in the basic/dilutive EPS computations:

Net income attributable to equity holders of the parent
Weighted average number of
common shares
Basic/dilutive EPS

Nine Months Ended June 30
2008
2009
=1,047,966
P
=2,075,269
P
2,149,409
P
=0.97

2,183,643
=0.48
P

There were no potential dilutive shares for the nine months of fiscal 2009 and 2008. As of
June 30, 2009, the Company’s outstanding common stock is 2,152,534,733 shares.

22. Commitments and Contingencies
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 Group’s 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.

23. Subsequent Events
There were no material events that occurred subsequent to June 30, 2009 that requires
disclosures for the period.

- 56 -

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URC And Subs_17Q_Q3FY09 _3_ RTD317 Subs 17q Q3fy09 Disclosure Statement

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