The world saw the rapid spread of COVID-19, a novel strain of coronavirus, during the first quarter of the year which continued in the second quarter. In January, the outbreak was declared as a public health emergency of international concern; and in March, it was characterized as a pandemic as it had reached 114 countries and territories, including the Philippines, Spain and UK where Emperador Inc. and Subsidiaries (EMP) operate. At present, the pandemic has affected more than 210 countries and territories. To prevent the further spread of COVID-19 and bring down its transmission, the governments across the world have implemented extensive measures such as travel bans/restrictions, lockdowns, home isolation (stay-at-home orders), physical distancing, limited gathering and closing of non-essential businesses (all types of recreational venues and most public places included). The entire Luzon and almost the whole country were under lockdown from the second half of March, which paralyzed all non-essential business activities, and liquor bans were imposed by most localities. Restrictions have started to ease through a four-phase program from mid-May, as the governments tried to balance economic and health concerns. Metro Manila and Laguna were still under the third phase to new normality in June. It is in this general background that EMP operated in the first half of the year.

Despite the grim operating environment, EMP’s revenue increased by 0.40% to 21.5 Billion Pesos in the first half of 2020 as compared to the same period last year. With the lockdowns, limited gatherings, and closing of on-trade channels and air and sea ports in most countries, plus the liquor bans in most Philippine localities, EMP took advantage of the buoyant off-trade and e-commerce channels available where EMP’s products sold well.

EMP was fast to adapt to the grim operating environment by quickly initiating financial discipline. Operating expenses contracted by 11% as compared to the same period a year ago. The reduction in operating expenses showed EMP’s operational flexibility. This allowed EMP to increase net profit to owners by 2.4% to 3.3 Billion Pesos under a grim operating environment.

Net profits of 3.3 Billion Pesos was translated by EMP to cash generated from operations of 2.4 Billion Pesos. The cash generated from operations allowed EMP to spend for some capital investments. The cash generation from operations also enabled EMP to pay debts, buy back its own shares, and pay dividends primarily using its own cash as against borrowing.

EMP exhibits attributes of resiliency.

Disclaimer and Disclosure: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent view point.  Accuretti Systems Inc. in the course of day to day trading may have own, or is considering buying or disposing, the shares of the companies mentioned in this commentary.