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URC’s 1H 2021 cash from operations down as 24.5B debts becomes due

Universal Robina Corporation (URC) earned 8.5 billion Pesos at the end of 1H 2021. That net income is 2.5 billion more than that of the same period last year.

URC’s bottom line may have improved but the cash from operating activities was down 5 billion Pesos to just 4.3 billion Pesos. The decrease in cash from operations can be attributed to the inventory buildup by URC. URC’s inventories increased by 5.9 billion Pesos to 32.1 billion Pesos.

Inventory build-up can be due to URC’s continuing expansion. In 1H 2021, URC spent 8.3 billion for property, plant and equipment expansion. The expansion eats up on the cash balance of URC. URC ended the quarter with 16.8 billion pesos of cash.

That cash balance could further deteriorate should URC repay the 24.5 billion debts maturing in the near-term. URC either must take further debts or sell assets to boosts its cash balance.

It appears now that URC is selling assets. It has been reported that URC will be divesting its remaining 60% stake in its Oceania business.

Proceeds from the sale can be used to retire debts. URC may end up debt-free after the exercise. URC is down 6.15% year-to-date closing at 126.70. Its 52-week high was at 160.90.

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