Message from the President

Despite the challenges brought about by rising inflation and interest rates, increased competition and other external factors, Cosco turned in another strong performance for 2018 as shown by our  operational and financial achievements.
 
Financial Performance
 
Cosco ended 2018 on a strong note with a consolidated revenues of PHP168.39 billion for a growth of 16% compared to the PHP145.75 billion generated in 2017. The growth in consolidated revenues was largely driven by a combination of the following factors:
 
  • sustained organic growth from our grocery retail segment largely driven by a very strong same-store-sales growth;
  • exceptional revenue growth from the LPG business unit driven by the gradual recovery of global petroleum and gas prices and on the back of a very strong growth in sales volume;
  • significant increase in revenue contributions from the real estate segment with a consistent high-capacity utilization of its rental assets portfolio coupled with additional leasable spaces from new commercial assets; and
  • robust sales performance and growth in revenue contributions from the liquor and wine distribution business segment.
     
The Group also realized a 12% increase in consolidated net income to PHP8.80 billion in 2018 from PHP7.83 billion in the previous year.
 
Our dedication to providing the highest quality of service as well as our effective management of costs and operating expenses have enabled the company to turn in another successful year.
 
Business Segment Highlights
 
Grocery Retailing
 
During the year, the grocery retail business segment registered a consolidated revenue contribution of PHP140.92 billion -- an increase of 13.2% or PHP16.42 billion compared to the segment’s revenue contribution of PHP124.49 billion in 2017.
 
The growth was brought about by its continued aggressive organic stores expansion program and the management’s combined strategies to enhance operating efficiencies and deliver quality customer service experience at all its store outlets.
 
Puregold surpassed its target of opening 25 stores for 2018 by opening a total of 30 new Puregold stores for the year, and established its presence in Panay Island through the newly-acquired chain of five supermarkets in Roxas City.
 
On the other hand, S&R opened two new warehouse clubs in Parañaque and Cabanatuan and seven new S&R quick service restaurants around Metro Manila during the year.
 
Commercial Real Estate
 
The Group’s Real Estate Segment posted PHP2.43 billion in revenues for the year ended December 31, 2018 or a 10.56% increase from PHP2.19 billion in 2017. This was mainly attributable to the additional leasable space from its three new mall assets opened during the first quarter of 2018 and one in December 2017, consistent higher occupancy rates and higher income from its oil storage tanks business unit operating within the Subic Bay Freeport Zone. Income from operations before depreciation grew by 9.5% to PHP1.45 billion while net income grew by 10.42% to PHP1.07 billion.
 
The three new community mall assets added to the portfolio in the first quarter of 2018 are strategically located in Cavite, Subic and Muntinlupa. As of end 2018, our real estate segment had a total portfolio of 53 properties with a combined gross leasable and land area of 516,373 square meters, consisting of 252,065.70 square meter land area and 264,306.51 square meter floor area.
 
Wine and Liquor Distribution
 
The wine and liquor distribution segment continued to deliver a robust sales performance with its overall volume sold growing by 32% consistently driven by its brandy category reinforced by very strong sales performance of its other spirits and specialty beverage categories.
 
Consequently, the segment posted a revenue growth of 31.3% to PHP8.7 billion during the year 2018 while its net income grew by 17.6% to PHP738 million.
 
The group will continue to pursue its aggressive sales and marketing campaigns to promote its product portfolio leveraging on its growing network of national key retail accounts, distributors and dealers as well as in premise customers.
 
Specialty Retail
 
The LPG business unit sustained its solid performance in 2018 after adding PHP17.09 billion to the company’s consolidated revenue. This is an increase of PHP3.96 billion, or 30% higher than the 2017 revenue contribution of PHP13.13 billion.
 
This was mainly driven by increase in sales volume and the recovery in global LPG prices during the period.
On the other hand, our office supplies and technology retail business unit contributed PHP2.09 billion to the company’s consolidated revenues in 2018. This was a 15% increase from the PHP1.82 billion recorded in 2017.
The strong growth was mainly brought about by the high same-store sales growth (SSSG) of 9.09% as
well as its continuing stores network expansion program, enhanced product offerings, and aggressive sales and marketing campaign. Office Warehouse currently has 88 stores in operation across the country, nearly doubling its operating stores since its acquisition in 2014.
 
Positioned for Strategic Growth
 
We look to 2019 and beyond with confidence and optimism. The next year is forecasted to be a better one for the business community due to continued easing of inflation and interest rates as well as legislative developments and agenda that supports the momentum of the country’s economic  gains. There will always be challenges ahead but Cosco will continue to overcome by executing its strategies efficiently and effectively.
 
We will maintain our leadership position in the market through a combination of effective cost controls, systems and process automation, personnel development, and aggressive expansion of the business segments into new markets. We intend to cover more areas and to establish our presence in new territories by expanding our grocery retail business and other segments.
 
Beyond business, Cosco actively contributes to nation-building by creating employment opportunities as we expand across the country. We also continue to support micro, small, and medium sized enterprises (MSME) through our various livelihood and business programs. In addition to our environmental CSR projects, the group also provides scholarships for deserving but financially challenged students through the LCCK Foundation under Puregold. One of the main goals of Cosco is to be a strong catalyst and active partner in the delivery of real and inclusive growth for the communities we serve and operate in.
 
I would like to take this opportunity to thank all of our stakeholders for your never-ending support. For the past few years, we have exceeded our targets and created more value – all of which you can expect to continue in the coming years. Rest assured that we will always strive to reach greater heights and to create a sustainable future for all Filipinos.
 
Leonardo B. Dayao
President