Port congestion, truck shortage crimped RFM sales in first 3 qtrs

Supply chain bottlenecks and a truck shortage caused by different transport regulations affected company sales in the first nine months of 2014, claims food and beverage firm RFM Corp.

In a disclosure to the Philippine Stock Exchange, RFM said its net income from January to September 2014 grew 10% to P578 million from the same period last year, while revenues improved 10% to P7.84 billion.

RFM president and chief executive officer Jose Concepcion III said growth accelerated in the third quarter, pushing the year-to-date September revenue growth to 10%, coming from a 5% growth in the first half of the year.

However, Concepcion “believes that sales could have been higher if not for the bottlenecks in operations caused by the Manila port congestion, aggravated by the delivery truck shortage due to the poorly timed implementation of rules on franchised trucking services.”

The Manila City government implemented a truck ban on February 24 but lifted it indefinitely last September 13 after the ordinance led to congestion at Manila ports and supply chain and logistics problems.

Meanwhile, in June, the Department of Transportation and Communications and its attached agencies, the Land Transportation Franchising and Regulatory Board and Land Transportation Office, signed Joint Administrative Order 2014-01 that increased fees for illegally operating (colorum) public utility vehicles.

Since most trucks servicing the ports had not yet secured a certificate of public convenience, some truck operators opted to stop operations. A longer truck turnaround due to congested off-dock container yards also affected the availability of trucks.

Residual effects

Concepcion noted that while the problems have been easing with “remedial efforts from government,” he said issues over congestion and supply chain slowdown remain, affecting the entire industry, especially the delivery of raw materials and packaging requirements to manufacturers, as well as finished products to customers and distributors.

Concepcion added, however, that “despite the operational issues, RFM managed to find ways to improve the supply and distribution system which helped increase further revenue and profit growth in the third quarter.”

At the same time, “the company was also able to manage its operating expenses, while costs of certain critical inputs were also seen tracking lower than previous periods,” Concepcion noted.

“We also saw double-digit growth in our major consumer brands like Selecta (for) ice cream and milk, and Royal and Fiesta pasta, and we shall continue to prioritize our efforts in these categories. We expect even better numbers as we go to the last quarter of the year, with the usual surge in demand during the Christmas season,” he continued.