No. 40 San Miguel Avenue, Mandaluyong City

Income from operations in the third quarter grew by 24%, from Php 1.18 billion in 1998 to Php 1.47 billion this year, largely as a result of improvements in the company's international operations, better margins in the packaging business, on-going improvements in distribution and the streamlining of the Company's business operations.

The company experienced mixed results in terms of sales volumes; with packaging, processed meats and dairy products recording strong growth; while beer, hard liquor, juice, pork and coconut oil registered declines largely occuring in July and August. San Miguel ended the quarter with aggregate volumes slightly down and consolidated net sales at Php 17.6 billion.

Net financing charges were significantly lower at Php 321 million compared to Php 70 million last year.

San Miguel Brewing Philippines (SMBP) registered revenues of Php 6.27 billion, an increase of 3% from that in 1998. Adverse weather conditions pulled down domestic beer volumes in July and August, but the downtrend was reversed in September.

Revitalizing  it distribution network and pushing for wider market penetration particularly in underserved areas remain the priority of SMBP. Thus trade management efforts such as rationalization, training and greater support to distributors have been implemented.

San Miguel's international operations turned in an an operationg profit of US$3.55 million in the third quarter, versus a loss of US$6.41 million last year, due to efforts to aggressively reduce overhead costs.

San Miguel continues to work on improving sales and increasing utilization of capacities, reviewing its brewing operations in China, Indonesia and Vietnam to identify specific areas for further improvement and streamlining.

Consolidated revenue of La Tondena Distillers, Inc. improved by 1% from Php 2.43 billion to Php 2.45 billion. Net income grew by 74% to Php 274 million despite a decline in hard liquor volumes because of adverse weather conditions and a shift by consumers in the south to lower-priced native liquor. La Tondena's bottled water business posted a 40%i increase in sales over last year, boosted by the newly acquired Wilkins brand. The ready-to-drink juice business also experienced significant growth, driven by strong sales of FunChum Juice.

San Miguel Food Group showed improved sales for most of its products, with sales of processed meats, butter, margarine and cheese showing the greatest improvement. Aggregate sales volumes grew by 5% while revenue grew by 2% to Php 3.8 billion.

On the other hand, coconut oil volume was down by 73% for the quarter. Revenue amounted to Php 478 million, down 69% largely due to the lack of copra supply.

In packaging, aggregate sales volumes grew by 18% over the previous year with glass rebounding from the previous quarter's decline. Sales revenue was 6% higher at Php3.02 billion from Php2.85 billion last year. Aggregate sales efforts, favorable demand, cost containment efforts and lower raw material costs resulted in operating income of Php297 million, up 9% from Php273 million in 1998.

Improving sales volumes and market share in the face of a weak economy remains a priority of San Miguel, company officials said. The company continues to focus on managing costs and reducing working captal while it refines its strategies in the effort to turn more profitable growth.

As of September 30, 1999, issued capital stock consisted of 1,580 million Class A shares and 708 million Class B shares or a total of 2,288 million shares.