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Philippines' LT Group to wade into regional beverage production

Conglomerate boosting capital spending 43% for 2017

Yogurt produced by Asia Brewery and Calidad Pascual is seen at a convenience store in Manila's Makati business district.

MANILA -- Philippine conglomerate LT Group plans to expand its beverage business in Southeast Asia, marking its first move to establish a regional manufacturing footprint, company President Michael Tan said on Tuesday. 

Financial subsidiary Philippine National Bank, the country's fifth-largest lender by assets in 2016, has operations in Singapore, but LT Group has yet to bring its production operations to neighboring markets. At home, the conglomerate is known for its liquor and tobacco, and is also engaged in property development.

Group unit Asia Brewery's joint venture with Spanish dairy company Calidad Pascual, which produces affordable pasteurized yogurt, covers the entire Southeast Asian region, Tan said. "The strategy is that, if we go out, we will look at the nonalcoholic [food and beverage segment]," he told reporters after the company's shareholders meeting.

Tan, the son of chairman and founder Lucio Tan, declined to provide more details, saying, "We will announce something soon." 

Asia Brewery also produces distilled water, coconut water and soy milk, as well as energy drinks and juices.

When it comes to beer -- also produced by Asia Brewery -- Tan said the focus will remain on the domestic market, particularly the premium segment, where the company can compete better with dominant player San Miguel.

Later this year, Asia Brewery is to start local production of Tiger and Heineken beer.

The company is spending over 600 million pesos ($12 million) to upgrade its breweries for the joint venture with Heineken International, Tan said. Asia Brewery also distributes Asahi beer and Brew Kettle, a Belgian-style beer it developed for the premium market.

The plant upgrade budget is part of the 10 billion pesos LT Group has earmarked for capital expenditures this year -- 43% more than last year's 7 billion pesos.

Tan said the higher capex will go toward investments in real estate and bankroll a major modernization of Philippine National Bank's IT infrastructure. He said the group is capable of growing the bank on its own, even though other local banks have accepted investments from Japanese and Taiwanese lenders to compete with bigger players.

He also said that Philippine Airlines, which is controlled by his family, would remain a separate entity.

The carrier is in talks with a strategic investor to become more competitive. On Tuesday, at the Paris Air Show, it announced a $235 million deal with Bombardier for seven Q400 turboprops.

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