Year Ended December 31, 2021 Compared With Year Ended December 31,

2020
Brandy sales grew year-on-year at both the Philippine and international
markets, particularly in Mexico, Spain and the US where restriction on on-
trade business have loosened up. 'Emperador','Fundador', 'Presidente', and
'Terry' remained as the top-selling brandy brands, with sales increases
registered during the year. Sales of 'Harveyys Bristol Cream' also rose as it sold
well in UK. Normalized net profit soared 35% to P10.8 billion [i.e. P0.7 billion
non-cash consolidation tax adjustment in 2021added back] from P6.4 billion a
year ago.

Brandy segment realized net profit of P7.6 billion  during the year, up 31%, as
itturned over P37.2 billion revenues and other income from external customers,
up 1%. The Scotch Whisky segment ended the year with P18.7 billion revenues
and other income fromexternal customers, a 17% jump year-on-year, with net
profit growing at14% to P2.6 billion. There were large increases in Asia, UK,
Europe, USA, Travel Retail, andpractically all regions as economies began to
bounce back against the pandemic although some countries were re-imposing
restrictions. The segment ended with NPR of14% and normalized NPR of 17%
as compared to 14% of last year.
Revenues and Other Income
Total revenues and other income grew 6% (+P3.1 billion) year-on-year to P55.9
billion in 2021 as compared to P52.8 billion in 2020 as external revenues from
Scotch Whisky segment and from Brandy segment grew by 17% (+P2.8 billion)
and 1% (+P0.3 billion), respectively. ‘Emperador’, ‘Fundador’ and ‘El Presidente’
remained to be the Group’s top selling Philippine, Spanish and Mexican
brands, respectively while single malts ‘The Dalmore’, ‘Jura’ and ‘Tamnavulin’
were the Group’s top selling Scotch Whisky brands during the current year.
Other income dipped 24%(-P0.3 billion) to P1.1 billion from P1.4 billion a year
ago due to lower share in net income of BLC, lower foreign exchange gains and
lower interest income during the year.
Costs and Expenses
Total costs and expenses remained stable at P43.0 billion this year from P43.4
billion a year ago, down 0.8% (-P0.4 billion) year-on-year, as Scotch Whisky
business’ costs and expenses, including intersegment purchases, expanded
11% (+P1.4 billion) and those of Brandy business contracted 6% (-P1.8 billion).
Cost of Goods Sold
Costs slid 2% (-P0.6 billion), to P34.8 billion from P35.4 billion a year ago due
to product sales mix (sale of high-priced/high-margin products).
Gross Profit
Gross profit rates on consolidated level improved to 36% in 2021 as compared
to 31% in 2020. This is largely attributed to sales growth (+7%) outpacing cost
of goods sold (-2%), which is further attributed to sales product mix. The GPRs
of the Brandy and Scotch Whisky segments were respectively posted at 34%
and 40% in 2021 as compared to 28% and 36% in 2020.
Other operating expenses
Other operating expenses shrank 4% (-P0.3 billion) to P7.0 billion from P7.4
billion because of optimized spending in the current lockdown situation and
travel restrictions, especially in the Philippines. Advertising and promotions (-
P0.1 billion), freight and handling (-P0.1 billion), and other services (-P0.1
billion) were down year-on-year. Salaries and employee benefits, on the other
hand, went up (+P0.1 billion) year-on-year due to increased business activity
from a year ago. Selling and distribution expenses decreased 8% (-P0.4 billion)
from a year ago. Brandy segment optimized its expenditures reflective of the
current situation, and had spent 23% less (-P0.8 billion) year-on-year,
particularly on Emperador’s advertising and promotions, freight and handling,
representation and merchandising service fees. On the other hand, Scotch
Whisky segment had resumed its expenditures and spent 18% more (+P0.4
billion), particularly on strategic and promotional marketing and freight and
handling in the light of its growing sales. General and administrative expenses
increased 5% (+P0.1 billion) from a year ago. Brandy segment’s expenses
remained stable while Scotch Whisky segment’s expenses grew on its salaries
and employee benefits from a year ago.
Interest and Other charges
Interest and other charges increased 89% (+P0.6 billion) to P1.2 billion from
P0.6 billion due to higher interest expense and unrealized foreign exchange
losses. Interest expense increased 43% (+P0.2billion) due to higher variable
interest on ELS (due to 3 dividend declarations) during the year while Other
charges increased 5times (+P0.3 billion) from unrealized foreign exchange
losses.
Profit before Tax
As a result of the foregoing, profit before tax improved 37% to P12.9 billion
from P9.4 billion a year ago.
Tax Expense
Tax expense went up 96% (+P1.3 billion) to P2.7 billion from P1.4 billion a year
ago due to higher taxable income attributed to robust sales and the take-up of
P0.7 billion deferred tax adjustment on intangible assets at consolidation level,
which was triggered by the increase in corporation tax in UK (effective April 1,
2023)(that received Royal Assent in June 2021). The said tax adjustment is a
noncash item, does not affect UK stand-alone operating results and will never
be paid in the far future unless the UK business is sold or liquidated.
Net Profit
As a result of the foregoing, net profit soared 26% (+P2.1 billion) to P10.1
billion from P8.0 billion from a year ago. Net profit to owners jumped 25% to
P10.0 billion from P8.0 billion last year. Excluding non-cash deferred tax
expense, normalized net profit leaped 35% to P10.8 billion and normalized net
profit to owners jumped 34% to P10.6 billion.
EBITDA
EBITDA, which is computed as profit before interest expense, tax, depreciation
and amortization, went up 32% (+P3.7 billion) to P15.2 billion from P11.6
billion a year ago, showing respective margins of 27% and 22%.
Year Ended December 31, 2020 Compared With Year Ended December 31,
2019
The year 2020 was marked by the challenges attributed to COVID-19 pandemic
that prompted key changes in consumer attitudes and revolutionized the
market landscape. What was declared as a 'public health emergency of
international concern' in January soon became a pandemic in March. The
governments across the world responded immediately and implemented
measures at varying degrees, such as travel bans/restrictions, lockdowns,
home isolation and physical distancing. The Brandy segment realized a 20%
soar in net profit to owners to P5.7 billion in 2020 from P4.8 billion in 2019 as
it turned over P36.9 billion revenues from external customers, a 2% dip year-
onyear. The business was affected by the two-month hard lockdown from mid-
March up to mid-May, when local production and distribution were suspended
in compliance with government's liquor bans.

When borders began opening up in June, sales picked up in Europe, Asia and
the Americas. 'Terry Centenario' remained as the fastest growing brandy and
market leader in Spain cornering about one-fourth of the market. 'Tres Cepas'
expanded market share in Guinea and Cameroon. The Scotch Whisky segment
ended the year 2020 with P16.0 billion revenues to externalcustomers, a 14%
surge year-on-year, with net profit to owners growing at the same 14% pace
year on-year to P2.3 billion. Business in UK accelerated in 2020 as consumers
sought out our brands in off-trade and e-commerce channels while on-trade
was effectively shut March-July and restrictions reimposed from November.

Good growths were seen in North America and developing markets for
'Dalmore', 'Jura' and 'Tamnavulin', and in Europe for 'Fettercairn'. Global
Travel Retail was the most challenged channel asmost airports have remained
closed and restricted.
Revenues
Total revenues grew 2% year-on-year to record-high P52.8 billion in 2020 as
compared to P51.6 billion in 2019 as Scotch Whisky segment’s external
revenues grew 14% and Brandy’s dipped 2%. The Group’s on-premise channel
had been affected by the lockdowns and liquor bans while offpremise and e-
commerce channels flourished. ‘Emperador’, ‘Terry’ and ‘El Presidente’
remained to be the Group’s top selling Philippine, Spanish and Mexican brandy
brands, respectively. Single malts ‘The Dalmore’, ‘Jura’ and ‘Tamnavulin’ were
the Group’s top selling Scotch Whisky brands. Other income went up 10% to
P1.4 billion from P1.3 billion in 2019 due to higher scrap sales, gain on sale of
securities and unrealized foreign exchange gains recorded for this year.
Costs and Expenses
Total costs and expenses remained stable at P43.4 billion in 2020 from P43.1
billion in 2019, up 0.7% year-on-year, as Scotch Whisky business’ costs and
expenses, including intersegment purchases, expanded 12% (P1.4 billion) and
those of Brandy business contracted 4% (-P1.3 billion).
Cost of Goods Sold
Costs increased 6%, which was faster than sales growth due to product mix
and spike of cost inputs from abroad.
Gross Profit
Gross profit rates (“GPR”) on consolidated level remained healthy at 31% in
2020 and 34% in 2019. The slight swing was attributed to product mix, spike
of cost inputs abroad and promotional bundling, especially towards the last
quarter of the year in time for the Christmas season. The GPMs of the Brandy
and Scotch Whisky segments were respectively posted at 28% and 36% in 2020
as compared to 30% and 40% in 2019.
Other operating expenses
Other operating expenses decelerated 18% (-P1.6 billion) to P7.4 billion from
P8.9 billion, mainly from reduced advertising and promotions as brand and
marketing support were controlled; depreciation and amortization, due to right-
of-use assets; professional fees, largely relating to loan refinancing and
contracted services; and travel and transportation, due to lockdown and travel
bans.
Interest and Other charges
Interest expense went down 30% (-P0.2 billion) due to principal amortizations
paid during the year 2020. Other charges went up slightly (+P0.05 billion) to
P0.08 billion due to foreign exchange losses realized during the year.
Profit before Tax
As a result of the foregoing, profit before tax improved 11% to P9.4 billion from
P8.5 billion.
Tax Expense
Tax expense decreased 15% (-P0.2 billion) to P1.4 billion from P1.6 billion due
to lower taxable income and temporary differences for deferred tax.
Net Profit
As a result of the foregoing, net profit soared 18% (P1.2 billion) to P8.0 billion
from P6.8 billion in 2019. Net profit to owners jumped 18% as well to P8.0
billion from P6.7 billion last year.
EBITDA
EBITDA, which is computed as profit before interest expense, tax, depreciation
and amortization amounted to P11.6 billion and P10.8 billion for 2020 and
2019, respectively, showing margins of 22% and 21% in respective years.
Year Ended December 31, 2019 Compared With Year Ended December 31,
2018
The Group reported P51.6 billion revenues, up 10% year-on-year, and net
profit reached P7.1 billion in 2019, excluding a one-time loss of P0.3 billion,
which was due to impairment of certain trademarks. The Group continued to
deliver positive growths in 2019 with revenues up 10% and profits up 5%.
Revenues
Total revenues reached P51.6 billion in 2019 as compared to P47.0 billion in
2018, rising 10% yearon-year as both the Brandy and Scotch Whisky segments
registered growths. The Brandy segment turned over revenues from external
customers higher by 12% year-on-year, thereby increasing its share in EMP
revenue pie to 73%. ‘Emperador’, ‘Fundador’, and ‘Presidente’ remained to be
the segment’s top-selling Philippine, Spanish and Mexican brandy brands,
respectively, followed by Spain’s ‘Terry’ and ‘Tres Cepas’ and Mexico’s ‘Don
Pedro’. On the local front, ‘Emperador Brandy’ remains the nationwide leader,
particularly in key metro cities, amid fierce competition among local brands.
Emperador introduced a lighter brandy, ‘Emperador Double Light’ in July 2019
and a bundle pairing ‘Apple of My Light’ in August 2019. The ‘Apple of My
Light’ is the second pairing of ‘Emperador Light’ with ‘Club Mix’, this time with
the Apple Tea Cordial variant. The first pairing bundle called ‘Lime Light’ pairs
‘Emperador Light’ with ‘Club Mix Lime Cordial’, which came out in August
2018 is still being offered at present. The offshore brandies were seen growing
in the Philippines, Spain, Mexico, Guinea and USA.
The Scotch Whisky segment turned over revenues to external customers higher
by 4% year-onyear. The business was growing not only in UK but also in other
parts of the world, especially in Asia, Greater Europe, USA, Canada,
France/Germany, Latin America and Africa. Most of these territories showed
double-digit growths which all together accounted for a big chunk of the
segment’s revenues.
The single malts continued to attract sales. The blended malts further boosted
sales. Other income went up 85% to P1.3 billion from P0.7 billion a year ago
due to higher interest income, scrap sales, gain on sale of securities, unrealized
foreign exchange gains, and share in net profit of BLC recorded for this year.
Costs and Expenses
Total costs and expenses amounted to P43.1 billion in 2019 from P38.6 billion
a year ago, up 12% year-on-year primarily from the Brandy business’ costs and
expenses which, including intersegment purchases, increased 14% year-on-
year while those of Scotch Whisky business expanded 4%.
Cost of Goods Sold
Costs increased 10%, which was at almost same pace as sales. The slight
difference was attributed to product mix and packaging for the new and
re/packaged products this year.
Gross Profit
Gross profit margins (GPM) on consolidated level remained healthy at 34% in
2019 and 35% in 2018. The slight swing was attributed to product mix and
promotional bundling, especially towards the last quarter of the year in time for
the Christmas season. The GPMs of the Brandy and Scotch Whisky segments
were respectively posted at 30% and 40% in 2019 as compared to 32% and
40% in 2018.
Other operating expenses
Other operating expenses went up 20% to P8.9 billion from P7.5 billion, mainly
due to advertising and promotions as brand and marketing support;
depreciation and amortization, due to new capital additions and right-of-use
assets; professional fees, largely relating to loan refinancing and contracted
services; and the impairment loss on certain Spanish trademarks.
Interest Expense and Other charges
Interest expense shrank 5% to P781 million from P819 million due to lower
interest rate of the refinanced loan in 2019, which was offset partially by the
finance cost under PFRS 16 this year. Other charges almost doubled to P24
million from P12 million a year ago mainly from loss on disposal of property.
Profit before Tax
As a result of the foregoing, profit before tax inched 0.5% to P8.5 billion from
P8.4 billion a year ago.
Tax Expense
Tax expense inched 2% to stay at P1.6 billion level, due to higher final tax on
interest income.
Net Profit
As a result of the foregoing, net profit remained stable at P6.8 billion.
Excluding the one-time loss, net profit jumped 4% to P7.1 billion and the
portion attributable to owners rose 5% to P7.0 billion.
EBITDA
EBITDA, which is computed as profit before interest expense, tax, depreciation
and amortization, amounted to P10.8 billion and P10.3 billion for 2019 and
2018, respectively, showing margins of 21% and 22% in respective years.
Year Ended December 31, 2018 Compared With Year Ended December 31,
2017
Revenues
Total revenues climbed P47,050 million in 2018, up 10.3% from P42,656
million a year ago attributed to continuing sales growth from both the Brandy
and Scotch Whisky segments. The Scotch Whisky segment turned over
revenues to external customers higher by 9.0% yearon-year. The business is
growing not only in UK but also in other parts of the world, especially in Asia
where revenues had more than doubled as brands enjoyed success across a
number of markets. The Dalmore, the flagship malt whisky product, was again
the major driver of growth for the year as it continued to attract new
consumers at the apex of the single malt category through both the Core Range
and the Rare Expressions. The new The Dalmore Port Wood Reserve was added
to the Core Range with further limited releases of 35YO, 40YO, 45YO, and
Vintage Expressions. Jura with its redesigned range and exclusive Global
Travel Retail range continued to attract sales. The re-launch of Fettercairn in a
new packaging, and the launch of Tamnavulin Vintage Collection in the single
malt category in 2018 and the new contemporary blended malt brand
Shackleton in 2017 further boost revenues during the year.
The Brandy segment on the other hand, reported revenues to external
customers higher by 10.8% year-on-year. The Spanish business is growing in
Spain, Philippines, UK and USA, which all together accounted for three-
quarters of its revenues. The Spanish brands continued to collect awards and
recognitions in international competitions this year – a total of ten gold medals
for Fundador, and Terry brandies, highlighting a Trophy for Fundador
Supremo 18YO as the Best Grape Brandy at the Hong Kong International Wine
& Spirit Competition; and seventeen gold medals and three trophies for
Harveys Sherries. Fundador Supremo 18YO, a super-premium Brandy de
Jerez, is available in Travel Retail across Europe and Asia, and in the
Philippines. On the local front, Emperador Brandy remains the nationwide
leader, particularly in key metro cities, amid fierce competition among local
brands. Recognizing the preference of the young drinkers for variety and
excitement, Emperador created a new offering for Emperador Light drinkers by
pairing Emperador Light with Club Mix Lime Cordial, dubbed as ‘LimeLight’
and ‘GreenLight’; and, in mid-September, ‘the gin for the new generation’ The
BaR Premium Gin was launched, infused with flavors and botanicals from the
gardens of Andalusia, Spain, in Pink, Lime and Premium Dry variants.
Other revenues and income went up 56.9% to P705 million from P449 million a
year ago due to higher interest income and dividends, scrap sales and higher
net results from BLC which resulted in higher share in net profit recorded for
this year.
Costs and Expenses
Total costs and expenses amounted to P38,614 million this year from P34,820
million a year ago, up 10.9% year-on-year primarily from the Brandy business
which, including intersegment purchases, increased 13.6% year-on-year while
the Scotch Whisky business expanded 2.4%.
Cost of Goods Sold
Costs increased 11.2% primarily due to higher costs in the Brandy segment,
which grew faster than sales, while Scotch Whisky segment’s costs saved 4.3%
from a year ago. Such increase in the Brandy Segment is attributed to high
cost of wine, new bottles and packaging for the new and re/packaged products
this year.
Gross Profit
Gross profit margins (GPM) on consolidated level remained healthy at 35% in
2018 and 2017. The GPMs of the Brandy and Scotch Whisky segments were
respectively posted at 32% and 40% in 2018 as compared to 35% and 33% in
2017.
Other operating expenses
Other operating expenses went up 22.0% to P7,478 million from P6,131
million, mainly due to advertising and promotions which include strategic
marketing spends (new and repackaged products launched this year by both
segments), salaries and employee benefits (due to more employees and new
positions created) and travel and transportation (for international sales
promotions).
Finance and Other charges
Finance and Other charges shrank 41.6% to P831 million from P1,425 million
due to the fixed interest expense on ELS and foreign exchange losses recorded
in previous year.
Profit before Tax
As a result of the foregoing, profit before tax climbed 7.7% to P8,436 million
from P7,835 million in 2017.
Tax Expense
Tax expense increased 6.9% to P1,607 million from P1,503 million a year ago
due to higher taxable income, especially in the Scotch Whisky segment.
Net Profit
As a result of the foregoing, net profit went up 7.8% to P6,829 million from
P6,332 million a year ago.