Good afternoon, everyone. Welcome to the combined 2026 first semester results analyst briefing. I am Jericho, and I will be your moderator for today. A few reminders before we begin. Number one, questions will be entertained only at the end of the presentation and only via the Q&A feature. Number two, questions sent through the chat box will not be entertained. Number three, please be reminded that this webinar is recorded. Allow me now to introduce our panelists for this afternoon.
We are joined here today by Ms. Chesca Tenorio, VP and Head of Corporate Financial Planning and Investor Relations, Ms. Tatish Palabyab, SMC Chief Sustainability Advisor, Ms. Monica Ang-Mercado, San Miguel Food and Beverage Inc. CFO, Ms. Tina Garcia, SMFB Investor Relations Head, and Mr. Erich Pe Lim, Petron Corporation Investor Relations Head. We would also like to acknowledge the presence of other key executives of the group who will be joining us in this call. I now turn you over to Ms. Chesca Tenorio to discuss the SMC Group's financial and operational results.
Thank you, Jericho. Good afternoon, and welcome to San Miguel Corporation's combined first half 2026 results analyst briefing. We are very pleased to report that despite a more challenging operating environment, the SMC Group delivered resilient first half results, demonstrating the strength of our diversified portfolio and the continued execution of our long-term growth strategy. Let me begin with an overview of the key developments and drivers behind our performance during the period.
The first half of 2026 was marked by a more challenging operating environment in the Philippines, with GDP growth slowing to 2.3% in the second quarter and 2.6% for the first half. Weaker investment activity, softer consumer spending, elevated inflation, peso depreciation, and disruptions arising from tensions in the Middle East weighed on overall business and consumer sentiment. Despite these headwinds, SMC delivered resilient first half results.
Core net income grew significantly, while consolidated operating income grew by 17%, reflecting the resilience of our diversified portfolio. Although second quarter performance was affected by the Middle East crisis and foreign exchange movements, the group continued to benefit from solid top-line growth, steady domestic demand, and stronger contributions from the energy, food, spirits, and infrastructure businesses. On the sustainability front, SMC continued to advance its sustainability agenda in the first half of 2026, moving from establishing key frameworks toward greater integration into business operations and decision-making.
Key progress included advancing in the climate risk assessment, net zero roadmap, and people upliftment framework, alongside the publication of the 2025 sustainability report. Flagship initiatives such as the Better Rivers program continued to deliver measurable environmental and social outcomes, while stronger internal engagement and sustainability governance supported SMC's focus on long-term resilience, value creation, and sustainability growth.
We will discuss these developments in greater detail in the succeeding slides. Let's now take a closer look at the group's financial performance. San Miguel Corporation remains resilient in the first half of 2026, with its diversified portfolio supporting strong performance despite heightened external challenges. For the first semester of 2026, the group generated consolidated revenues of PHP 964.1 billion, up 34% from last year. Growth was driven by higher average selling price and volumes at Petron, sustained strength in the energy business, and solid food business, led by record-high feeds volumes and continued support from Magnolia Dairy. This growth was achieved despite more pronounced headwinds in the second quarter, when the Middle East crisis and foreign exchange movements weighed on Petron's margins.
The resilience of the group's diversified portfolio, supported by stronger contributions from the energy and other key businesses, helped cushion these pressures and brought consolidated operating income for the first half to PHP 102.3 billion, and that's 17% higher year-on-year. Consolidated reported net income reached PHP 37.7 billion, 44% lower than last year, but this is mainly reflecting the absence of prior year one-off gains and the impact of a PHP 16.5 billion foreign exchange loss from the peso depreciation. Stripping out these non-core items, consolidated net income would have grown 48% to PHP 54.2 billion, reinforcing the strength of the group's core earnings. To walk us through the performance of San Miguel Food and Beverage, I'll turn the floor over to Tina.
Thank you, Chesca. San Miguel Food and Beverage remained resilient through the first half of the year, supported by the strength of our operations and the hard work of our teams despite high inflation, slower growth, and geopolitical disruption. Let me start with the macro conditions. The economy grew 2.8% in the first quarter, and household spending was 3% down from 3.8% in the fourth quarter of 2025.
Inflation moved from 2% in January to 4.1% in March, led by transport at 9.9% as the Middle East conflict pushed up fuel costs. That pressure intensified through the second quarter, with inflation reaching 6.8% and the peso weakening 4.6%, which raised the cost of our imported inputs. Consolidated sales reached PHP 205.3 billion, 2% higher, led by the continued growth in food. Food grew 5% on volumes, spirits was steady, and beer eased 1%.
Food and beer are still our largest contributors at 48% and 36% of sales, with spirits at 16%. Gross profit was steady at PHP 58.4 billion, supported by revenue growth and efficient cost management. The earnings pressure this first half came through operating expenses rather than the top line or the gross margin, mainly on higher freight and handling costs and the cost of running new facilities.
Income from operations and net income both eased 4% to PHP 28.8 billion and PHP 22.1 billion, with both margins easing one percentage point. EBITDA was 1% lower at PHP 38.8 billion, with margin of 19%. Beer is still the largest contributor at 50% of income from operations and 52% of net income. Food follows at 31% and 30%, and spirits at 19% and 20%. Despite these pressures, demand across our core categories remained relatively stable.
We closed the first half with total equity of PHP 205.3 billion, up 4% alongside improved liquidity and leverage ratios. Next slide, please. Turning to the food business, food revenue rose 5% to PHP 99.3 billion, driven by the feed segment and sustained demand for branded products. Animal Nutrition and Health had its best first half volume ever, up 26%. This was driven by measured growth in hog feeds, supported by product enhancements, effective sales and marketing programs, farm conversions, and industry repopulation. Layer, free-range, and broiler feeds also posted strong gains. Volumes grew double digit across every channel, more notably from feed stores due to improved distribution and trade execution. Feeds accounted for most of food's added sales. Protein sales eased 5% to PHP 35.9 billion amid a challenging industry supply situation and softer demand.
While poultry volumes remained stable, the sustained influx of imported frozen chicken continued to weigh on chicken prices, which averaged 5% below last year's levels. Industry frozen chicken inventory rose from 57.5 million kilos at the end of 2025 to 68.1 million kilos by June 2026, with imports accounting for 69% of total stocks. As the shortfall was driven by weaker pricing rather than lower volumes, it cut directly into profitability. There are early signs of improvement. Chicken prices have gradually recovered since April, although they remain below year-ago levels. Demand in the second quarter remained resilient, particularly from food service and wet market channels, helping support a more positive outlook for the business. Monterey Meats also returned to profit, given a more focused business team, a better channel mix, and improved farm efficiency.
Prepared and packaged food grew sales 5% on stronger volumes, better prices, and improved product mix, supported by Magnolia Dairy and Coffee, Purefoods luncheon meats, and Purefoods Pinoy Favorites. Our economy brands Star and Bonga also contributed to the top line as consumers sought affordable yet trusted alternatives. Flour sales eased as customers moved to lower-priced alternatives, including imported flour. Our Fighting Brands bakery ingredients and retail premixes offset part of that, and operating income still improved on wheat costs that were below last year's levels. For food overall, gross profit grew 4% to PHP 22 billion, helped by favorable prices for most raw materials and by deliberate cost-reduction efforts across operations. Operating income increased 2% to PHP 8.8 billion. EBITDA was 5% higher at PHP 13.8 billion, and net income rose 8% to PHP 6.4 billion.
Favorable input prices and cost discipline helped the business cope with high inflation and the impact of the Middle East conflict and sustained margins. Next slide, please. Moving on to the beer business. Beer remained the group's largest earnings contributor, although sales eased 1% to PHP 73.7 billion as consumers became more selective with discretionary spending amid elevated inflation and a weaker peso. Domestic sales remained steady at PHP 66 billion, supported by the January price adjustment implemented to offset higher excise taxes despite a 5% moderation in volume. First quarter volume was partly affected by the trade's inventory buildup in December 2025 ahead of the adjustment, while second quarter performance reflected more cautious consumer spending amid elevated inflation. The June earthquake in Mindanao also temporarily affected volumes in the region.
We continued investing in our brands with campaigns and sponsorships across our portfolio, alongside intensified sales and distribution initiatives that helped cushion the volume shortfall. Domestic operating income closed at PHP 13.4 billion, 5% below last year, as lower volumes, higher fuel prices and excise taxes, and fixed costs offset the pricing gain. International sales were PHP 7.7 billion, 7% lower, or 11% lower in dollar terms at $128.5 million, primarily because the Middle East conflict affected our exports business.
That was partly offset by growth in the domestic operations of our international markets, with stronger sales in Indonesia, South China, and Hong Kong, and higher San Miguel brand volumes in Vietnam. Operating income declined on lower volumes, higher production costs driven by aluminum can prices, and increased distribution expenses, including freight subsidies. We are now gearing up for export recovery as conditions ease.
For the beer business, consolidated operating income was down 11% to PHP 14.4 billion, and net income declined 12% to PHP 11.4 billion. EBITDA was PHP 19 billion, 7% lower. Higher container amortization and the distribution costs from the conflict added to the decline. Turning now to the spirits business. Spirits revenue was steady at PHP 32.3 billion as higher pricing offset softer volumes. Volume eased 5%, reflecting more careful consumer spending against the elevated inflation and slower economic growth, which I described earlier.
Our core brands held up well, supported by campaigns and in-store promotions that reinforced value and affordability. We also widened the portfolio and route to market, launching Vamos Tequila Gold in May and adding dealer routes, wholesalers, and warehouses, and exports grew as we reached overseas Filipinos in more countries. Profitability improved despite lower volumes. Gross profit rose 5% to PHP 8.9 billion, helped by lower molasses and alcohol costs, better distillery efficiency, and use of more secondhand bottles. Operating income rose 8% to PHP 5.4 billion. EBITDA was up 3% to PHP 5.8 billion, and margin improved from 17% to 18%. Net income increased 3% to PHP 4.4 billion. That concludes the update for San Miguel Food and Beverage. I would now like to invite Erich to present the updates on Petron.
Thank you, Tina. For the first half of 2026, Petron Corporation reported a net income of PHP 3.8 billion, 27% lower than the same period last year due to a challenging external environment, mainly attributed to the continued impact of the geopolitical tensions in the Middle East. The war has pushed freight costs, insurance, and import premiums to record highs. Excluding trading activities, total volumes in the Philippines and Malaysia reached 52.9 million barrels during the period, down from 56.2 million barrels last year. This is due to a number of factors, namely lower refining output as the jetty port in the Port Dickson refinery in Malaysia is still being constructed, a scheduled first quarter maintenance at the Bataan refinery, and lastly, volumes strategically being funneled to more profitable business segments.
This is most evident in the continued growth of the vital and profitable retail business in the Philippines, which continued its notable growth momentum, recording an outstanding 15% year-to-year growth as more motorists chose Petron due to competitive pricing and fuel availability and reliability. Revenues rose 57% to PHP 605.9 billion on the back of higher prices and overall sales to volume improvement. However, higher costs of products sold, both from production and importation, together with higher operating expenses, weighed on margins. Consequently, operating income fell to PHP 12.6 billion while the EBITDA likewise increased to PHP 19.8 billion. That concludes the update on Petron's results. I will now hand the presentation back to Chesca to discuss the performance of the group's remaining business.
Thank you, Erich. Let me now continue with the performance of the remaining businesses in the group. The packaging group's first half revenues remained steady at PHP 19.3 billion, as strong gains from international operations offset lower demand in its core domestic businesses, particularly in the glass segment, due to the slowdown in market consumption of its food and beverage customers. Despite cost-saving initiatives, lower demand and significantly higher fuel and power rates weighed on the business and more than offset these measures. As a result, operating income declined to PHP 1.2 billion while EBITDA fell to PHP 2.5 billion.
Moving on to our power business, revenues rose 27% year-on-year to PHP 101.9 billion, driven by the recovery of tariffs representing passthrough power supply costs incurred in 2022, higher realization rates, and the contributions of the five BESS facilities commissioned in 2025 and fully operational in 2026, with a combined capacity of 140 MWh . Revenue growth was further supported by new power supply agreements supplied by the Mariveles, Masinloc, and San Roque power plants, with a combined contracted capacity of 1,140 MW .
These PSAs took effect in June, August, and September 2025 respectively. Excluding the impact of the recovery of incremental power supply costs, revenue growth will still be at 7%. Operating income surged 90% to PHP 42 billion, with operating margins expanding significantly to 41% from 28%, on account of previously unrecognized revenues, better contract terms, and increased contributions from BESS facilities.
Meanwhile, EBITDA grew 55% year-on-year to PHP 53.4 billion, while net income declined to PHP 32.2 billion, mainly due to the PHP 21.9 billion investment revaluation gain from the chromite transaction recognized last year. Excluding the effects of the aforesaid revaluation gains and the 2022 incremental cost recovery, net income would have still increased by 52%. Turning now to our infrastructure business. SMC Infrastructure's operating toll roads in the first half of 2026 reflected the partial impact
Of higher fuel prices that started in March amid the ongoing Middle East conflict. As a result, traffic volume slightly dropped by 1% to 1.07 million. Despite softer traffic, revenues increased by 3% to PHP 20.5 billion, while operating income remained steady at PHP 11.1 billion. Meanwhile, EBITDA grew 8% to PHP 17 billion, while net income grew 29% to PHP 8.8 billion. Moving on to our cement business. The cement business posted first half consolidated revenues of PHP 18.2 billion, up 2% year-on-year, driven by higher sales volume.
The volume growth more than offset the decline in average selling prices, which remained under pressure by intense market competition. The increase in volume was supported by solid performance across all three cement businesses, with the group gaining market share as imported traded cement volumes remained low following the implementation of anti-dumping duties in February, even as overall market demand weakened.
Despite higher revenues, operating income declined by 9% to PHP 3.2 billion, while net income fell by 18% to PHP 1.6 billion. This is primarily due to elevated raw material and power costs resulting from heightened geopolitical tensions in the Middle East. Now moving on to a snippet of our balance sheet. Consolidated total assets as of June 30, 2026, for the consolidated SMC stood at PHP 3.0 trillion while total liabilities amounted to PHP 2.2 trillion. Stockholders' equity ended at PHP 794 billion. Consolidated cash balance stood at PHP 454 billion, while interest-bearing debt totaled to PHP 1.8 trillion. Now, I would like to invite Ms. Tatish to provide an update on our sustainability initiatives and key developments during the period.
Thank you, Chesca. Good afternoon, everyone. I'd like to begin with a brief overview of our sustainability highlights before discussing some of our key initiatives and accomplishments in detail. We published our 2025 sustainability report in June, providing investors with a comprehensive view of how sustainability is embedded across the group. Rather than highlighting a single initiative, the report demonstrates how sustainability supports long-term value creation across all forms of capital. Financially, we generated over PHP 1.5 trillion in economic value. Operationally, we continue to provide critical infrastructure through our power generation assets and expressway network. Socially, our employee volunteers and community programs continue to expand our reach. While environmentally, our reforestation program, water conservation, biodiversity, and river rehabilitation programs continue to deliver measurable outcomes.
Equally important, our governance foundation remains strong, with 100% of directors and officers completing governance training and 282 internationally recognized certifications supporting disciplined operations across the group. Next slide. One initiative that continues to distinguish San Miguel is our Better Rivers program. As of the end of June, we have dredged approximately 9.2 million cu m of accumulated silt and debris, restoring nearly 200 km of waterways across Luzon, and more recently, expanding our efforts into Cebu through the Butuanon River.
Beyond its environmental benefits, the program helps improve river capacity, reduce flood risk, restore water flow, and strengthen climate resilience in the communities we serve. It reflects our belief that sustainability investments should generate tangible benefits for society while supporting the long-term resilience of the areas where we operate. San Miguel continues to receive recognitions for its sustainability initiatives.
In April, SMC was again recognized at the Cambridge IFA Global Good Governance Awards, receiving the 3G Excellence in Sustainable Development Award and the 3G Community Development and Philanthropy Award. In June, Eagle Cement Corporation, an SMC subsidiary, was likewise honored at the Asia Responsible Enterprise Awards, earning accolades in the Green Leadership category for its waste heat recovery system and the Social Empowerment category for its Wealth on Waste program.
While awards are not an objective in themselves, they provide independent validation that our environmental and community initiatives are producing results that are recognized internationally. While much of our sustainability work focuses on large-scale infrastructure and industrial operations, embedding sustainability into everyday employee behavior remains equally important. The relaunch of the Tamang Tapon program reinforces a culture of resource efficiency and accountability throughout the organization, complementing our broader operational initiatives.
Following the completion of our climate risk assessment, net zero roadmap, and people upliftment framework in 2025, our focus in 2026 has shifted toward implementation. On climate, we are translating facility-level assessments into resilience plans, integrating climate considerations into enterprise risk management, and incorporating ESG risk evaluation into major capital investment decisions. On decarbonization, we continue advancing renewable energy projects, Petron CME plant, and other emissions reduction programs across the group while working with our businesses to establish measurable intermediate targets. For our social goal, we are strengthening the measurement of outcomes so that we can better demonstrate progress toward our commitment to uplift 15 million people by 2030.
We also continue strengthening our sustainability reporting and governance processes in preparation for evolving IFRS sustainability disclosure standards, enhancing the quality, consistency, and decision usefulness of information provided to investors. Overall, our sustainability agenda continues to mature from establishing foundations toward integrating sustainability into risk management, capital allocation, and operational decision-making across the group. That concludes our sustainability update. I hand the presentation back to Ches.
Thank you, Ms. Tatish. Let me now highlight key developments across our businesses during the period and share the group's outlook for the remainder of the year. SMC successfully completed its PHP 30 billion of preferred shares follow-on offering, with strong demand from institutional and retail investors driving a 3.3x oversubscription despite the volatile and challenging market environment.
The successful issuance reflects continued market confidence in San Miguel's long-term growth plans and supports the group's ongoing capital requirements, including investments in infrastructure and other strategic projects that contribute to national development. For SMFB, capacity expansion projects are currently ongoing that the spirit of business will have a new production line in Cabuyao by November, and its mechanized bottle washing facility was commissioned in March. For beer, its Lucanin malt terminal is expected to improve inventory management later this year.
For the food group, additional capacities for butter, margarine, and salad aids were installed while a new cold storage facility for Purefoods commenced operations already. Scheduled for completion within the year are the second Cebu feed mill, a new cheese processing line, and additional grain silos in Davao. Construction is ongoing on two more feed mills, a pet food plant, nuggets capacity expansion, and two grains terminal.
For power, SMGP continues to advance its energy transition strategy through the development of its hydro and solar projects under the GEA P rogram. Development and construction activities across the portfolio continue to advance in line with the planned project timelines. Meanwhile, for the Masinloc power plant project, unit four is currently undergoing testing and commissioning activities, while unit five remains under construction. Our infrastructure business continues to make significant progress across its several key projects.
Construction is progressing across priority toll road projects, particularly SLEX TR4, which has reached approximately 50% completion. Significant progress continues in the widening and expansion of STAR, SLEX, NAIAX, and Skyway. MRT 7 continues to advance steadily with overall completion rate at 84.42%, where civil works and site development activities are ongoing. As well as in the Manila International Airport, which has maintained its overall progress and continues to advance towards completion.
For NAIA, actual passenger volume reached 26.9 million in the first half, reflecting 1% growth from the same period last year. Enhancing the passenger journey remains a key priority of the airport, with initiatives such as Terminal 1 airside F&B concession area, Terminal 2 mega toilet, Terminal 3 retail level premium food and beverage, and shared business class lounge, as well as improvement of escalators, elevators, and moving walkways across all terminals.
The airport continues to invest in capacity improvements, including construction of bus gates and ground transportation center, extension of immigration area, and switching of security and immigration screening area. Furthermore, NAIA made several backend investments to support long-term operational reliability, such as construction of new data center, implementation of queue management system, and SAP HANA plant maintenance module, and launch of the flight info display system into official airport website for real-time flight updates. Overall, the first half underscored the resilience of SMC's business model. The strength of our diversified portfolio, combined with our scale, market leadership, and disciplined execution, enabled us to deliver stable performance despite a more challenging operational environment marked by moderate economic growth, persistent inflationary pressures, and evolving market dynamics. As we look to the second half of 2026, we remain cautiously optimistic.
While economic and market conditions are expected to remain dynamic, SMC is well-positioned to benefit from long-term growth drivers across its businesses, including anticipated increase in public infrastructure development and investment activities, rising energy demand, resilient consumer spending, and the continued recovery of mobility and broader economic activity. Supported by prudent capital allocation, sound risk management, and strong governance, we will remain focused on strengthening our businesses, executing our strategic priorities, and creating sustainable long-term value for our stakeholders. This concludes our presentation, and thank you for your time and attention. We will now open the floor in the chat box for questions.
Thank you, Ms. Chesca. We now open the floor for your questions, and we will be reading questions sent via the Q&A feature.
Go ahead, Jericho. We can ask questions now.
For our first question, what is Power's CapEx guidance for 2026 and 2027, and how much is allotted for BESS and Masinloc units four and five?
I will take questions for Power. I will take the opportunity to answer CapEx guidance already for the full group. Right now, I think we were backended on some of our payments or disbursements last 2025. We fell short of our guidance from 2025. I think those will be pushed forward to 2026. Do please expect CapEx for 2026 for the total group will be north of PHP 200 billion.
Again, depending on schedules and CapEx disbursements on toll or on their infrastructure side, depending on completions. Having said that, for Power, zooming in Power, they would take up almost half of our CapEx guidance already for the group. That would be around PHP 100 billion. BESS already, I think BESS will only take up as much as single digits CapEx only for Power, given that most of the expenses already were early on spent prior to 2026. Meanwhile, Masinloc 4 and 5 can be as much as, let me just double-check. Close to about PHP 30 billion of that total PHP 100 billion for Power.
Thank you, Ms. Chesca. Now, for the second question we have, what is management's outlook for food, beers, and spirits segment for the rest of the year? What is the company's view on the proposed increase on excise tax on distilled spirits and sweetened beverages? Are there any plans to increase prices for food and/or beer segment to preserve margins?
Thank you for that question. For the second half of the year, we usually anticipate an increase or an improvement in the market demand, right? Especially with the OND or October, November, December, the Ber months. That's usually the time where people start spending more for celebrations and family gatherings, and fiestas. However, I do have to highlight that there remains to be a challenge in the market. We don't see a full recovery for last year, given the market conditions after the Middle East crisis. Affordability remains to be a top priority for most of the consumers, and as you know, for alcohol, our beers and spirits businesses, these are discretionary spending. Even for June, at the start of school season for many students, we saw a decline in the alcohol businesses. But of course, this was offset by our food segment.
Now, for the excise tax, there's a lot of talk on that proposed by some of our regulators. But we don't foresee there to be any impact or any effect this year or even till next year. So it's a long way away before this gets finalized. However, excise tax remains to be a huge contributor to costs for our alcohol, beers, and spirits businesses. We do think it is unfair for there to be any discussion for further excise tax increases because as a FAB or fermented alcoholic beverage, we're already taxed way more than, say, the likes of Smirnoff Mule or Tanduay Ice, those kinds of categories. So, we do think it's unfair that this discussion is being debated once again.
Next, for the pricing, I do think that it is going to be very challenging and unwise for us to be increasing our selling prices for the alcohol or the beer and spirit segments. We do understand that margins are very important, and as you have seen from our figures, we have tried our best to contain increases in fixed costs, expenses, and cost of goods sold. But in terms of costs, it is a mix versus last year. Some materials have driven up. Some have improved way better than budgeted. We will try our best to maintain margins. However, again, selling prices, lifting that is not a decision we will be taking. It is also good for maintaining our market share.
Thank you, Ms. Monica. Now, for our next question. Are there any updates on the planned merger of SMC and Metro Pacific Tollways?
I will take that question. For the discussions between SMC through San Miguel Holdings Corp., which is our holding company for our infrastructure group, and Metro Pacific Tollways, relating to this contemplated merger of their respective tollway business, we believe an appropriate disclosure will maybe be soon, but it will be made upon the execution of the definitive agreements that contains the relevant terms and conditions of the joint venture, including the parties' respective proportionate shares between them. I think we will just wait for the appropriate disclosure for them to plan.
Thank you, Miss Chesca. We have another question for SMFB. Can you provide some more details on volumes performance over the last two quarters, why we experience an accelerated volume decline? Should we expect a slowdown in price increases to help volumes? Could you also share the cases numbers for the quarter? Thank you.
Okay. I believe the question is from a Ginebra investor. For volume performance, the company was actually affected by the challenges that the country faced in the first half of the year. High inflation, slow economic growth, and weak consumer sentiment dampened the purchasing power for core consumers. Nonetheless, we responded proactively through relevant campaigns, expanded distribution reach, and improved supply chain efficiencies to help mitigate headwinds.
However, as the economic pressures persisted, the negative impact on demand became more pronounced, resulting in a 5% decline in our first semester sales volume from last year. First quarter volumes were 12.3 million cases, and the second quarter was 23.5 million cases. I think it is also worth noting that our core brands held up better. The softness in the segments were actually the ones that are most exposed to younger and price-sensitive drinkers. The February pricing offset, and so revenue held at PHP 32.3 billion. On price increases, we do not expect, as Monica said earlier, we do not expect another price increase for the remainder of the year to help volumes. Thank you.
Thank you, Ms. Tina. We have a question for Petron. How much inventory holding losses or gains did PCOR record in 2Q 2026, and how does this compare to 2Q 2025? Additionally, I understand that the situation is very uncertain still, but would you have an outlook how the remainder of the year might play out for PCOR, particularly with regards to sales growth and margins?
Thanks for the question. For the first semester of the year, for the first six months, inventory gains amounts to around PHP 3 billion. This is compared to last year for the same period, where we had actually inventory losses of around roughly PHP 2.9 billion. In terms of outlook for the rest of the year, I would say that we are cautiously optimistic. There are things that are going to our favor if you look at the first semester figures, and if I may point out some of them. In terms of volumes, I mentioned earlier that we actually continued to grow at a very healthy pace in terms of our retail sales volume, continuously growing year-on-year for the past, I think, four or five years already by double digits.
We were able to continue and capitalize on that momentum growing by around 15% year-on-year in the first semester for retail sales in the Philippines. We registered actually double-digit growth, despite the high prices, across most of our products except MoGas. I think that the double-digit growth across various products, again, is something that is quite notable given the operating environment that we are in. We expect volumes to improve, especially if we see some stability in terms of prices. Hopefully, the elevated prices would not continue because, of course, there would come a point that a price elasticity will manifest. If things continue to stabilize towards the end of the year, which we are hopeful for, then I believe that the volumes will continue to fall.
In terms of outlook in terms of profitability for the rest of the year, I think a lot of it would depend on external factors, market factors. Namely, of course, margins being pressured or compressed due to the landed costs. I have been explaining it to a lot of the analysts that I have been discussing with for the past five months that landed costs have significantly increased. When we say landed cost, that includes freight costs, your crude premiums, and also your insurance. To illustrate the margin, the costs that we have in terms of crude premium basically peaked at around $18, if I remember right, in April and May. If you average it out for the past five, six months, the crude premium when you buy raw materials is around roughly around $8/bbl already.
This is compared to pre-war, where your crude premium would just probably be around $1/bbl . Freight has likewise significantly increased. It peaked around close to $10/bbl , I believe, in March when the war unravelled. Right now, I believe the August is close to around $8/bbl with the renewed uncertainties in the Middle East. All of these increase in terms of costs will of course continue to, as I mentioned, pressure margins. If there is one thing that is a silver lining again, is in terms of market, is the very healthy refining margins that is currently prevailing.
If you look at the rough refining margins on a per barrel basis, it has increased year-on-year by around roughly, on a spot basis, around 200%. That is something that we are trying to capitalize on by running our refinery higher. We are running our refinery close to capacity of roughly close to around 90% as we speak. Of course, we making sure that whatever we produce, we sell to the most profitable segments strategically. Put all of these things together, we hope that it would more or less be a continuation of the first half going into the second semester. Yeah.
Thank you, Sir Erich. For the next question is for the group. Can you share core net income in 2Q 2026 and how this compares with 1Q 2026?
Okay. Yeah. I think our 2026 results might be very interesting on this level, beside our Forex exposure because again, of some one-off gains. Let me describe that in detail. On a reported net income basis, we are printing PHP 37.7 billion. That is down 44% from PHP 67 billion from last year first half. There are one-off items, mainly one is the gain of fair valuation which we had last year.
Stripping that out. Two, we also had a Forex gain, again, that is non-core in nature from last year against a Forex loss this year. Our Forex gain last year is PHP 8.1 billion versus our Forex loss this year of PHP 16.5 billion. Stripping those one-off, or I would say non-core items, we will be at PHP 54.2 billion this year versus last year's PHP 37 billion. That is up 48%. That was what was noted in the presentation. Hope that clarifies. Yes.
Thank you, Ms. Chesca . For our next question, how much cash is available at the parent company level?
Okay, I will take that as well. Yes, as of first half or as of June 2026, net debt for SMC parent is at PHP 772.151 billion . That is net of the cash at the parent level of PHP 89.82 billion . Hope that is clear for the net debt of SMC at parent level and cash as well.
Thank you, Ms. Chesca . Next question is for power. What is the expected revenue and EBITDA of the company's planned 4.2 GW hydropower capacity and 2.2 GW solar capacity?
EBITDA, we do not really provide guidance, but I would say at minimum we would be way above PHP 50 billion coming from PHP 50 billion, PHP 60 billion coming from EBITDA. Again, on a mature full capacity of these JF projects, JF 3 and 4, solar and hydro, we should be hitting EBITDA of north of PHP 50 billion, PHP 60 billion on an annual basis, again, on a full capacity run rate.
Thank you, Ms. Chesca.
At minimum, yes.
Now, next question. Could you describe SMC's interest for the Semirara coal block coal operating contract and provide updates regarding the bidding?
Well, to be honest, there is not much update. We are interested to participate if that is what people are looking at. We are interested and when DOE comes up with the terms of reference, of course. But again, when this comes out, we will evaluate if we will continue with our bid participation. Right now, we will just show our interest to participate and see what the bid terms would come out to.
Thank you, Ms . Chesca Next question is for GSMI. Can management elaborate factors driving the gross profit margin improvement in GSMI year-over-year?
Okay, for GSMI input costs and efficiency, there were some improvements in both. Cost of sales actually fell 1% even on higher excise tax because lower raw materials costs, such as molasses, offset it, and gross profit rose 5%. Behind that, there were also better distillery yields and greater use of secondhand bottles alongside pricing or price increase. Yeah.
Thank you, Ms. Tina. Now, next question. Is the $500 million RPCs raised by SGLTC in Q1 issued to a third party or related party?
This is for Global Power. Yes, it is a third party private placement.
Thank you, Ms . Chesca We have another question for Petron. Could you please provide an update on the current crude oil supply situation? In particular, have any cargoes lifted from Yanbu Port been affected by the recent Houthi attacks in the Red Sea. Additionally, what proportion of Petron's total crude oil imports is currently sourced from non-Middle East countries?
Okay. Thanks again for that question. Coming from March, right? March and April, where there was a lot of uncertainty in terms of supply. I believe that relatively speaking, in the past five to six months, supply lines have been established despite the uncertainty in the Middle East, right? Supply from the Middle East, categorically speaking, actually continued to flow. Of course, at a lesser extent. But it continues to come out of that region, of course, just at certain elevated prices. Hence, on our part, we have, of course, diversified our sourcing of supply. Aside from the Middle East, which we still continue to get from, we do get more production from Asian producers. We do get also from North America, Latin America, and also West African crude.
That's particularly because of the capability of the refinery with the upgrade that we did a few years back where the refinery now actually processes the whole spectrum of crude, right? From light to heavy, to start. That then basically gives us an advantage in terms of supply sourcing. Now, in terms of percentage, I'd say a good chunk of our supply still comes from the Middle East, probably around roughly around 50%-60%.
The Middle East continues to be resilient, right? Yes, there are threats currently in the Bab el-Mandeb Strait, where the Houthis have some sort of hold. But I'd say relatively speaking, based on the last reports that we've been getting from analysts, the shipping traffic, relatively speaking, is close to normal, right? There are threats, but nevertheless, a lot of the ships to avoid that would go the other way.
They go north. There are other alternative routes, right? It's a little longer because they have to go through the Suez Canal. A lot of the Middle Eastern crude is, particularly from the South, is being actually loaded in Egypt, in the Sidi Kerir port. A lot have been allocated there and other port points within the area, right? They've been resilient. They're still getting products out, also through the north, through Suez Canal and the Mediterranean Sea and around the Cape of Good Hope. But of course, that would again be longer and entail certain costs, incremental costs. Strictly speaking, there is supply. It's just that it comes at a certain price.
Thank you, Sir Erich. Our next question: Based on the news, the government is looking to fast-track the Sangley Airport project in Cavite. How will this affect SMC's airport operations?
I'll take that infrastructure question. While we're not really privy to the feasibility of Sangley, it will be technically and financially challenging given NAIA and the new Manila International Airport are both already in their advanced stages. Sangley may affect NAIA since it shares the same airspace with NAIA. But under the Concession Agreement of NAIA's operation should be prioritized and surrounding airports cannot hamper or limit the capacity of NAIA.
All right, everyone. That concludes our Q&A. Thank you to everyone for your questions and to our panelists for providing detailed and informative answers to our queries. For those who have further questions, you may address it to us via email at smcinvestorrelations@sanmiguel.com.ph. Thank you and good day.
Thank you.
Thank you.
Thank you all.
Thank you.