By Bernie Cahiles-Magkilat

Pilmico Foods Corp., one of the country’s top three flour and feeds manufacturing companies, is expanding production capacity for both its flour and feed mill plants to cope with the growing demand in the local market.

Tristan Aboitiz, COO of Pilmico, said that investment for the Iligan plant expansion is a little bit lower than P500 million as their winning Chinese bidder Muyang for equipment supplier was able to integrate other European parts in the system.

Pilmico’s existing flour manufacturing plant in Iligan in Mindanao was established in 1962 while its feed mill plant in Capaz, Tarlac has been operating since 1998.

For the feed milling, he said, the expansion will add milling capacity to its existing 80,000 per hour capacity for a total of 140,000 tons per hour capacity by end of next year.

For the Tarlac feedmill plant, the plan is to add 20,000 tons per hour also but they are looking at utilizing others means like tolling and rent of facilities to augment its volume without adding new investments for capital equipment. At the time of the Tarlac plant’s construction, the company invested as much as P300 million.

Aboitiz further said that demand for flour is steady because the economy is also growing, but there is a new growth segment in the market that has been captured by the new millers because of their cheaper pricing scheme.

“Competition among players in the local market is already stiff. This situation has kept imports at bay as they could no longer compete with the local prices. Imports cannot also compete with quality of the locally milled flour, which wheat are imported from North America, particularly the US,” said Aboitiz.

Demand for feeds though is growing is growing double-digit, especially the farms segment.

The high inflation rate has not also translated into lower demand for pork and meat products.

They have already adjusted a little of their prices for feeds but most of it was absorbed by the company. The higher cost of imported raw materials was primarily due to the depreciation of the peso against the dollar because 80 percent of their inputs are imported.

Since they could not pass on all its forex cost adjustments, Aboitiz said their profit has been squeezed.

“What we see that’s happening is a squeeze in the margins because we have not been able to pass on the higher cost to consumers. This is a very competitive industry,” he added.

Pilmico imports raw materials from all over the world with soybean coming from the US and Argentina and feedwheat from Russia, Ukrain and Australia. The local inputs include corn, molasses, coconut oil and rice bran.

While Pilmico feeds are focused on swine, they are also making an effort into the poultry and gamefowl space where usage of corn is much higher.

Early this year, the company has partnered with a cooperative in Bukidnon for corn supply and is also looking at sourcing opportunities in Luzon.

Hopefully by next year they would be able to partner with coops for local inputs sourcing and eliminate middle men to benefit more farmers.