Liberty Flour Mills’ ongoing seek for various strategic choices to remain in play

Listed Liberty Flour Mills Included (LFM) made a disclosure to the Philippine Inventory Change (PSE) final January 29 that it has commenced to judge all obtainable strategic company choices to maintain its 67 years of company existence.  

As defined, the transfer was prompted by the conventional need “to maximise shareholder worth and make sure the firm’s capital is allotted to the highest-growth alternatives.”

Beneath the veneer of this standard language of the disclosure, LFM is in actuality not simply in a matter-of-fact seek for progress alternatives. It’s truly navigating a serious company problem to a possible path of divestment from its flour enterprise within the face of low progress charges and declining income resulting from a household feud that’s driving down the corporate. The corporate has been moreover confronted with exterior challenges affecting its company instructions ensuing from a enterprise surroundings that’s altering, for the trade has attracted new and larger gamers that’s making competitors even stiffer.

Therefore, the main focus of LFM’s strategic evaluation included “a possible sale, demerger, three way partnership (JV), or the continued retention and additional growth of the flour enterprise inside the firm’s present construction,” because the flour enterprise stays a major a part of the corporate’s core operation.

At present, LFM has two subsidiaries: LFM Properties Company (LPC) and Liberty Engineering Company (LEC). LPC is engaged within the enterprise of leasing out workplace and industrial areas, whereas LEC is engaged within the sale, lease, and buy of kit and equipment.

Developments and challenges within the trade

The excellent news is that the trade’s general outlook is constructive. The flour trade is poised to develop steadily, pushed by an increasing inhabitants, elevated buying energy and shifting dietary habits.

No participant within the trade has a definite benefit over the opposite in as a lot because the nation doesn’t produce wheat domestically. However it’s 100% depending on imports in order that the trade is extremely delicate to international wheat value fluctuations. Provides are primarily coming from the United States for milling wheat and Australia for feed wheat.

Consumption for human-grade milling wheat is projected to succeed in 3.75 million metric tons (MT) within the 2025/26 advertising and marketing yr on an estimated gross home product (GDP) progress fee of 6% per yr. That is fueled by a rising urge for food for bread, noodles, and high-end baked items like cheese buns.

Extra revenue margins additionally exist: there’s a rising desire for premium, licensed flours, together with gluten-free, natural, and fortified choices, notably amongst health-conscious and middle-income customers. These merchandise command costs that might make up for revenue margins in any other case misplaced resulting from foreign money depreciation, enter value volatility or from rising working prices due to excessive power and logistics bills.

Once more, the largest risk to the trade is whereas wheat costs have softened not too long ago, native millers face rising operational prices, together with excessive power and logistics bills. These elements have tempered profitability.

The variety of flour mills has additionally grown from 12 to round 20 in recent times, resulting in a extra crowded and aggressive market. And the trade has a scarcity of climate-controlled storage amenities within the Philippines’ high-humidity surroundings forcing gamers to play “hand-to-mouth” supply sample, as long-term storage of wheat is tough. 

On high of those developments, main gamers like Common Robina Company (URC) and San Miguel Meals and Drinks (SMFB) are investing billions in superior, automated milling amenities, and high-capacity mills. For example, URC has invested in a milling plant with a day by day capability of 1,320 tons or 297,000 metric tons yearly in Sariaya, Quezon, that stands to boost meals safety and market share.

Company choices taken and present dilemma

Past milling, LFM made a major structural transfer: it diversified, and in November 2022, it listed its property arm LFM Properties Company (included in 1995 by the use of introduction or LBWI).  

Beforehand, the board of LFM declared a property dividend with an entitlement ratio of 69 LPC widespread shares for each one LFM widespread share as of December 18, 2020.  The Securities and Change Fee (SEC) authorised this declaration on August 19, 2021. The inventory certificates have been distributed on June 30, 2022. 

Once more, LBWI is a technique the place an organization lists its present shares on a inventory trade with out an preliminary public providing (IPO), which means no new capital is raised and no new shares are issued. The first goal is to not increase funds however to introduce its shares to a buying and selling market, sparing the corporate the costly underwriting and advertising and marketing prices related to conventional IPOs. That is usually permitted in conditions when shares are already extensively held, or mandated by regulation, amongst others.  

LFM has additionally a historical past of a steady, worthwhile, and dividend-paying efficiency through the years, however not too long ago, core profitability has weakened. Revenues dropped by about 10.3% in late 2025 resulting from decrease promoting costs and a marginal dip in gross sales quantity. And but, LFM reported a internet revenue of P413.08 million in 2025 (a large leap from P70.21 million in 2024) as a result of this was largely resulting from a one-time achieve from property dividend distributions.

To recall, LFM once more authorised a property dividend of LPC shares with an entitlement ratio of 97 LPC shares for each one LFM share. This was authorised by the SEC on August 5, 2025. As well as, LFM declared a money dividend of P0.60 per share with a fee date of February 10, 2026.

Whereas LFM stays energetic in returning capital to its shareholders, a good portion of its income has been tied up in receivables from its foremost distributor and largest shareholder, Parity Values Included (PVI). LFM has an impressive receivable of P804.7 million from PVI as of late 2024. Critics blame the interlocking directorships between LFM and PVI because the offender to the issue.

LFM executed a virtually P1-billion sale of its Liberty Constructing in Makati Metropolis to its subsidiary, LPC, to streamline its stability sheet. Within the course of, it is usually streamlining its organizational decision-making by decreasing the dimensions of its board from 11 to 7 members. 

Inventory efficiency 

The worth of LFM shares has proven stability however has generated some adverse returns over the 90-day interval resulting in February 2026 because of the inner household feud involving administration. Surprisingly, its shares skilled a surge by as a lot as 8.7% following the evaluation announcement. LFM’s shares have a 52-week excessive of P39.50, established on October 21, 2025.  

Compared to the broader Philippine market, LFM’s shares usually a have steady share value motion. Its shares have maintained a constant buying and selling value, hovering across the P33 value vary. As of this month, LFM’s valuation is mirrored in a trailing twelve-month (TTM) P/E ratio of 11.10x. 

The inventory market has been much less sort to LPC than its stability sheet suggests: its market capitalization has dropped considerably since its IPO, at present sitting at roughly P925 million. LPC’s shares have hovered close to its all-time low of P0.032 to P0.040, rendering LPC shares a “penny inventory” standing. It has an impressive 25 billion shares.  

Not like its mum or dad LFM, LPC doesn’t at present pay money dividends. Nonetheless, it not too long ago authorised a 60% inventory dividend (to be issued in 2026) as a part of a transfer to extend its approved capital inventory and doubtlessly enhance buying and selling liquidity.

LPC’s technique is targeted on “consolidation.” By transferring the Liberty Constructing from LFM to LPC, the group has efficiently separated the unstable flour enterprise from the steady, recurring revenue of the property belongings.  

LPC is at present an asset-rich however “liquidity-poor” inventory. It serves as a steady rental-income automobile, however buyers have been cautious because of the excessive debt taken on for acquisitions and the dearth of money dividends in comparison with its mum or dad.

Important insights

LFM is in a giant mess far too difficult: regardless of good investor returns, LFM is  too tightly held by a small group of associated buyers who’re in the mean time are at odds.  

Even when the corporate is now faithfully complying with the order of the SEC to repeatedly file reviews any further its associated occasion transactions with PVI, which was the basis trigger — and now the answer — to its monetary predicament, it’s additional beset with a number of exterior challenges that may require the present controlling shareholders to both put up extra capital (which appears tough in the mean time) or confide in different strategic buyers. 

LFM’s board has additionally appointed an adviser to help within the course of. Separating the standard flour milling enterprise from the corporate’s different high-value belongings, notably its actual property holdings is a given. However no matter different company instructions the evaluation might disclose to revitalize the corporate, LFM just isn’t an funding goal beneficial for the atypical investor with its current administration nonetheless controlling.  

Till then, LFM is not a maintain or a purchase, however a promote. And if you’re not but invested in it, it’s definitely a goal to keep away from. – Rappler.com

(The article has been ready for common circulation for the studying public and should not be construed as a suggestion, or solicitation of a suggestion to purchase or promote any securities or monetary devices whether or not referred to herein or in any other case. Furthermore, the general public must be conscious that the author or any investing events talked about within the column might have a battle of curiosity that might have an effect on the objectivity of their reported or talked about funding exercise. You might attain the author at densomera@yahoo.com)