Lucio Co’s liquor distribution arm, The Keepers Holdings Inc., delivered a stronger first-quarter profit as Filipinos bought more spirits, but the company’s latest numbers also showed the squeeze facing import-heavy consumer businesses: higher foreign exchange costs, elevated fuel prices, and another round of excise-tax increases.
The company reported net sales of ₱4.31 billion in the three months ended March 31, 2026, up 6.1% from a year earlier, as total cases sold rose 4%. Brandy remained the group’s anchor category, accounting for 81% of sales value and 84% of sales volume.
But the volume growth came at a cost. Gross margin narrowed to 25.5% from 27.0% a year earlier, as the cost of sales rose faster than revenue. Management attributed the margin decline to high foreign-currency rates, elevated fuel costs, and the annual excise tax increase, while noting that the group did not implement price increases during the first three months of 2026.
That makes Keepers’ first-quarter report a study in trade-offs: the company sold more, protected operating profit through tighter spending, and kept a fortress-like liquidity position — but it also absorbed inflationary pressures rather than passing them on to drinkers.
Cost discipline cushions the blow
Keepers’ cost of sales increased 8.2% to ₱3.21 billion, outpacing the 6.1% rise in sales. As a result, gross profit was almost flat at ₱1.10 billion, up just 0.2% from the prior year.
The company made up for that through operating discipline. Operating expenses fell 12.7% to ₱310.8 million, from ₱356.0 million a year earlier, as marketing and promotional spending tapered off in the quarter.
That reduction helped lift income from operations to ₱785.3 million, up 6.4%, keeping operating margin broadly steady at about 18.2% of sales despite weaker gross profitability.
For investors, that is the key tension in the quarter. Keepers did not enjoy clean margin expansion from better pricing or mix. Instead, it leaned on lower advertising and promotional expenses to preserve profitability. That is effective in the short run, but the sustainability of that strategy will depend on whether the company can maintain brand momentum with learner marketing support.
Profit rises, helped by non-core income
Net income rose 17.6% to ₱811.4 million, from ₱690.0 million a year earlier. Earnings per share improved to ₱0.06, from ₱0.05.
Keepers said about ₱617.8 million, or 76.1%, of first-quarter net income came from core operations, while ₱193.5 million, or 23.9%, came from investing activities.
The bottom line was also supported by a sharp increase in other income, which rose to ₱106.2 million from ₱7.4 million a year earlier. This included ₱80.9 million in interest income and ₱28.9 million in net foreign-exchange gains.
That gives the quarter a somewhat mixed quality. The reported profit growth is strong, but part of the uplift came from interest income and foreign-exchange gains, which may be less predictable than recurring distribution earnings.
Strong liquidity remains a defining feature
If margins were the weak spot, liquidity was the strength. Keepers ended March with ₱4.28 billion in cash and cash equivalents and ₱4.97 billion in short-term investments, for a total of about ₱9.25 billion in cash-like assets.
Total current assets stood at ₱18.09 billion, while current liabilities were ₱5.96 billion, producing a still-comfortable current ratio of 3.04 times. The ratio declined from 4.48 times at the end of 2025, largely due to an increase in current liabilities following the company's ₱1.74 billion in dividends payable.
The board approved a cash dividend of about ₱0.12 per share, totaling ₱1.74 billion, payable to shareholders of record as of April 17, 2026, with payment expected on May 7, 2026.
For a company often viewed by income-oriented investors as a dividend play, the cash position remains important. Even after the dividend declaration, Keepers’ balance sheet looks conservative, with low financial debt and significant liquid assets.
Receivables fall, inventories rise
Working capital movements were notable. Trade and other receivables fell 58.4% to ₱1.14 billion, which management attributed to strong customer collections. The company reported an average collection period of 36 days, within its usual 30- to 60-day credit terms.
Inventories, however, increased 12.1% to ₱5.39 billion, as the group maintained what it described as a safe inventory level given importation-related factors. Prepaid expenses and other current assets also more than doubled to ₱2.32 billion, mainly because of advance payments for excise taxes tied to 2026 purchase orders.
Operating cash flow remained positive at ₱837.7 million, though it was lower than the ₱2.23 billion generated in the same period last year.
Bodegas helps, Pernod drags
Keepers’ equity-accounted investments also moved in different directions. Its joint venture, Bodegas Williams & Humbert, performed strongly, with revenue of ₱2.43 billion and net income of ₱274.0 million for the quarter. Keepers recognized ₱103.8 million in share of net income from Bodegas after adjustments.
By contrast, associate Pernod Ricard Philippines posted weaker results, with revenue declining to ₱271.6 million from ₱422.6 million and a net loss of ₱56.6 million. Keepers recognized a ₱17.0 million share in loss from Pernod for the quarter.
The group’s newer joint venture, Cervia Global Trading Inc., the company behind the Filipino liquor brand SULA, contributed a modest ₱567,000 share in net income.
Outlook: Pricing power is the question
Keepers’ first-quarter performance suggests demand remains resilient, especially in brandy, its dominant category. But the company’s decision not to raise prices in the quarter meant it had to absorb the combined effects of currency, fuel, and tax pressures.
The next few quarters may therefore hinge on whether Keepers can recover some of that margin through pricing, improved mix, or easing cost pressures — without hurting volume growth.
For now, the company remains in a strong position: sales are growing, profits are up, expenses are under control, and liquidity is strong. But the Q1 report also makes clear that even a market leader with a strong balance sheet is not immune to the economics of imported spirits in a high-cost environment.
In short: Keepers delivered a profitable and liquid quarter, but not an effortless one. The company sold more liquor and earned more money — yet the margin pressure beneath the headline numbers is the story investors should keep an eye on.
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Disclaimer: This is for informational purposes and is not investment advice. Figures are taken from company disclosures and exchange data; valuation ratios include the author’s calculations based on cited inputs.
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