Standard & Poor's Ratings Services said yesterday that this would reduce the likelihood of further deterioration to San Miguel's financial risk profile.

San Miguel's liquidity is weak, according to the analysts, given that its cash and cash equivalent of PHP20.9 billion (US$407 million) were insufficient to cover debt payable in the next 12 months of almost PHP41 billion (as at 31 December 2005).

Liquidity concerns, however, are expected to lessen upon completion of a perpetual preferred shares issue, proceeds of which will be used to prepay existing borrowings of about US$300 million, said the analysts.

Standard & Poor's also revised its outlook on the group because San Miguel "should be able to maintain its dominant domestic position in the alcoholic beverage segment, while benefiting from increased foreign currency earnings from its premium Australian brands".

San Miguel's acquisition of Australian dairy group National Foods last year, as well as the country's largest fruit juice group Berri, the prior year, has given it a significant present in the Australian market.

Analyst Greg Pau said: "The outlook takes into account the company's ability to manage and extract benefits from its geographically more diverse business operations, while maintaining an acceptable risk profile."

San Miguel has a sizeable share of the domestic food and beverage industry, and a favourable cost structure but these advantages are reduced by the company's high operating risks, weaker overseas market positions, and earnings exposure to volatile raw material costs and supply, said Pau.

The company is taking action to improve its position in overseas markets, announcing recently that it will close a loss-making brewery in southern China.