Century Pacific’s Sales Surge, but Inventory Build Drains Cash

The Philippine food maker increased short-term borrowings, yet ended the first half with less cash as inventories, capital spending and dividends absorbed funds.

Century Pacific Food Inc. delivered the kind of sales growth consumer companies usually celebrate. Its cash-flow statement gave investors less reason to cheer.

The Philippine food manufacturer reported revenue of ₱45.8 billion for the first half of 2026, up 15% from a year earlier, as its domestic branded-food business expanded and exports recovered. Branded revenue, which accounts for roughly four-fifths of the company’s sales, rose 13%, while original-equipment-manufacturing exports jumped 26%.

The growth was broad enough to suggest that Century Pacific’s expansion isn’t resting solely on its established canned-tuna and meat brands. Milk, coconut products and other emerging businesses helped drive branded sales, while improving global trade supported the export business. Branded growth was also volume-led, with the company reporting double-digit volume growth during the period, an encouraging sign that higher revenue wasn’t simply the result of price increases.

But the strong showing at the top of the income statement didn’t make its way to the bank account.

Century Pacific generated only about ₱95 million in net cash from operations during the six months ended June, down from roughly ₱1.84 billion a year earlier. Inventory was the main drag, absorbing about ₱4.84 billion of cash as the company accumulated raw materials, work in process, and finished products. Receivables and other operating assets also consumed cash, partly offsetting the benefit of higher earnings and increased supplier credit.

The result illustrates a familiar corporate-finance problem: A company can book a sale and report a profit before it collects the cash, while goods produced but not yet sold remain on the balance sheet as inventory. When inventories and receivables grow faster than cash collected from customers, reported earnings can look much stronger than operating cash generation.

Century Pacific’s net inventory rose to about ₱26.1 billion at the end of June from ₱21.3 billion at the end of December, a nearly 23% increase in just six months. That increase was substantially faster than the company’s 15% revenue growth. Finished goods rose especially quickly, while work in process more than tripled from its year-end level.

Some of the buildup could be deliberate. Century Pacific has been increasing capacity and expanding its coconut-processing operations to meet demand at home and overseas. The company’s portfolio includes canned tuna, meat products, dairy, coconut products, pet food and plant-based products. It has said its growth is being supported by the essential nature and value positioning of its branded portfolio, alongside a recovery in global trade from a weak export base in 2025.

Still, investors will want to see the additional inventory turn into sales rather than remain in warehouses. Inventory built in anticipation of demand can support future growth. Slow-moving inventory can lead to discounting, additional storage costs, and, in a worse outcome, write-downs.

The strain was visible elsewhere on the balance sheet. Century Pacific’s cash and short-term investments fell to about ₱1.88 billion as of June 30 from ₱2.89 billion at the end of 2025, even as the company’s debt increased. Total debt rose to about ₱14.73 billion from ₱9.67 billion, according to financial data compiled after the first-half results.

Interest-bearing borrowings reported in the company’s accounts increased by roughly ₱5.2 billion, with most of the increase concentrated in short-term bank loans. Short-term borrowings climbed to around ₱10 billion, leaving the company more dependent on refinancing and exposing it to higher interest expense.

In effect, Century Pacific borrowed more but still finished the half with less cash.

That doesn’t necessarily signal financial distress. The company remains profitable, owns valuable brands, and has a relatively substantial equity base. Higher borrowings can be reasonable when they finance working capital and productive capacity that will generate future sales. But the divergence between profit and cash raises the hurdle for the second half: Inventory must be sold, receivables collected and debt either reduced or rolled over without materially eroding returns.

Financing costs are already becoming visible. Finance expenses nearly doubled from the year-earlier period, helping explain why operating profit grew faster than net income. Century Pacific’s headline net income rose only about 6%, even though revenue increased 15% and operating income advanced at a double-digit pace. Earthquake-related provisions and a higher effective tax rate also restrained the bottom line.

Capital spending added to the pressure. Century Pacific continued investing in manufacturing capacity and other fixed assets while also paying cash dividends. Those outlays, combined with weak operating cash generation, meant external financing had to bridge the gap. The company’s trailing free cash flow remained negative as capital expenditures exceeded the cash produced by operations.

For shareholders, the first-half results test whether Century Pacific’s cash squeeze reflects investment ahead of growth or a more lasting increase in the capital needed to support the business.

The optimistic case is straightforward. The company has built inventories to meet rising domestic volumes and recovering export demand. As those goods are sold and customer payments arrive, cash flow should rebound, allowing Century Pacific to reduce short-term loans while continuing to grow earnings.

The less reassuring possibility is that the company now requires larger inventories, supplier advances, and receivables steadily to produce each peso of incremental revenue. If so, sales and accounting profits could continue rising without generating comparable free cash flow for dividends, debt reduction or future expansion.

Century Pacific’s income statement still shows strong momentum. Its brands are growing, exports are recovering, and margins have remained resilient. The balance sheet, however, shows the price of that momentum.

The next set of results won’t be judged on revenue growth alone. Investors will be looking for evidence that the ₱26.1 billion inventory pile is moving into customers’ hands, operating cash flow is recovering, and the short-term loans used to fund the expansion are beginning to come down.