Manila, July 1: San Miguel Corp's surprise cut in beer prices has sent analysts scrambling back to their spread sheets and some have cut their net profit forecasts.ING Barings said on Tuesday it had cut its full year figure to 5.3 billion pesos ($200.9 million) from an earlier 6.07 billion.San Miguel, watching competitors slice into its share of the Philippine beer market, announced at the weekend it was cutting the price of a bottle of beer by 1.50 pesos to nine pesos.

The company called it "a major strategic initiative that will provide a springboard for future growth".The announcement reversed a move three months ago when it raised prices by one peso to 10.50 pesos per bottle.The price hike, which passed on recent tax increases to consumers, was then hailed by analysts who said the higher income in the second quarter would offset a bleak first three months.

A poll last week by Reuters forecast first six months earnings would stay at 2.40 billion pesos, barely changed from 2.41 billion in 1996.

Since the price cut came into effect on July 1, the first half forecasts were left unchanged.

The poll forecast San Miguel's full year 1997 net to rise 14 per cent to six billion pesos.

Sun Hung Kai Securities has now cut its full year forecast to 4.7 billion pesos from 5.6 billion.

Its research head Raul Ruiz said he estimated a price elasticity of three, meaning with a 14 per cent drop in prices, sales would rise by 42 per cent.But even with a 42-per cent rise in sales, the price cut would mean operating income would fall by 1.8 billion pesos, he said.

Analysts said it seemed that San Miguel, a household name for beer in the Philippines, was willing to risk a drop in immediate income because it was in a fierce war with rival Asia Brewery Inc.

The unlisted Asia Brewery, owned by Filipino-Chinese tycoon Lucio Tan, was sniggered at less than a decade ago for being a cheap brand sold to illiterate labourers.

But the persistent Tan has managed to raise Asia Brewery's market share to over 20 per cent from 10 per cent in 1989.

"At this point San Miguel is more concerned about preventing Asia Brewery from picking up further market share," said Ruiz.

The only bright spot for San Miguel in the short-term is that its rival may not be able to hold prices down for long.

In the staring match in which each side is waiting for the other to blink, San Miguel could probably hold out longer because it has much more efficient operations, Ruiz said.

But San Miguel's subtle strengths have been ignored by stock market punters.In the last two days, San Miguel B shares which are open to foreign investors have fallen nearly seven per cent to 67.50 pesos.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.