[Vantage Point] Liberty Flour Mills: From breadbasket to balance-sheet risk

After more than three decades in financial journalism, I have learned that truth does not announce itself — it must be extracted from filings, balance sheets, and transaction trails buried beneath narrative and noise. Vantage Point is built on that discipline.

Hello, I’m Val Villanueva, former assistant business editor of the Philippine Star and business editor of the Gokongwei-owned Manila Times, with decades of experience writing for international financial publications. Those years taught me that the most important stories are not found in headlines, but in the gaps between promise and performance.

This newsletter examines politics, business, and public policy through the lens of forensic accounting and market logic, stripping complex decisions down to their real economic consequences. It is anchored on a question institutions rarely welcome but can never avoid: who ultimately bears the risk when power is exercised without accountability?

Flour, what it means to us

In any economy, flour is not just another commodity. It’s embedded in bread, noodles, biscuits, and processed food that anchors daily consumption across income groups.

Disruptions in flour supply ripple quickly through households, retailers, and inflation statistics. That is why milling companies occupy a quiet but critical position in the country’s food-security architecture.

Within that system, Liberty Flour Mills, Inc. has long been a secondary — but still material — player. It neither dominates the Philippine milling industry nor dictates national pricing. But it operates at sufficient scale to matter in specific regional markets and distribution channels. Its output supports bakeries, food processors, and traders operating on thin margins, whose survival depends on stable supply and predictable credit terms.

This is what makes Liberty’s current governance and liquidity stress more than a corporate sideshow. When a company embedded in the food chain becomes financially unstable or operationally distracted, the impact does not remain confined to shareholders. It migrates into delayed deliveries, tighter credit, disrupted contracts, and higher working-capital costs across the supply network. Over time, those frictions translate into price pressure and volatility.

Measured against the entire national food sector, Liberty’s contribution is not systemically dominant. But it is large enough to function as a stress amplifier. When a firm of its size begins to prioritize internal conflict and financial engineering over industrial reliability, it introduces fragility into a segment that depends on predictability.

That is where the story begins.

Illusion of recovery

On paper, Liberty appeared to regain its footing in 2024. After posting losses the year before, it reported net income of roughly P107 million. For casual observers, this looked like a cyclical rebound — a return to normal after pandemic and commodity shocks.

But Vantage Point reads it differently. Return on equity in 2024 was about 3.7%. Return on assets was near 2.5%. These are not the metrics of a revitalized industrial franchise. They describe a company barely clearing its cost of capital, operating with little margin for error.

Then came 2025. By the third quarter, Liberty reported pre-tax income of around P435 million and net income of more than P400 million for nine months — nearly four times its full-year 2024 profit. At first glance, this looked like a breakout year.

But let’s take a look at the operating spread: Revenues stood at about P829 million. Expenses were P766 million. The core business generated barely P64 million in surplus. Yet, reported profit exceeded P400 million. The difference came from below-the-line items — non-operating income, transactional gains, and accounting effects.

To me, it looks more like an engineered earning.

When profit stops being cash

Profits that do not convert to cash are liabilities in disguise. Liberty’s public summaries do not yet allow a complete reconstruction of free cash flow, but the structure of its earnings already raises concern. When profits are driven by non-core items, free cash flow typically lags. Working capital absorbs liquidity. Receivables expand. Financing costs creep in.

This risk is magnified when governance is weak. Public reporting on the company’s board dispute has pointed to unusually large and extended receivables linked to major counterparties, with credit terms reportedly far beyond industry norms. In practical terms, the listed company has been functioning as a shadow lender.

Instead of earning cash from sales, it has been financing partners through its balance sheet. Instead of converting profits into reinvestable capital, it has been converting them into IOUs. Liquidity, in this structure, becomes hostage to relationships.

Leverage without transparency 

Officially, Liberty’s balance sheet still looks moderate. In 2024, total liabilities were about 0.86 times equity. By September 2025, that ratio had risen to roughly 1.16 — a directional and not-crisis leverage.

In simple terms, Liberty’s debts were still manageable in 2024, at about 86 centavos of obligations for every peso of owners’ money in the company. By September 2025, that had grown to about P1.16 in obligations for every peso of equity.

This is not yet a debt crisis. But it shows the company is becoming more dependent on borrowed and owed money over time. The direction is moving toward higher financial risk, even if it has not reached a dangerous level yet. 

More important is what the ratio conceals. Public highlights disclose total liabilities, not interest-bearing debt. They do not separate bank loans from trade financing. They do not isolate related-party exposure. In governance-stressed firms, this opacity matters. It blurs where risk truly resides.

At the same time, shareholder equity fell sharply in 2025, consistent with major corporate actions rather than organic business shifts. When equity moves that violently in a staples company, it signals structural disruption.

Governance turns from asset to liability

In well-run consumer companies, governance is an invisible premium. It lowers funding costs, reassures suppliers, and attracts patient capital. At Liberty, that premium has turned negative.

Public disputes among directors, allegations of fiduciary lapses, and repeated appeals for regulatory intervention have transformed internal disagreements into systemic risk. When executives accuse one another of mismanagement and related-party abuses, every reported figure becomes provisional. Investors no longer discount earnings alone; they begin to discount enforceability itself — whether receivables will be collected, transactions unwound, minority interests protected, and contracts honored after the next board reshuffle.

These uncertainties now hang permanently over Liberty’s valuation. This is why even strong-looking 2025 returns — nearly 20% return on equity (ROE) on a nine-month basis — are misleading. In simple terms, those profits are built on shaky ground. They come more from one-time deals and accounting maneuvers than from a strong, reliable business. Investors understand this. Once doubts about who really controls a company and how it is run become public, the company is seen as riskier — and that risk always comes at a price.

From industrial operator to transaction platform

The data point to a deeper transformation. A traditional milling firm earns money through operational discipline: optimizing throughput, managing procurement, controlling logistics. Its risks are weather, currency, and competition.

Liberty’s dominant risks today are internal: receivable concentration, related-party exposure, volatile earnings, balance-sheet opacity, and board fragmentation.

These do not look like the fingerprints of a manufacturing enterprise, but rather the markers of a transaction platform.

In such firms, value is created — and destroyed — through restructurings, asset movements, and financial engineering. Operating performance becomes secondary.

Reports that Liberty is considering selling or restructuring core assets therefore matter. They confirm what the numbers already suggest: management attention is shifting from running mills to managing disputes. The company is being governed as a balance sheet, not as a factory.

Why this matters to the economy

Food-processing firms anchor price stability. When their balance sheets weaken, supply chains tighten. When liquidity strains, distributors and farmers feel it first. Eventually, consumers pay. More broadly, staples companies are supposed to be the market’s credibility layer. They demonstrate that boring businesses can be run transparently and profitably.

When one of them descends into prolonged turmoil, the signal is unmistakable: even essential industries are vulnerable to control conflicts. That perception raises the country’s risk premium. It tells institutional capital that minority protections remain fragile, and that enforcement still depends on pressure rather than process. The economy does not lose one company; it loses a layer of reliability.

Diagnosis

Liberty’s transformation did not happen overnight. It unfolded through three gradual shifts: structurally weakened profitability that narrowed its margin for error; politicized working capital driven by extended and concentrated credit; and internal disputes that spilled from private boardrooms into public confrontation.

Once these forces converged, the company ceased to be judged on milling economics and began to be judged on trust. That is the defining change.

Liberty is no longer priced primarily as a food processor. It is priced as a governance experiment. Whether this becomes a recovery story or a cautionary tale will hinge on three tests: the conversion of earnings into cash, the normalization of receivables, and the restoration of board stability.

If profits begin to translate into liquidity and discipline returns, Liberty can still reclaim its staples identity. If not, its performance will remain a mirage — visible on income statements, but absent in bank accounts.

In finance, that is the difference between a business and a balance-sheet narrative. And today, Liberty Flour stands far closer to the latter.

When authority is exercised without discipline and fiduciary responsibility, the costs surface not only in governance failures but in lost confidence, higher risk, and weaker institutions. 

I welcome your views on these and other issues where decisions made in power shape the country’s economic future. 

This analysis draws on Liberty Flour’s audited and interim filings on PSE EDGE, supplemented by verified business reporting, regulatory disclosures, and market data. All findings are assessed through a forensic accounting and capital-markets lens.

– Rappler.com