8990 Holding’s 1st half profit up 18%

8990 Holdings president Januario Jesus Atencio reporting to stockholders

LEADING mass housing developer 8990 Holdings grew its six-month net profit by 18 percent year-on-year to P2.13 billion as stronger second quarter performance made up for the flat earnings earlier in the year.

This first-semester performance surpassed the company’s mid-year earnings guidance of P2 billion and was on track with the 20-percent full-year earnings growth guidance for 2015, 8990 Holdings president Januario Jesus Atencio reported during the company’s stockholders meeting on Monday.

Gross sales went up by 12 percent year-on-year to P4.51 billion in the first semester as 8990 Holdings unlocked better margins from its projects. Net margin of 47 percent in the first half 15 was now 7 percent better than the 40 percent benchmark, he said.

Atencio said: “2015 is indeed shaping up to be a good year…As we build more houses and create a DECAnation, we also need to transform people’s lives.”

Since 8990 Holdings – which sells homes mostly under the brand Deca Homes – will launch nine new projects this year, Atencio said a “momentum buildup” could be expected.

Despite embarking on start-up projects, Atencio reported that 8990 Holdings’ core business – referring to the sum of housing revenues and contract to sell (CTS) interest income, had grown by 16 percent year-on-year to reach almost P5 billion. At 97 percent of gross revenue, he said housing-related income remained the dominant component of income, and therefore the prime determinant of 8990 Holdings’ growth as an enterprise.

“Last year, we said that the macroeconomic environment provides for a bullish and positive market for primary housing. These factors are still in play today. What is new is Pag-IBIG Fund’s lowering their core interest rate to 6.5 percent, and the latest HUDCC (Housing and Urban Development Coordinating Council) policy increasing the ceiling of low-cost housing from P1.25 million to P1.7 million,” Atencio said.

“This means that buyers of DECA homes can now avail of lower monthly amortizations even at higher package prices that allow us to provide more added value to our housing products and services,” he said.

Apart from launching new residential developments, Atencio reported that 8990 Holdings had stabilized its direct costs and continued the double casting of panels to increase housing production. The company also recruited new sellers and increased prices by 7 percent compared to last year.

A big factor contributing to 8990 Holding’s improving balance sheet and cash flow position was its increasing business with Pag-IBIG Fund, Atencio said. The company increased its business with the fund in the first semester by delivering more than 2,000 accounts with a loan takeout value of almost P1.9 billion.

“What is notable is that in just two quarters, we have already surpassed the entire year’s performance of 2014. We believe that HDMF will increasingly be able to handle more of the industry’s business as they have, in my perception, finally turned the corner towards what we feel is the right direction,” he said.

Due to the Pag-IBIG’s loan take-outs, 8990 Holdings’ first semester cash flows indicated a 70 percent decline in use of net cash, indicating a greater usage of internally generated funds versus borrowing.

“We expect to create more cash flows based on not only increasing deliveries to HDMF, which we target to reach P5 billion by yearend, but also our one billion (peso) securitization which we hope to launch this year finally, as well as our discussions with certain banks towards creating a new facility called the purchase of CTS receivables with limited recourse,” he said.

The CTS portfolio contributes about 12 percent to core business revenue. The value of this portfolio now stood at P17 billion, comprising 19,000 accounts that generated for the first semester P575 million in interest income.