Ayala nets P26B

The country’s oldest business house Ayala Corp. chalked up a net profit of P26 billion last year, up by 17 percent from the previous year, on the back of double-digit growth contributions from its real estate and banking units alongside new contribution from power and industrial technologies.

In the fourth quarter alone, Ayala’s net income increased by 39 percent to P6.4 billion mostly on strong contribution from telecom arm Globe Telecoms, chief finance officer Teodoro Limcaoco said in a press briefing on Monday.

For the full year, equity earnings contribution from Ayala business units expanded by 14 percent to P32 billion. Equity earnings from Bank of the Philippine Islands and Ayala Land jumped by 19 percent and 18 percent, respectively. Meanwhile, equity earnings from AC Energy soared 27 percent, while equity earnings from AC Industrials grew 51 percent as its automotive business surged by nearly fivefold during the year.

“Ayala capped its five-year strategic target in 2016 with net income expanding nearly threefold and a 23 percent compounded annual growth rate since we put the plan in place in 2011. We believe this was achieved through our disciplined execution and a strong domestic environment,” Ayala president and chief operating officer Fernando Zobel de Ayala said in a press statement.

The conglomerate’s return on equity last year improved to 12.6 percent. Five years ago when the Ayala group set a new roadmap for expansion, return on equity was at 8.8 percent.

AC Energy recorded a 25-percent expansion in net earnings during the year to P2.7 billion. This sustained earnings trajectory was fuelled by strong equity earnings contribution from its operating assets on improved operating efficiencies, boosted by gains from value realization from its partial sale of shares in South Luzon Thermal Energy Corp.

Equity earnings from AC Energy’s investee companies climbed by 67 percent to P1.8 billion on higher operating efficiencies of GNPower Mariveles and the successful start of operations of South Luzon Thermal Energy Corporation’s second unit.

AC Energy ended last year with close to 1,300 megawatts of attributable generation capacity after investing close to $800 million to build up its portfolio, Limcaoco said. This business unit continues to scale up as it executes on its new strategic aspirations of doubling its equity commitment to $1.6 billion and its attributable power generating capacity to 2,000
megawatts by 2020.

Last December, AC Energy, as part of a consortium, signed an agreement with the Chevron Global Energy and the Union Oil Company of California groups for the acquisition of Chevron’s geothermal operations in Indonesia and the Philippines. Moreover, in January 2017, AC Energy signed investment agreements with UPC Renewables Indonesia for the development, construction, and operation of a 75 megawatt-wind farm project in Sidrap, South Sulawesi, Indonesia.

AC Infrastructure continues to execute on its three public-private partnership projects. For the LRT 1, this business increased capacity by 30 percent, with average daily ridership breaching 500,000 in December. The Muntinlupa-Cavite Expressway is currently servicing an average of about 27,000 vehicles daily. Meanwhile, the Beep card posted P9.7 billion in total transactions, reaching 2.8 million users at the end of 2016. The Beep card has now expanded beyond rail to include select bus lines. It is also accepted as a payment platform in 80 FamilyMart stores.

Early last year, Ayala set up AC Industrials to house the group’s investments in industrial technologies, namely Integrated Micro-Electronics and AC Automotive, to take advantage of opportunities in emerging trends in the global manufacturing. On a combined basis, Ayala’s industrial technologies portfolio reached a net income of P1.8 billion during the year, 29 percent higher than a year ago as its automotive business contributed significant profit growth, lifted by robust vehicle sales across all brands as well as higher contribution from its distribution businesses.

In electronics manufacturing, IMI posted a net income of $28.1 million (P1.3 billion), 2 percent lower than its year-ago level owing to transaction and financing costs related to strategic acquisitions and foreign exchange headwinds from the Chinese renminbi.

On its four biggest businesses, it was earlier reported that the following publicly listed units performed last year as follows:

– Ayala Land recorded a net income of P20.9 billion, growing by 19 percent from a year ago, boosted by strong improvements in its property development and commercial leasing businesses;

– Bank of the Philippine Islands’ net profits increased by 21 percent from the previous year to P22.1 billion, driven by solid gains from the bank’s core banking, transactional and bancassurance (the cross-selling of insurance policies through ban branches) businesses, boosted by significant securities trading gains;

– Despite sustained topline growth, the impact of non-operating and depreciation expenses from
its recent strategic acquisitions weighed down on Globe Telecom’s net profits last year, which declined by 4 percent to P15.9 billion;

– Manila Water’s net income reached P6.1 billion, up 2 percent from the previous year on the improved performance of the Manila concession combined with higher contributions from its businesses outside Metro Manila.

The Ayala group is increasing its capital expenditures this year by 13 percent to P185 billion, primarily to support the growth strategies of its real estate, telecommunications, and water units and ramp up its emerging businesses in power, industrial technologies, healthcare, and education. At the parent level, Ayala has earmarked P21 billion in capital spending this year, largely to fund the investment program of its power business.

Over the past five years, the Ayala group has invested over P700 billion in cumulative capital expenditures across its portfolio of businesses.

“The aggressive capital spending we have programmed this year reflects the Ayala group’s continued optimism in the domestic environment,” Ayala chair and chief executive officer Jaime Augusto Zobel de Ayala said. “While we remain mindful of macroeconomic indicators that may affect the overall business landscape, our business units continue to perform well and carry out their strategic direction for 2020,” Zobel noted.

Ayala aims to double its net income to P50 billion by 2020 anchored on strong growth projections in its core businesses in real estate, banking, telecommunications, and water, as well as emerging businesses in power and industrial technologies.