JG Summit sets P48.2B capital spending

Industrial conglomerate JG Summit Holdings Inc. has budgeted P48.2 billion for capital spending this year as the group starts a new phase of expansion program for its pioneering petrochemical business.

JG Summit president Lance Gokongwei reported to stockholders in an annual meeting late Wednesday that this year’s capital outlays would be bigger than the P41.9 billion spent last year.

Outside of the regular capital outlays in 2016, JG Summit had invested additional P33.4 billion last year with its acquisition of a 35 percent stake in Global Business Power Corp. for P11.8 billion and the purchase by food unit Universal Robina Corp. (URC) of a 65 percent interest in leading Australian firm Snackbrands for P21.6 billion.

This year, the capital spending budget of P48.2 billion covers only outlays for the expansion of existing businesses and does not include any budget for prospective acquisitions.

Gokongwei estimated that the airline business under Cebu Air would account for P18-P20 billion of capital spending this year while property arm Robinsons Land Corp. would likely spend P15 billion. URC has an estimated budget of P7 billion. The banking business under Robinsons Bank will spend a few hundred millions. The rest is of the budget is for petrochemicals, Gokongwei said.

“We think we’ll be able to have a world-class cost structure to compete in this business,” Gokongwei said.

The engineering, procurement and construction contract for the petrochemical expansion will be bid out soon and expected to be awarded before yearend, Gokongwei said.

JG Summit’s $700-million petrochemical business expansion will have five components: expansion of the naptha cracker plant, expansion of the polypropylene plant as well as building of a brand-new polyethylene factory, aromatics factory and butadiene plant. These are targeted to be operational by 2021.