LT Group ’17 profit up 15% to P10.8B

Tycoon Lucio Tan-led conglomerate LT Group Inc. (LTG) grew its net profit last year by 15 percent to P10.83 billion as higher earnings from its banking and tobacco businesses made up for the slack in the beverage and real estate units.

Philippine National Bank (PNB) contributed P4.83 billion or 45 percent of total attributable income, followed by the tobacco business at P4.39 billion or 40 percent of total.

PNB’s net income rose by 16 percent to P8.56 billion on a double-digit expansion in interest and fee-based earnings alongside higher values unlocked from the sale of idle assets.

Meanwhile, income from the tobacco business reached P4.4 billion last year, about 70 percent better than the reported level of P2.59 billion in the previous year. Equity in net earnings from the 49.6-percent stake in PMFTC Inc., a joint venture with the Philip Morris group, amounted to P4.37 billion.

A key competitor that had gnawed on PMFTC’s market share, Mighty Corp., faced a tax evasion crackdown last year and was forced to sell its assets to the local unit of Japan Tobacco International to settle its tax liabilities to the government.

For its part, the higher earnings of PMFTC were mainly attributed to better pricing and improved mix. In November 2016, PMFTC raised the price of Marlboro, adjusting prices for the first time since 2013.

Total volume for the whole local tobacco industry was estimated to have decreased by 6 percent to 74.9 billion sticks last year, largely due to excise tax-driven price increases, tempered by front-loading toward the end of 2017, in anticipation of more price increases as the excise tax was further increased starting 2018.

Meanwhile, the beverage businesses underperformed the previous year’s levels.

Rum-maker Tanduay Distillers Inc.’s net income last year fell by 31 percent to P631 million. While liquor revenues rose by 20 percent to P15.19 billion, revenues from ethanol dropped by 31 percent to P1.6 billion as volume dropped 21 percent and selling prices also declined.

Based on Nielsen estimates, TDI’s market share was 61 percent in the Visayas and 65 percent in Mindanao as of December 2017.

Beer maker Asia Brewery’s net income for the year slid by 69 percent to P552 million, primarily attributed to higher spending for new products. Moreover, the comparative income in 2016 included a P594- million extraordinary gain from the revaluation of beer assets.

Revenues of Asia Brewery rose by 17 percent to P13.89 billion with the higher contribution from bottled water, soymilk and packaging partly offset by the decrease in revenues from energy drinks.

Cobra Energy Drink and Vitamilk soymilk maintained their market-leading positions, while Absolute and Summit bottled water have the second largest market share.

Operating expenses increased as Asia Brewery spent more on advertising and selling expenses due to the competitive environment in the carbonated beverage segment, as well as to promote the recently launched Vitamilk in returnable glass bottles.

The company also had to book additional depreciation expenses from the new soymilk plant.

For property arm Eton Properties Philippines Inc., net income last year fell by 11 percent to P348 million. Revenues fell by 21 percent to P2.23 billion attributed to a deliberate change in strategy to focus on increasing its recurring income base. But while real estate sales declined, leasing revenues increased by 9 percent to P1.39 billion with the opening of 2,100 square meters (sqm) of additional retail space in Eton Tower Makati and higher lease rates. Eton’s BPO office buildings enjoyed a take-up rate of 99 percent as of end-2017.