Financing costs weigh on Megawide bottom line

Megawide Construction Corp., a diversified contractor and infrastructure company, saw its profit fall in the first nine months of the year as it took on more debt to finance its airport projects.

Megawide said unaudited January to September net income hit P649.7 million versus P1.3 billion in the same period in 2018.

Earnings were weighed down by financing costs on loans used to build the new international terminal at the Mactan Cebu International Airport and the new Clark airport passenger terminal.

The investments were linked to Megawide’s aggressive push into infrastructure to diversify revenues, which were once confined to construction.

New businesses helped prop up revenue to P13.7 billion during the nine-month period, or a gain of 7 percent. Megawide said construction still accounted for 77 percent of revenue while airport operations contributed 20 percent.

Airport merchandising and terminal operations accounted for 3 percent, it said.

“The coming year will be a lot stronger due to the catch-up in construction revenue, normalizing airport operations, and full commercial potential of PITX coming into play,” Edgar Saavedra, Megawide chair and CEO, said on Friday.

The PITX is an integrated transport terminal in southern Metro Manila and among the previous administration’s public-private partnership projects that Megawide had won.

“Finance costs are also expected to taper off with loan takeouts and possible refinancing at lower interest rates,” Saavedra noted.

Megawide said its strategy was to focus on “longer gestation projects” to provide a stable revenue pipeline and shield it amid the industry’s “natural cyclicality.”

The company is also looking at better prospects for its construction business in 2020.

“The continued recovery in construction this year will serve as a springboard for an even stronger performance next year, when we will embark on big-ticket, long-term projects,” Saavedra said.