AEV’s Q1 net profit down by 42% on slower power business

Conglomerate Aboitiz Equity Ventures (AEV) posted a 42 percent drop in first quarter net profit to P2 billion mostly due to slower earnings from its flagship power business.

AEV also booked one-time losses of P262 million during the period versus the P334 million in non-recurring losses due to unrealized foreign exchange losses from the revaluation of dollar-denominated assets during the first quarter. Without these one-off items, AEV’s core net income for the first quarter amounted to P2.3 billion, down by 41 percent year-on-year.

“The strong showing of our banking and financial services and food units have helped shore up our operational performance, underscoring the resilience provided by a diversified portfolio. This same resilience will also help us face headwinds from coronavirus disease 2019 (COVID-19),” AEV president and chief executive officer Sabin Aboitiz said in a disclosure to the Philippine Stock Exchange on Thursday.

Power accounted for 55 percent of the total income contribution from AEV’s strategic business units, followed by banking and financial services (46 percent), food (2 percent) and infrastructure (1 percent). On the other hand, the real estate business remains unprofitable.

“We will continue to look for opportunities to keep the country’s economy moving as we carefully evaluate our business strategy,” Aboitiz said.

Aboitiz Power Corp.’s net income contribution to AEV for the first quarter decreased by 43 percent year-on-year to P1.6 billion. Its net income for the quarter was P2.1 billion, 43 percent lower year-on-year.

AboitizPower’s generation and retail supply business saw a 13 percent decline in cash flow to P7.4 billion during the period due to outages in Therma South and GN Power Mariveles Coal Plant, and by lower selling prices. These offset the fresh contributions of Therma Visayas and the decreased purchased power costs.

The decline in cash flow also came from a relatively high base in the previous year, during which cash flow included other income. Without such variance, AboitizPower’s cash flow would have been lower by only 3 percent.

On the other hand, Union Bank of the Philippines’ income contribution to AEV amounted to P1.3 billion, 23 percent higher year-on-year. UnionBank and its subsidiaries recorded a net income of P2.6 billion in the first quarter, up by 22 percent year-on-year, mainly due to revenue growth from the increase in net interest income, which grew by 47 percent to P6.8 billion.

AEV’s non-listed food subsidiaries – Pilmico Foods Corp., Pilmico Animal Nutrition Corp., and Pilmico International Pte. Ltd. which includes Gold Coin Management Holdings Ltd. – saw a 56 percent drop in income contribution to AEV amounted to P60 million in the first quarter.

Pilmico International recorded net income of P297 million in the first quarter, marking a 116 percent year-on-year increase, due to the higher income contribution of Gold Coin Management Holdings Limited (Gold Coin) resulting from an increased equity ownership, and increased volumes from Gold Coin’s China, Vietnam, Malaysia, and Sri Lanka operations.
Gains from Pilmico International, however, were outweighed by a net loss for Pilmico’s local subsidiaries.

AEV’s non-listed real estate businesses, comprising Aboitiz Land Inc. and its subsidiaries, reported a consolidated net loss of P110 million for the first quarter of 2020, higher than the P44 million in losses recorded in the same period last year. Revenues were constrained by higher forfeitures and lower construction progress resulting from the eruption of Taal Volcano and the enhanced community quarantine (ECQ) due to COVID-19, alongside an increase in operating costs.

For the infrastructure group, Republic Cement & Building Materials, Inc.’s income contribution to AEV for the first quarter amounted to P61 million, a turnaround from the P32 million loss recorded in the same period last year.  This was due to strong demand growth during the first two months of the year but tempered by the slowdown in construction activities in March due to the Luzon-wide ECQ.