LT Group readies bigger budget of P9.7B to face 2021 head-on

Tycoon Lucio Tan-led LT Group Inc. (LTG) will almost double its capital outlays this year as it expects business to become more bearable compared to last year, albeit still challenging.

Capital expenditure is set at P9.7 billion compared to P4.94 billion last year. The increase in capital outlays will mainly be for the digitalization initiatives of banking arm, Philippine National Bank (PNB), which will get the lion’s share of P4.6 billion.

About P2 billion will go to Eton Properties amid halted construction activities with the reimposition of tighter lockdown protocols. The amount is on top of a P1-billion budget for a joint venture township project with Ayala Land.

Tanduay’s capital expenditure is expected to reach P1.5 billion while Asia Brewery’s budget is P700 million.

At the company’s annual stockholders’ meeting on Wednesday, LTG president and chief operating officer Michael Tan expressed optimism that business would be better this year with the slow reopening of the economy.

“This year will still be a tough one, but hopefully better than 2020. Vaccination is a crucial step towards the path to normalcy. It is crucial for opening up the economy. While we may not entirely and immediately get back our old life, it is an important step to get back some of what we once had,” Tan said.

LTG expects demand for consumer goods produced by Tanduay and Asia Brewery to eke out some volume growth or at least remain steady.

PMFTC Inc.’s volumes, however, are seen to remain under pressure with the expected increase in cigarette prices reflecting the annual increase in excise taxes.

PMFTC’s volume went down by 16 percent in 2020. However, equity in net earnings from LTG’s 49.6-percent stake in PMFTC grew by 11 percent year-on-year, due to the higher share of premium Marlboro as customers shifted from mid-priced Fortune amid price increases.

The tobacco business accounted for 80 percent of LTG’s net earnings last year.

PNB expects to see its stock of bad loans continuing to rise this year even as the Bayanihan 1 and 2 laws that provided a grace period for borrowers ended in 2020. The country’s economic recovery is seen to boost loan demand.

Eton Properties’ leasing portfolio in office space, on the other hand, won’t be affected as much as other developers who are more reliant on retail space, according to Tan.