Ayala Corporation’s net income climbed 32 percent in the first half of the year to P13.8 billion as its banking, real estate, power, and automotive businesses delivered robust results.
Equity earnings from Ayala’s business units reached P16.4 billion in the first semester, 24 percent higher from a year ago, boosted by strong contributions from the Bank of the Philippine Islands, which jumped 32 percent, and Ayala Land, which expanded 16 percent. In addition, Ayala’s unlisted businesses registered solid performance in the first semester led by AC Energy and Ayala Automotive, which both expanded threefold.
“Most of our business units recorded an overall strong performance in the first half of the year. Among our new businesses, our power unit is starting to contribute significantly to our bottomline,” Ayala President and Chief Operating Officer Fernando Zobel de Ayala said. “We continue to strengthen our portfolio by entering new industries or reinventing our existing businesses. For instance, we are developing an automotive and manufacturing portfolio in order to maximize synergies in the Ayala group and take advantage of the exciting opportunities in this space,” Mr. Zobel added.
Ayala Land’s net profits expanded 16 percent to P9.7 billion in the first semester largely driven by strong revenue growth and higher margins of its residential and leasing businesses.
Revenues from the property development segment, composed of sales from residential units, office spaces, and commercial lots, grew 6 percent to P36 billion. The sustained demand in Ayala Land’s higher end and mid-range brands lifted its residential development revenues, up 8 percent to P29 billion. Reservation sales went up 5 percent to P55.1 billion, while booked sales improved 8 percent to P33.3 billion.
Meanwhile, office space sales jumped 44 percent driven by the completion of the Alveo Financial Tower. In commercial leasing, revenues from shopping centers climbed 16 percent to P7 billion on higher contribution from newly opened malls, while revenues from office leasing increased 6 percent to P2.6 billion supported by newly launched office spaces. Together with hotels and resorts, mall and office leasing, the recurring income business contributed 40 percent to Ayala Land’s net income during the first half of the year.
Ayala Land spent P43.4 billion in capital expenditures during the period, accounting for 51 percent of its budget of P84.5 billion earmarked for the year.
Bank of the Philippine Islands registered robust results in the first semester with net income soaring 36 percent to P12.7 billion bolstered by its core banking business and securities trading gains during the period.
BPI’s comprehensive income, which represents the net change in fair value reserve on the bank's available for sale securities and investments of insurance subsidiaries, jumped 54 percent to P13.9 billion. Total revenues expanded 21 percent to P35.2 billion. Net interest income grew 10 percent to P20.7 billion as the bank’s average asset base expanded 12 percent.
BPI’s non-interest income surged 42 percent to P14.5 billion primarily driven by securities trading gains and higher income from bank fees and commissions, bancassurance, and capital markets. Last June, taking advantage of a rallying bond market, the bank sold a portion of its hold-to-maturity securities to fund loan growth, reduce relatively expensive deposits, and enhance capital.
BPI’s total loans expanded 19 percent to P904.4 billion largely driven by its corporate segment, which climbed 20 percent. Total deposits increased 11 percent to P1.3 trillion with current and savings account ratio at 73.5 percent. The bank’s total assets stood at P1.6 trillion during the first half of the year, 11 percent higher than a year ago.
The increasing demand for data-related services across mobile, broadband, and corporate segments continued to drive Globe’s topline growth, with service revenues climbing 11 percent to P59.6 billion in the first half of the year. In addition, Bayan, which contributed P3 billion in standalone revenues, supported Globe’s growth trajectory during the period.
The increases in depreciation arising from its capital expenditure programs completed in 2015 and Bayan’s depreciation charges and non-operating charges tempered Globe’s net earnings during the period, up 3 percent to P9 billion from a year ago. Its core net income, which excludes the impact of non-recurring charges, foreign exchange gains, and mark-to-market charges, went up 2 percent to ?8.8 billion.
Mobile revenues grew 3 percent to P45.7 billion in the first half of the year largely driven by strong subscriber expansion in the prepaid segment. Mobile data service revenues surged 46 percent to P17.8 billion supported by rising smartphone penetration coupled with Globe’s data-driven products and offerings. At the end of June 2016, Globe’s mobile subscribers stood at 61.3 million, a 20 percent-growth year-on-year.
In home broadband, Globe posted a 49 percent growth in revenues as it expanded its subscriber base, reaching 1.14 million customers in the first semester, a 38 percent-jump from the previous year. Similarly, Globe’s corporate data business surged 55 percent to P4.9 billion in the first semester on the back of strong demand for digital services and data connectivity solutions.
This translated to a 13 percent growth in consolidated EBITDA to P25.6 billion in the first semester, with EBITDA margin at 43 percent, slightly higher than the 42 percent recorded in the previous year.
Under a co-use agreement approved by the National Telecommunications Commission, Globe is currently rolling out its LTE service using the 700 megahertz and 2500 megahertz frequencies which form part of the telecommunications assets acquired from San Miguel Corporation. It has so far deployed over 80 700MHz cell sites nationwide and over 600 2500MHz cell sites in the Visayas and Mindanao regions to cover large enterprises and highly urbanized areas. This acquisition of frequency assets had no impact in Globe’s first semester results.
The continued expansion in the Metro Manila East Zone combined with the solid performance of its domestic businesses drove the 3 percent growth in Manila Water’s net earnings in the first semester to P3.1 billion. This balanced out the 3 percent tariff reduction in the Metro Manila East Zone concession.
Billed volume in the East Zone improved 5 percent as a result of the expansion in the Taguig, Pasig, and Rizal areas. The non-revenue water ratio was steady at 11.4 percent while collection efficiency remained solid at 100 percent. Manila Water’s domestic operating subsidiaries sustained its momentum, with Laguna Water, Boracay Water, Clark Water, and Cebu Water posting a consolidated billed volume growth of 11 percent.
Contribution from its businesses outside the East Zone expanded 5 percent, accounting for 14 percent of Manila Water’s net income in the first half of the year.
Estate Water, Manila Water’s private full-service water and used water operator, is in discussion with various property developers for potential projects in the country. Early this year, Estate Water partnered with Ayala Land to provide water and used water services to the 56 mixed use developments of Ayala Land nationwide.
Manufacturing and Automotive
IMI posted a flat net income in the first semester at $15 million, as higher margins from the automotive and industrial product segments and line productivity and cost savings initiatives were partially offset by foreign exchange headwinds due to a stronger dollar. Operating income climbed 19 percent year-over-year to $20.7 million.
Revenues slipped 2 percent to $410 million owing to a decline in the consumer and computing segments, offsetting the growth in the automotive, industrial, and telecommunications segments.
IMI’s Europe and Mexico operations recorded $153.4 million in revenues in the first half, an 11.5 percent improvement from a year ago on higher demand for automotive body controls and lighting systems assembled in Bulgaria and Czech Republic.
IMI’s China operations posted $130.4 million in revenues, down 10.7 percent year-on-year mainly due to weak performance of the consumer electronics lines. Revenues for IMI’s EMS operations in the Philippines was flat at $109.6 million. Lines for automotive cameras, security and access controls, asset tag sensors, and lighting controls continued on the growth path, partially offsetting the weak storage device business.
In automotive, Ayala Automotive sustained its growth trajectory, more than tripling its net earnings to P402 million in the first half of the year. This was supported by strong sales across the Honda and Isuzu brands, lifted by higher contributions from the Isuzu distribution businesses.
Power and Transport
In power, AC Energy almost tripled its net income for the same period from the previous year to P578 million, largely driven by higher equity earning contributions from its operating thermal plants, GNPower Mariveles in Bataan and South Luzon Thermal Energy Corporation in Batangas.
In July, GNPower Kauswagan (GNPK), AC Energy’s limited partnership with the Philippine Investment Alliance for Infrastructure (PINAI) Fund and Power Partners Ltd., achieved financial close for the fourth unit of its 4 x 151 MW (gross) thermal facility in Kauswagan, Lanao del Norte. Construction of the GNPK project is in full swing and the first three units are expected to be completed by 2018. GNPK will operate as a baseload plant to support the power demand and economic development of Mindanao.
AC Energy currently has around 750MW in attributable capacity across its thermal and renewable platforms, and is expected to exceed 1,000 megawatts of attributable capacity by the end of 2016.
In transport, AC Infrastructure recorded a net income of P27 million in the first semester following the system takeover of LRT1 in September 2015. AC Infrastructure currently has three (3) operating public-private partnership projects in its portfolio – the 4-kilometer MCX toll road, the Beep ticketing system, and the extension, operations and maintenance of LRT1.
Ayala’s balance sheet remained healthy. At the end of June 2016, cash at the parent level stood at P31.2 billion, with debt at P81.4 billion. Ayala maintains a comfortable gearing level with net debt to equity ratio at 0.43 at the parent level and 0.61 at the consolidated level. The conglomerate’s loan-to-value ratio or the ratio of its parent net debt to the value of its investments stood at 8.1 percent at the end of June.
Last July, Ayala raised P10 billion from the issuance of 3.920% fixed-rate bonds due 2023. The issuance is the first tranche of its P20 billion fixed rate bonds program. The bond was rated “PRS Aaa” by the Philippine Ratings Services Corporation and was listed in the Philippine Dealing Exchange. Last June, Ayala declared a cash dividend of P2.88 per share.
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