Ayala Corporation’s consolidated net income in 1Q10 reached P2.1 billion, at par with the P2.2 billion net earnings in the same period in 2009. Equity earnings from its business units rose by 6%, driven by higher equity earnings from its real estate unit Ayala Land, Inc. and a significant turnaround in equity earnings from AC Capital.
Equity earnings from Ayala Land rose by 31% year-on-year driven by the sustained recovery in the real estate sector. Ayala Land attained record-high quarterly net income of P1.2 billion in the first quarter, 32% higher than 1Q09 as it achieved record sales and bookings from its residential project launches. Its leasing portfolio likewise performed steadily with occupancy rate in its malls rising to 94% and occupied business process outsourcing office leasable area expanding by 20% from 4Q09 and by 59% from 1Q09.
All companies under Ayala’s AC Capital unit contributed to the turnaround. Manila Water, IMI, and Ayala Automotive posted substantial growth year-on-year, while AG Holdings and LiveIt recorded lower losses during the period. Combined equity earnings from AC Capital companies improved to P228 million in the first quarter, a turnaround from a P132 million loss in 1Q09.
Equity earnings from Manila Water grew by 78% as its net income rose by 35% to P839 million. Manila Water continued to grow within its concession area as well as in other areas in the Philippines. Revenues rose by 18% to P2.5 billion as a result of higher water sales volume and new service connections in the East Zone. Operating efficiency improved further with better supply and water pressure management and network enhancements. This reduced non-revenue water to 13.7% and kept the company’s service levels unaffected by the El Nino dry spell. The substantial growth in equity earnings was also due to Ayala’s increased ownership stake in the company following its purchase of United Utilities’ 11.6% interest. Manila Water continues to make headway in other parts of the country with operations running in Laguna and Boracay.
A recovery in the global electronics exports sector sustained IMI’s positive momentum. IMI posted earnings of US$3.2 million in 1Q10, reversing the loss in the same period last year. Sales grew by 11% driven by its Philippine and China operations. China operations contributed substantially, making up 58% of revenues. IMI continues to increase its presence in China as it becomes increasingly in the center of the global manufacturing industry. It opened its 6th manufacturing facility in Chengdu last April.
Ayala’s automotive dealerships delivered a 9% growth in unit sales, reflecting the country’s vibrant domestic consumption. This pushed Ayala’s dealership income up by 124% year-on-year as a result of higher vehicle sales, better service income, and improved income from collateral businesses.
Its business process outsourcing investment company, LiveIt, grew its share of investee company revenues to US$67 million in the first quarter, which represents 48% growth over last year, primarily as a result of the eTelecare-Stream merger and Integreon’s acquisitions of Onsite and Grail Research. Revenue growth and enhanced operating efficiencies resulted in a 23% increase in LiveIt’s share of investee company EBITDA to US$3.7 million. LiveIt’s consolidated net loss improved from last year’s Php306 million to this year’s P279 million, which includes acquisition related expenses of P131 million.
Ayala’s other core business units, Globe Telecom and Bank of the Philippine (BPI) Islands reported lower net earnings year-on-year. Globe’s reported net income declined by 26% in 1Q10 vs 1Q09 to P2.9 billion mainly due to the soft performance of the mobile business. Mobile revenues fell by 10% year-on-year and by 3% quarter-on-quarter as the mobile market was weighed down by intense competition and price pressures. Despite this, Globe sustained positive net additions in 1Q10, an improvement from the net reductions last year when the company deliberately recalibrated acquisition efforts. As a result, cumulative mobile subscribers increased by 3% year-to-date to 23.9 million. Recent programs that focused on acquiring new subscribers, stimulating usage, and rewarding loyal Globe customers helped stem the decline in the mobile business. Globe’s broadband business and corporate data business, however, grew at double-digit rate. Its broadband subscriber base nearly tripled from last year’s level driven by wireless broadband, which contributed over 80% of the net adds during the quarter.
Its banking unit, BPI, posted 1Q10 net income of P2.7 billion, 5% lower than same period last year, but remains substantially higher than earnings in the past three successive quarters. The bank’s revenues were steady at P9 billion despite the 54 basis point decline in net interest spreads and weaker trading profits. Compensating for the drop in spreads was an 11% improvement in the bank’s average asset base. Loan growth improved by 8% over the previous year with strong growth registered in the consumer and middle market. Middle market loans were up by 20%, credit card receivables up by 18%, and SME loans were up by 15%. Retail mortgages and auto loans grew by 13%. The bank’s total asset base increased by 8% versus last year with deposits growing by 8% to P558 billion.
Ayala chairman and CEO Jaime Augusto Zobel de Ayala commented, “We are pleased with the trend in earnings performance of the business units, particularly in comparison to the past three quarters. The continued and steady improvement reflects the sustained recovery in the domestic market. We remain confident this trend will continue to improve moving forward in step with the economy and the improving pace of domestic consumption.”
This press statement refers to the disclosure submitted today, May 14, 2010, to the Securities and Exchange Commission and the Philippine Stock Exchange.