Ayala Corporation reported first nine months’ net income of P6.8 billion, 17% higher than earnings in the same period last year. Its property, banking and water businesses fuelled growth, offsetting the weakness in its telco unit. Nearly all businesses posted double-digit growth in earnings which resulted in a 26% increase in equity earnings to P8.6 billion.
Ayala Corporation president and COO Fernando Zobel de Ayala noted, “We are encouraged by the strong growth trajectory of our core businesses. The favorable economic environment, robust domestic consumption, and low interest rate environment set the condition for rapid growth and expansion. The initiatives we have taken the past few years have clearly positioned our businesses to benefit from this renewed growth cycle.”
Ayala Land’s net income rose by 35% to a nine-month record high of P3.9 billion on strong revenue growth across all business lines. Residential revenues grew by 19% with take-up of projects doubling versus last year. Shopping center revenues also rose by 6% with the expansion of occupied gross leasable area (GLA) and steady occupancy rate across its shopping malls. Office building revenues rose by 12% as occupied GLA and leased-out rate in its BPO portfolio improved significantly while average lease rates remained steady. Higher revenues and better cost control translated to a substantial improvement in overall margins. Ayala Land continues to expand aggressively. This year it has launched 9 retail projects, 8 BPO buildings and around 8,400 residential units with a deep pipeline of project launches secured.
Bank of the Philippine Islands’ net income grew by 24% year-on-year putting nine-month profit at P9.1 billion. The bank’s push to broaden customer base resulted in strong loan and deposit growth. Net loans grew by 14% mainly from middle market/SMEs and consumer loans, while its deposit base increased by 19% year-on-year. Total revenues reached P29 billion, 13% higher than same period last year driven by higher net interest income and non-interest income which rose by 8% and 22%, respectively. Net interest income grew on an 11% increase in average asset base while non-interest income rose due to significant gains from securities trading, fee-based income, and foreign exchange transactions. BPI’s asset quality is among the top. Its non-performing loan ratio declined further to 2.6%. BPI continues to pursue its growth strategy centered on more aggressive customer acquisition, prudent lending, and deeper cross selling penetration.
In its telco business, Globe Telecom’s broadband business sustained its growth momentum in the first nine months of the year as broadband revenues grew by 84%, while its mobile postpaid business registered a 7% revenue growth. These effectively cushioned the impact of lower mobile prepaid revenues and combined put Globe’s consolidated service revenues for the nine-month period at P45.8 billion, 2% lower than the same period last year. While Globe’s mobile subscriber base continued to expand with mobile SIM base at 25.4 million and its SMS and voice traffic on the rise, intense price competition due to unlimited and bulk offers capped growth in the mobile prepaid segment. Its broadband subscribers, however, surpassed the 1 million mark. Globe maintains a healthy financial position with strong cash flows giving it room to sustain dividend flows and pursue initiatives that will sustain the growth momentum in broadband while recovering mobile revenue market share.
Ayala’s water business posted strong revenue and net income growth. Revenues in the first nine months grew by 19% to P8.3 billion driven by a 4% increase in billed volume and a 9% increase in household connections from its expansion areas within in the concession zone. Its water concessions in Laguna and Boracay also improved revenue contribution. This was further boosted by favorable depreciation levels and regulatory costs brought about by the full implementation of the renewal of its concession agreement. Despite increased operating costs, net income jumped by 31% to P2.9 billion in the first nine months of the year. Continued investments in its network resulted in efficiency improvements. Non-revenue water or system losses were reduced further to 12.2% as of September from 15.4%. Its efficiency standards helped sustain service levels to customers, particularly during the height of the El Nino period early this year. While water supply has improved, the company continues to put in place mitigating measures to stem water supply challenges in the future. Manila Water is pursuing development of other water supply sources to augment and diversify its water source. It is also progressing on new business development outside of its concession zone.
Electronics unit Integrated Microelectronics, Inc. (IMI) posted US$293 million in consolidated revenues for the first nine months of the year, a 4% increase due to the sustained strong performance of its China operations. China and Singapore operations posted US$185 million in revenues, 22% higher year-on-year and accounted for 63% of IMI’s total revenues. This compensated for the 17% decline in revenues from its Philippine operations. IMI’s net income reached US$5 million during the period, 36% higher than same period last year. IMI’s diversification strategy has mitigated the impact of isolated business downturns. IMI continues to be in a robust financial position with cash of US$40M and low gearing levels that provide flexibility to support its expansion program. It recently completed the purchase of a 56% stake in PSi Technologies, Inc.
Ayala’s automotive dealerships registered a 10% growth in revenues to P9 billion on account of higher unit sales, benefitting from the robust industry car sales. Ayala is the leading dealer of the Honda and Isuzu network in the Philippines with a 51% share of Honda network sales and 30% of Isuzu sales nationwide. Ayala Auto posted a 47% growth in net income to P245 million in the first nine months.
Ayala’s BPO businesses under LiveIt delivered a net profit of P1.5 billion for the first 9 months of 2010, versus last year’s loss. The positive result was primarily due to the revaluation gain of P2.3 billion recognized in the second quarter as result of a third party investment in Integreon. This gain more than offset the operating net loss of P513 million and net interest expense of P303 million during the period. On a quarter-on-quarter basis, LiveIt’s net loss was lower at P178 million in 3Q10 versus P199 million in 3Q09. The combined revenue of the BPO businesses in the first 9 months was US$656 million, of which LiveIt’s share was US$200 million, reflecting 32% growth over the same period last year. Combined EBITDA was US$45 million, of which LiveIt’s share was US$11 million, reflecting 6% growth over the same period last year. LiveIt’s share of EBITDA in 3Q2010 was $4.7 million, up 122% over 2Q2010.
The strong performance of these business units negated the impact of the P1.8 billion net loss of Ayala’s international real estate unit, AG Holdings, which took impairment provisions in the first half of the year for certain real estate assets in North America. The company’s Asian portfolio, however, yielded positive earnings in the first nine months as projects in Macau, Thailand, India, and China remain on track and continue to receive favorable market response.
Ayala ended the period with P30 billion in cash and net debt of P13 billion, keeping net debt to equity low at 12%. Ayala is exploring opportunities in the infrastructure space, recently announcing an agreement with long-time strategic partner Mitsubishi Corporation to develop and test the technical and commercial feasibility of solar power generation in the Philippines.
The above statement pertains to the disclosure made to the PSE and SEC today, November 15, 2010, by Ayala chief finance officer Delfin C. Gonzalez, Jr.