Month: March 2011

Ayala Corporation, through Michigan Power, Inc., a 100%-owned subsidiary, acquired a 50% effective stake in NorthWind Power Development Corporation (NorthWind). NorthWind owns and operates the 33-MW wind farm located in Bangui Bay, Ilocos Norte. The wind farm has 20 wind turbines and is the first commercial wind farm ever established in Southeast Asia. The 50% stake was acquired from existing shareholders of NorthWind.

This is part of Ayala’s initiative to enter the power sector and comes after the company’s recent joint venture with Mitsubishi Corporation on solar power. Ayala Corporation President and COO, Mr. Fernando Zobel de Ayala said, “Our goal over the next five years is to build a portfolio of power generation assets of over 1,000 megawatts, which include both renewable and traditional forms of energy sources. We believe there are opportunities to make early stage investments in the renewable energy space which may have the potential to grow over time given the need to develop alternative sources of energy. In addition to our wind and solar initiatives we are also developing platforms for hydro electric power.”

The above disclosure was made by Ayala managing director for corporate strategy and development Eric T. Francia.

Ayala Corporation’s net income in 2010 grew by 37% to P11.2 billion. Its real estate, banking, water, and auto business all posted record earnings during the year, which cushioned lower earnings of its telecom and electronics manufacturing units. Earnings were boosted by a P3.6 billion net gain. The net gain was due to the revaluation of the company’s stake in Manila Water following its purchase of an additional 11% stake in the water company and in its BPO holding company, LiveIt, after the buy-in of a private equity firm in one of its investee companies. These revaluation gains were in turn partly offset by impairment provisions and restructuring costs at its international real estate unit, AG Holdings.

Ayala Corporation president and chief operating officer Fernando Zobel de Ayala said, “We are pleased with the record performance and strong growth trajectory of most of our domestic businesses. This reflects our ability to take advantage of the strong economic recovery and capture opportunities in this new growth cycle. Our international businesses, however, continued to feel the lingering effects of the global downturn but should be well-positioned for the turn of the global economy.”

Ayala Land achieved record earnings of P5.4 billion on all-time high revenues of P37.8 billion. This was 35% higher than prior year and 13% above the previous record high in 2008. Growth was driven by all business lines. Take-up values of residential units across all brands grew significantly with incremental contribution from its fourth residential brand, Amaia. Its leasing revenues rose by 13%. Revenues from shopping centers grew by 3% while the office segment rose by 21%. Occupied gross leasable area expanded for commercial center and offices by 5% and 35%, respectively, while rental rates increased slightly. In the meantime, revenues from its new foray in hotels and resorts also rose by 33% reflecting the consolidation of the acquisition of 60% of El Nido Resort in Palawan. This year Ayala Land is allotting P33 billion in capital expenditure to increase project launches and further capture the strong demand for its real estate products within and outside Metro Manila.

In banking, Bank of the Philippine Islands had another strong year with net income reaching a record P11.3 billion, up 33% for the second consecutive year. Solid business growth and trading gains both fuelled the rise in earnings. Revenues rose by 13% with net interest income up 10% to P24 billion driven by a 12% increase in its average asset base. Non-interest income was up 18% due to higher gains from securities trading as well as fee-based income. Loan growth was strong across all segments. Gross loans grew by 16% as all market segments sustained double-digit growth. The bank’s total resources reached P877 billion, up 21% while deposits grew by 24% to P720 billion as the bank introduced new deposit products to address the needs of its various customers. Combined with assets held in trust of P486 billion, total funds managed by the bank reached P1.2 trillion. BPI’s performance resulted in a 2.6 percentage point improvement in return on equity which reached 15.3% at year-end.

In telecom, Globe posted consolidated service revenues of P62 billion in 2010, slightly below prior year’s P62.4 billion due to intense competition. Performance in the fourth quarter was strong with quarter-on-quarter service revenues up by 7%. This was led by the surge in postpaid plan subscriptions and the increased usage and top-ups in both the Globe Prepaid and TM brands. Globe ended the year with a total SIM base of 26.5 million, 14% higher than in 2009. Steady gross adds and declining churn led to net SIM adds of 1.1 million in 4Q10, the highest since 2Q08. Postpaid net adds also hit a new 7-year high in the fourth quarter resulting in nearly 1.1 million postpaid customers by year-end. Its broadband and fixed line service business also grew with full year revenues up 32% compared to 2009. Globe net income of P9.7 billion was 22% lower than prior year, but reflects an improvement from prior quarters. Globe’s capital expenditure reached P19.5 billion in 2010 mainly to improve network performance, increase mobile and broadband capacities, and improve customer service capabilities.

Its water business under Manila Water Co. posted net income of P3.99 billion in 2010 as a result of steady growth in water sales volume and a one-time downward adjustment on its depreciation expense. Billed volume grew by 3.5% despite the El Nino condition which impacted the water allocation for Metro Manila’s requirements during the year. The company’s investments in the water network contributed to improving non-revenue water further to 11% in 2010 from 15.8% the prior year. This enabled the company to ensure 24/7 delivery of water service to its customers despite the effects of El Niño. In 2010 Manila Water invested at total of P9.6 billion to further improve the reliability and expand coverage of its water and wastewater networks. Manila Water aims to invest more than P10 billion annually for the next two years for the development of new water sources, network reliability improvements, as well as construction of several sewage treatment plants. Expansion continues beyond the East Zone both within the Philippines and overseas.

Ayala’s automotive dealerships posted revenues of P11.5 billion, up 6% versus prior year. Net income rose by 30% to P299 million. Ayala remains one of the largest vehicle distributors in the country, capturing 50% of Honda network sales and 30% of Isuzu sales nationwide.

Ayala’s overseas businesses continue to be impacted by the lingering effects of the global downturn in Europe and the U.S. Its electronics manufacturing business, Integrated Microelectronics, Inc.’s revenues grew by 4% to US$412 million, driven mainly by the sustained strong performance of its China operations. Net income reached US$4.7 million, a 53% decline versus prior year, partly driven by the global downturn. However, excluding one-off expenses earnings were up by 27%, remaining profitable despite the challenging market environment. Following the acquisition of a 56% stake in PSi Technologies, Inc., IMI continues to look for acquisition opportunities to build on its existing capabilities.

LiveIt, Ayala’s holding company for its business process outsourcing investments , reported a net profit of $4.9 million in 2010, as a revaluation gain realized on one of its companies more than offset an operating net loss of US$15.7 million which was primarily due to Stream and Integreon. LiveIt’s investees recorded a significant improvement in the second half of the year as the improving global economy resulted in higher transaction volumes for their clients. The combined revenues of LiveIt’s companies grew to $473 million in the second half of 2010, up 9% over the first half of the year, and their combined EBITDA grew to $39 million, up 65% over the first half.

Its international real estate investments continue to see strong performance of its Asian portfolio with projects in Macau, Thailand, and India receiving strong market reception. However, its US portfolio remained weak as a result of the credit contraction, persistent high unemployment, and weak consumer spending in the U.S. The Company booked impairment provisions on some of its US investments that contributed to AG Holdings losses during the year.

Ayala maintains a very strong financial condition, ending the year with cash level of P29 billion and net debt-to-equity of 0.12:1. It is eyeing investments in the infrastructure and power sectors. On a group-wide basis, capital expenditures are expected to reach P79 billion this year, 21% higher than capex in 2010, reflecting the group’s optimism on the country’s renewed growth prospects.

The above press statement pertains to the disclosure made today, March 11, 2011, to the Securities and Exchange Commission, Philippine Stock Exchange, and Philippine Dealing and Exchange Corporation, by Ayala chief finance officer Delfin C. Gonzalez, Jr.

Ayala Corporation (“AC”) and Ayala Land, Inc. (“ALI”) announced they exchanged their ownership interests in ARCH Capital Management Company Limited (“ARCH Capital”) and ARCH Capital Asian Partners, G.P., (together “ARCH”) with The Rohatyn Group (“TRG”), resulting in TRG acquiring AC’s and ALI’s combined 50% interest in ARCH.

ARCH Capital and ARCH Capital Asian Partners, G.P. are the investment manager and the general partner, respectively, of ARCH Capital Asian Partners, L.P. (“ARCH Capital Fund” or “the Fund”) – an Asian real estate fund with investments in China, Macau, Singapore, Thailand and India. TRG is an emerging markets-focused private investment firm with approximately $3 billion in assets under management. AC, a cornerstone investor in TRG since its founding in 2003, will further increase its investment in TRG as a result of the share exchange to become one of TRG’s largest outside shareholders.

AC and ALI are sponsors of ARCH and co-founded the ARCH investment management firms in 2006 together with Richard Yue. Mr. Yue is retaining his current 50% interest in ARCH and will continue to serve as CEO and CIO of ARCH. The completed exchange of ownership interests will leave the activities, management, focus and shareholder structure of the ARCH Capital Fund unchanged, with AC and ALI retaining their respective ownership stakes in the Fund.

Commenting on the transaction, AC CEO Jaime Augusto Zobel de Ayala said, “We believe this is a natural progression for ARCH which has been a fruitful and exciting investment for us. At this stage in its next growth cycle, we feel it would be better served and managed within a globally dedicated alternative asset management firm. Given Ayala’s successful experience as an investor in TRG for a significant period of time, we believe TRG would be an ideal partner in ensuring ARCH’s continued success. It would also allow us to consolidate our investments in this particular industry grouping.”

The above statement pertains to the disclosure made on March 7, 2011, to the Securities and Exchange Commission, Philippine Stock Exchange, and Philippine Dealing and Exchange Corporation, by Ayala chief finance officer Delfin C. Gonzalez, Jr.