Ayala Corporation’s consolidated net income in the first half of the year reached P6.1 billion, 23% higher than in the same period last year. Core net income, however, was even higher at P6.3 billion or a 35% growth from a year ago. This excludes the impact of the accelerated depreciation of Globe Telecom as a result of its network modernization program and the revaluation gains realized at AG Holdings in the first half of last year.
Higher profits were driven by the strong equity earnings from Ayala’s core businesses. Substantially higher equity earnings from Ayala Land, Bank of the Philippine Islands, and Manila Water cushioned the slight decline in equity earnings from Globe Telecom, which was impacted by the accelerated depreciation from its network modernization program. Equity earnings of core and non-core businesses reached P7.7 billion in the first semester, 24% higher than the P6.2 billion achieved in the same period last year.
Ayala President and Chief Operating Officer Fernando Zobel de Ayala said: “We are encouraged to see the strong trajectory of our core businesses sustained through the first half of this year. The performance reflects the robust domestic demand and the fundamental strength of the economy. We envision our products and services to continue to tap this growing demand as we expand to new market segments and develop a more pervasive presence across the country.”
REAL ESTATE
Ayala Land sustained its high growth with net income up 28% year-on-year to P4.3 billion. All its businesses registered strong results. Revenues grew by 18% to P25 billion with its property development business contributing the bulk of P15.3 billion, up 24% year-on-year. Revenues from its commercial leasing business grew by 21% to P4.2 billion. Ayala Land’s construction and property management business also registered high growth of 47% to P9.4 billion due to brisk residential, office, and mall projects; while revenues from its hotels and resorts business also rose by 15% to P1.3 billion. Revenue growth outpaced the increase in expenses, resulting in margin improvements across the board. Ayala Land’s performance has tracked ahead of targets it originally set in its 5-10-15 plan. It continues to build sources of long-term growth as it replicates its mixed-use community development platform across cities in Mega Manila and as it re-creates its innovative township developments in other provinces in the country.
BANKING
Bank of the Philippine Island’s (BPI) net income reached P9.4 billion in the first half of the year, 52% higher than the P6.2 billion realized in the same period last year. This was driven by the 24% rise in revenues as net interest income rose by 9%, while non-interest income surged by 51%. Net interest income improved as a result of an increase in average asset base and a 14 basis point improvement in net interest spread. Non-interest income was boosted by trading gains realized in the first quarter of the year as the bank sold down its securities inventory at that time. The bank’s loan growth remained strong across all segments. Total net loan portfolio grew by 17%. Both the middle market and SME segments grew by 19% while the top corporate segment increased by 15%. Consumer lending increased by 17%. Despite the double-digit growth in loans, asset quality continued to improve with net 30-day NPL ratio down to 1.4%. With operating expenses growing at a slower rate, BPI’s cost-to-income ratio improved. BPI’s first semester net income performance translates to a return on equity of 21%.
TELECOM
Globe Telecom’s strong momentum was sustained through the first half of the year. Core net income grew by 2% to P5.7 billion. However, considering the increase in operating expenses and the impact of the accelerated depreciation arising from its network modernization program, reported net income declined by 10% to P4.9 billion. Top-line growth remained strong with service revenues reaching an all-time high of P40.8 billion, 6% higher than same period last year. This was driven by record mobile revenues which rose by 6% to P33.3 billion. Postpaid revenues, which now account for a third of revenues, rose by 21% to nearly P1.9 billion, with pre-paid revenues steady. Broadband revenues increased by 13% to P4.1 billion driven by a 22% expansion in subscriber base. The strong growth in broadband and mobile revenues as well as fixed line data revenues cushioned the decline in fixed line voice revenues. Globe’s total mobile subscriber base expanded by 12% during the period to 31.7 million while broadband subs grew by 22% with quarterly gross adds hitting an all-time high. Globe’s network modernization program is on track to hit its year-end target. Modernization of over 40% of its network equipment located in various cell sites all over the country is complete with prioritization for key areas such as metro Davao and Cebu. The next phase includes Metro Manila and other key areas which will result in significant improvements in service quality once completed.
WATER
Manila Water Co., Inc. recorded a net income of P2.6 billion in the first half of the year, a 31% increase year-on-year. The growth was driven by the sustained increase in revenues from both the East Zone and non-East Zone operations. Total revenues rose by P7.2 billion, 24% higher year-on-year as a result of the timely implementation of annual tariff increase and strong billed volume growth in the East Zone. The new businesses also contributed positively, accounting for 5% of revenues and net income. Total billed water volume grew by 36% due to strong sales growth among all operating units with the acquisition of Clark Water and Thu Duc Water in the fourth quarter of 2011. Growth in the East Zone was due to higher consumption of industrial customers and from new connections. Laguna Water, Boracay Water, and Clark Water all registered double-digit growth in revenues and net income. Manila Water recently completed the acquisition of a 47.35% stake in Kenh Dong Water Supply Joint Stock Company in Vietnam. Kenh Dong is expected to start operations within the second half of 2012 with a guaranteed minimum sales volume of 150 million liters per day through a 20-year bulk water supply contract with the Saigon Water Company.
ELECTRONICS
Integrated Micro-Electronics, Inc. recorded an improvement in earnings in the first half of the year with net income up 173% to US$3.1 million. Revenues grew by 24% to US$326 million despite the weakness in developed economies in Europe and the US as well as a slowdown in China. Revenues from China and Singapore operations were 6% lower than year-ago levels due to reduced volumes in a telecommunications infrastructure program and a delay in the production of new models for an industrial electronics program. On the other hand, revenues from Philippine operations grew by 3% year-on-year. IMI recognized revenues this year from its new subsidiaries in Europe and Mexico which combined contributed US$86 million in the first six months of the year. Lower operating expenses resulted in a 22% increase in EBITDA and consequently an improvement in IMI’s bottomline. While the outlook for the global electronics industry remains on positive trend this is tempered by the uncertainty and weakness in the global economic environment. IMI continues to invest in research and development as well as process improvements to take advantage of the uptrend in emerging applications of electronics for the industrial and medical fields as well as renewable energy.
BUSINESS PROCESS OUTSOURCING (BPO)
LiveIt achieved continued growth and margin improvement in the first half of 2012. Share of Revenues reached US$166 million, up 9% year-on-year, while Share of EBITDA reached US$13.1 million, up 26% due primarily to improved profitability at Stream and Affinity Express. As a result, LiveIt reduced its net loss, which is primarily due to acquisition related charges and non-operating items such as those related to taking Stream private in the second quarter. Further improvement is expected in the second half of 2012 due to seasonality and the ramp up of recent client wins.
Ayala parent company ended the period with gross debt of P49 billion and cash of P23 billion. After it issued a 10-billion peso 15-year corporate bond last May, which was the longest tenor issued by a publicly listed corporate, the company raised another P6.45 billion in cash as it placed 15 million common shares it held in treasury. The company had accumulated treasury shares under a buy-back program instituted several years ago at the time the market and its shares were trading substantially below current levels. The bond issue and the share placement were part of the company’s efforts to gear up for planned significant size investments. Ayala is eyeing to invest around US$1 billion over the next five years in the power and transport infrastructure sectors.
The press statement above refers to the disclosure submitted to the SEC, PSE, and PDEx by Ayala chief finance officer Delfin C. Gonzalez, Jr.