Ayala Corporation’s consolidated net income in the first nine months of the year reached P8.7 billion, 19% higher than in the same period last year. Core net income, which excludes the impact of the accelerated depreciation from its telecom unit and revaluation gains realized at its international property unit last year, reached P9.3 billion up 31% year-on-year.
The conglomerate’s strong earnings growth was driven by robust equity earnings from its core and non-core businesses, which reached P11.1 billion in the first nine months, a 21% increase year-on-year. This was driven by its property, banking and water businesses which offset the decline in equity earnings from its telecom business. Significant improvement in equity earnings of its international businesses also helped boost equity earnings in the first nine months.
The strong earnings momentum over the past quarters has pushed share price up 49% year-to-date, outpacing the market’s 28% rise. Shares of its listed business units have likewise increased substantially over the period as they consistently delivered a solid earnings trajectory year-to-date.
REAL ESTATE
Ayala Land’s 9-month net income reached P6.6 billion, 27% higher year-on-year driven by strong revenues across all business lines. Total revenues grew by 20% to P39 billion with its property development business up 27% year-on-year on higher bookings and continued completion of projects. Its commercial leasing business grew by 19% to P6.3 billion with contribution from new malls, higher occupied office gross leasable area, and higher lease rates. Revenues from its construction and property management business surged by 40% to P14.6 billion on the back of brisk residential, office, and mall projects. In the meantime, its hotels and resorts business also rose by 11% year-on-year to P1.8 billion. Ayala Land continues to have a robust pipeline of projects for launch in the fourth quarter which includes 12,000 residential units, 117,000 square meters of shopping centers, and nearly 20,000 square meters of office GLA. It continues to position for strategic land banks within and outside Metro Manila. The company recently acquired the 74-hectare FTI property in Taguig which is strategically located near the country’s two premier business districts, the Makati CBD and Bonifacio Global City. The company’s capital expenditure this year is projected to reach a record P70 billion for both land acquisition and project completion.
BANKING
The Bank of the Philippine Island’s (BPI) 9-month net income grew by 37% to P13.2 billion. This was driven by an 18% growth in revenues as net interest income increased by 8% while non-interest income increased by 34% due to higher securities trading gains. Net interest income grew with the expansion in average asset base while net interest spreads remained relatively stable. The bank’s strong loan growth was sustained in the third quarter. Corporate and consumer loans continued their double-digit expansion, growing by 18% and 16%, respectively. Asset quality remained very healthy with net 30-day NPL ratio at 1.7%. Operating expenses increased at a very manageable rate with much of the increase arising from technology-related costs. BPI’s performance in the first nine months of the year translated to a return on equity of 19.2%.
TELECOM
Globe Telecom’s upward momentum was sustained with 9-month core net income up by 7% year-on-year to P8.8 billion. However, considering the increase in operating expenses and subsidy and the impact of the accelerated depreciation from its network modernization program, reported net income declined by 15% to P6.8 billion. Top-line growth, however, remained strong with service revenues reaching an all-time high of P61.3 billion, 6% higher than same period last year. This was driven by strong mobile, fixed line data and broadband growth which offset the decline in fixed line voice revenues. Mobile revenues rose by 6% to P49.9 billion while fixed line data and broad band revenues expanded by 9% and 14%, respectively. Total mobile subscriber base grew by 10% year-on-year breaching the 32 million mark driven by the continuous growth of both postpaid and prepaid segments. Its broadband subscribers also hit a record high of 1.6 million. Globe’s network modernization program is on track with 62% completion rate in various cell sites all over the country. Globe continues to roll-out in key areas and cover critical business districts such as Metro Davao, Metro Cebu, Quezon City and now moving in Makati City and Rockwell with target completion by November 2012. With very encouraging results, this puts Globe closer to delivering its 2012 capacity plans and network quality improvements for superior customer experience. Modernization of cell sites is accelerating through the fourth quarter of this year and is targeted to be complete by the first quarter of next year.
WATER
Manila Water Co., Inc. recorded a net income of P3.9 billion in the first nine months of the year, up 26% versus last year. Core net income, which excludes non-recurring expenses, also grew by 26% to P4.2 billion. The growth was driven by a 22% increase in revenues as a result of the steady rise in billed volume plus the timely implementation of the tariff adjustment and the contribution of new businesses outside the east zone. Its operating subsidiaries including Laguna, Boracay, Clark and Thu Duc Water in Vietnam contributed about 5% of total revenues and net income. Manila Water continues to expand operations outside the east zone. Following its recent acquisition of a 47.35% stake in Kenh Dong Water Supply Joint Stock Company in Vietnam, it recently signed a share purchase agreement to acquire 51% equity stake in Palyja, a water supply concession in Western Jakarta which serves a population of close to 6 million, nearly the size of its east zone concession in Manila. The transaction is still subject to government and regulatory approval and is expected to be closed within 180 days from its signing date last October 18, 2012.
INTERNATIONAL BUSINESSES
Ayala’s international businesses continued to improve despite lingering uncertainties in the global economy.
Its electronics business, Integrated Microelectronics, Inc. recorded a three-fold improvement in earnings in the first nine months of the year to US$5 million as revenues rose by 18% despite the weakness in developed economies as well as a slowdown in China. Revenues from its new subsidiaries in Europe and Mexico as well as contribution from another subsidiary, PSi Technologies, Inc., helped lift revenues during the period.
Its BPO unit, LiveIt, achieved continued growth and margin improvement. Share of revenues reached US$251 million, up 8% year-on-year, while share of EBITDA reached US$22 million, up 41% due to improved profitability at Stream, Integreon, and Affinity Express. As a result, LiveIt reduced its net loss, which were primarily due to acquisition related charges and other non-operating items.
Ayala Corporation Chairman and Chief Executive Officer, Mr. Jaime Augusto Zobel de Ayala, said: “We are pleased with the earnings performance of each of our core businesses and the continued improvement in profitability of our international units. Their combined performance to-date keeps us on track with our year-end targets. The positive momentum in the domestic economy continues to present opportunities for us to build on the trajectory of our core businesses and aggressively expand in these sectors. As our core businesses remain a steady source of earnings and cash flow, we also continue to optimize our portfolio to maximize value and actively invest in new sectors such as power and transport infrastructure to build a platform for long-term growth.”
Ayala parent company ended the period with gross debt of P49 billion and cash of P29 billion. After it issued a 10-billion peso 15-year corporate bond last May and placed P6.45 billion worth of treasury shares in July, the company is set to issue P8-10 billion worth of fixed rate bonds this month in preparation for significant size investments. Last October, the company acquired an additional 10.4% stake in BPI from strategic partner DBS Bank Ltd. On top of this acquisition, Ayala has deployed roughly P4 billion to date in various development projects in power generation and transport infrastructure as well as in other projects of its existing business units.
This press statement refers to the disclosure submitted to the SEC, PSE, and PDEx by Ayala chief finance officer Delfin C. Gonzalez, Jr.