Ayala Posts P17.7 Billion in 9-Month Earnings, Up 26% Year-on-Year; 3Q Earnings Up 72%

The sustained earnings momentum of its telecommunications, real estate and banking units, including capital gains realized in the third quarter, drove Ayala Corporation’s net earnings in the first nine months of the year to P17.7 billion, 26 percent higher than a year ago.

In the third quarter alone, Ayala registered a net income of P7.3 billion, representing a 72 percent increase year-on-year.

Excluding the capital gains primarily from the partial sale of AC Energy’s stake in North Luzon Renewable Energy Corporation this year and the divestment of Stream Global Services in the previous year, Ayala’s nine-month earnings recorded robust growth of 23 percent from a year ago.

This solid performance was underpinned by the strong double-digit growth in equity earnings contribution from Ayala’s business units, which reached P21.4 billion, 14 percent higher than its year-ago level.

“Our growth trajectory remains strong as we continue to be optimistic about the overall domestic environment,” Ayala President and Chief Operating Officer Fernando Zobel de Ayala said.

Real Estate
Ayala Land’s net income for the first nine months of the year expanded 19 percent to P12.8 billion fueled by the sustained growth in residential development, office sales, and commercial leasing segments. Real estate revenues rose 10 percent to P70.2 billion.

Revenues from residential development grew 10 percent to P40 billion on higher bookings and project completion, while new launches boosted office sales to P4.0 billion, 57 percent higher year-on-year. Residential sales reached P82.9 billion as of September 2015.

In commercial leasing, higher occupancy and average rental rates drove the 12 percent increase in shopping center revenues to P9.2 billion and the 18 percent improvement in office revenues to P3.7 billion. Hotels and resorts revenues posted a 7 percent increase to P4.3 billion.

The strong performance of its commercial leasing segment supported Ayala Land’s continued buildup of its recurring income business which contributed 46 percent of its net income during the period.

Ayala Land launched various residential, office for sale and leasing projects amounting to P97.9 billion during the period.

Bank of the Philippine Islands registered a net income of P13.8 billion, 8 percent higher than the previous year as its core banking business continues to grow at a healthy pace. Total revenues expanded 9 percent to P44.1 billion in the first nine months of the year, driven by net interest income and non-interest income, which expanded by P3 billion and P683 million, respectively. Comprehensive income rose 12.3 percent to P13.3 billion.

BPI’s operating expenses reached P22.9 billion, 6.7 percent higher than the previous year. This translated to an improved cost-to-income ratio of 51.9 percent from the previous year’s 53.1 percent.

The bank’s total loan portfolio expanded 11.2 percent, reaching P780 billion during the period. Corporate loans accounted for 76.6 percent, while retail loans comprised 23.4 percent of BPI’s lending portfolio. Total deposits expanded 13.3 percent to P1.2 trillion, while total assets rose 8.8 percent to P1.4 trillion from their year-ago levels.

The bank recorded a capital adequacy ratio of 14.9 percent compared to the 15.7 percent registered a year ago.

Globe Telecom sustained its solid performance in the first nine months of the year, recording a net income of P14.1 billion, 34 percent higher year-on-year. This was driven by strong growth in service revenues, which expanded 15 percent to P83.4 billion, buoyed by robust demand for data services across mobile, broadband, and fixed line segments. The P1.2 billion gain from the sale of its 51 percent stake in Yondu Inc. boosted Globe’s earnings during the period. Excluding one-time gains this year and the impact of accelerated depreciation in 2014, Globe’s core net income for the nine-month period grew 10 percent from a year ago.

Demand for data services continued to drive Globe’s strong revenue growth. Mobile browsing revenues jumped 48 percent to P15.1 billion, while broadband revenues increased 37 percent to P12.4 billion. Revenues from fixed line data surged 37 percent to P5.5 billion.

Globe’s mobile subscribers increased 17 percent to 50.1 million, surpassing the 50 million mark for the first time in the company’s history, while its broadband subscribers surged 57 percent to nearly 4 million.

Following the conversion of debt and acquisition of equity from existing shareholders last July, Globe now owns 98.6 percent of Bayan’s equity. Since then, Globe and Bayan jointly filed for the latter’s exit from financial rehabilitation. Globe’s acquisition of Bayan presents synergy opportunities, including the nearly P1.4 billion in both one-time and annual recurring savings from one-time capex avoidance, recurring operational expense savings, and cross-selling and up-selling of Globe and Bayan products.

Water Utilities
Manila Water recorded net earnings of P4.6 billion in the first nine months of the year, growing 1 percent from the same period last year. In the third quarter alone, its net income expanded 13 percent year-on-year to P1.6 billion on continued growth of the East Zone concession and higher contribution of its other businesses. Manila Water’s businesses outside the East Zone grew 3 percent, accounting for 12 percent of its consolidated net income.

Total billed volume rose 2 percent. In the East Zone alone, billed volume also grew 2 percent, while the combined billed volume of Manila Water’s local subsidiaries which includes Laguna Water, Boracay Water, Clark Water, and Cebu Manila Water, expanded 31 percent during the period.

Manila Water continues to expand its presence outside Metro Manila. Recently, through a subsidiary, it signed an agreement to operate the water supply system in Cu Chi District in Vietnam. It also entered into an agreement for a demonstration project to reduce non-revenue water in Bandung City, Indonesia.

Electronics Manufacturing
Integrated Micro-Electronics Inc. posted a net income of $22 million in the first nine months of the year, up 5 percent year-on-year on the back of operational efficiency improvements combined with the expansion of its automotive programs.

IMI’s revenues declined 4 percent to $621 million owing to weakness in Euro coupled with a weak China economy which impacted its computing and consumer segments.

IMI’s Europe and Mexico operations recorded combined revenues of $204 million for the nine-month period, a 1 percent growth year-on-year as the robust automotive growth was offset by the effect of currency weakness. Revenues from its electronics manufacturing services unit the Philippines was steady at $168.5 million, while its China operations declined 13 percent to $214.3 million as the country’s 4G rollout reached its projected volume and as the weaker economy adversely affected the consumer electronics customers.

Power Generation and Transport Infrastructure
AC Energy Holdings registered a net income of ?1.6 billion in the first nine months of the year as its power generation assets achieved more efficient operating levels, and as it realized a gain from the partial sale of its stake in North Luzon Renewable Energy Corporation, an 81-megawatt wind farm in Ilocos Norte.

AC Energy continues to expand its renewable energy portfolio. It recently entered into a partnership agreement with Bronzeoak Clean Energy Inc. for the development, construction and operation of a P1.3 billion-solar power farm in Bais City, Negros Oriental. The solar power farm will have a capacity of approximately 18 megawatts in the first phase with target completion in March 2016. The second phase involves the expansion of the solar power farm to up to 50 megawatts.

In transport infrastructure, AC Infrastructure continued to move forward with its public-private partnership projects. AC Infra, through Light Rail Manila Corporation, the concessionaire for the operations, maintenance and extension of LRT 1, took over the operations of the LRT Line 1 last September and has begun to introduce station rehabilitation and improvements. Its toll road, the Muntinlupa Cavite Expressway, has likewise started full commercial operations last July and has steadily ramped up traffic, while its automated fare collection systems project under AF Payments, Inc. has completed the roll out of its Beep cards on LRT lines 1 and 2 and MRT 3 with take-up hitting past the 1 million mark.

Balance Sheet
Ayala maintains a healthy balance sheet. Consolidated net debt to equity ratio stood at 0.53 to 1 as of September 30, 2015. Parent company cash reached P43.3 billion, putting its net debt to equity ratio at 0.41 to 1 and 0.21 to 1, if including its share from the undistributed earnings from its investee companies.