Ayala Corporation registered a net income of P19.6 billion in the first nine months of the year, expanding 11 percent from the previous year as its banking, real estate, and automotive businesses sustained their robust performance.
This healthy earnings trajectory was buoyed by strong equity earnings contribution from Ayala’s business units, which amounted to P23.6 billion, 10 percent higher year-on-year. Equity earnings from the Bank of the Philippine Islands and Ayala Land climbed 23 percent and 17 percent, respectively. Meanwhile, equity earnings from Ayala Automotive nearly tripled during the period.
“As they execute on their individual 2020 strategies, our businesses continue to perform well and within targets. As we develop new investments, we are happy to see our power business emerging to be a significant player in the space. With 1,000 megawatts in attributable capacity, AC Energy is beginning to be a major contributor to the country’s energy requirements. Further, we expect it to be a meaningful part of Ayala’s portfolio in the next five years,” Ayala President and Chief Operating Officer Fernando Zobel de Ayala said.
Real Estate
Ayala Land recorded a net income of P15.1 billion in the first nine months of the year, a 17 percent-growth year-on-year driven by higher revenues from its residential development and commercial leasing segments as well as commercial lot sales. This was further lifted by steady margins across various product lines.
Total revenues grew 14 percent to P85.5 billion. Revenues from property development jumped 12 percent to P52.6 billion as booked sales rose 12 percent to P57.9 billion while reservation sales went up 2 percent to P84.3 billion. New lot sales in Arca South, Alviera and Altaraza likewise boosted property development revenues.
Revenues from commercial leasing expanded 12 percent to P19.2 billion, lifted by improved performance of existing and new malls, hotels and resorts, and contribution from newly opened offices. Shopping center revenues climbed 15 percent to P10.6 billion, while office leasing revenues rose 10 percent to P4 billion. Meanwhile, revenues from hotels and resorts inched up 6 percent to P4.6 billion. Collectively, its recurring income business accounted for 38 percent of Ayala Land’s net income during the period.
Banking
Strong gains from its core banking, trading, and fee-based businesses sustained the Bank of the Philippine Islands’ net earnings in the first nine months, climbing 26 percent to P17.4 billion from its year-ago level.
Total revenues expanded 14.3 percent from a year ago to P50.4 billion. Non-interest income jumped 24 percent to P19.1 billion on the back of strong trading gains as well as fees from the bank’s transactional and bancassurance businesses. The bank’s average asset base increased 12.5 percent fueling a 9 percent increase in net interest income to 31.3 billion pesos.
The bank’s operating expenses grew 12 percent attributed to non-recurring collective bargaining costs and accelerated technology-related spending. Notwithstanding the higher operating expenses, BPI’s cost-to-income ratio improved to 50.7 percent from the 51.9 percent registered in the previous year.
BPI’s lending portfolio grew 19 percent to P931.1 billion mainly driven by corporate loans, which accounted for 77 percent of its loan book. BPI maintains a healthy asset base, improving gross 90-day non-performing loans ratio to 1.6 percent from 1.8 percent during the previous year. Total assets in the first nine months of the year reached P1.6 trillion. The bank recorded deposit liabilities of P1.3 trillion, a 12 percent growth year-on-year with a current and savings account ratio of 75.2 percent.
BPI continues to achieve financial inclusion through increased efforts in the Micro, Small and Medium Enterprises (MSMEs) segment. In September, BPI assumed full ownership of BanKO, a mobile-based savings bank that extends financial services to unbanked households and entrepreneurs.
Telecom
Despite intense competition, Globe posted higher topline growth in the first nine months of the year, with service revenues growing 7 percent to P89.1 billion spurred by gains across data-related product segments. Consolidated EBITDA during the period reached P37.5 billion, 8 percent higher year-on-year while EBITDA margin held steady at 42 percent compared to the previous year.
However, higher operating expenses, depreciation and non-operating charges mostly incurred in the third quarter, weighed on Globe’s nine-month performance. Globe’s net income declined 17 percent from the previous year to P11.7 billion. The depreciation charges arose from incremental asset build–up from the fourth quarter of the previous year and the full consolidation of Bayantel. The non-operating charges included costs related to the San Miguel transaction, consisting of interest expenses for the additional debt incurred for the acquisition, and Globe’s share in the net losses of Vega Telecom.
Globe continues to improve its mobile subscriber base, growing 23 percent to 65.4 million. Mobile revenues, however, slightly improved to P68.3 billion owing to the continued shift from the core voice and SMS towards mobile data. Home broadband revenues sustained its growth momentum with P10.7 billion, a 36 percent-growth from a year ago. Globe’s corporate data revenues expanded 33 percent to ?7.3 billion.
Globe continues to invest in improving service delivery by deploying cell sites to utilize the additional 700 megahertz and 2600 megahertz frequencies. Globe has rolled out close to 260 LTE 700mhz and 900 LTE 2600mhz frequencies as of September. Moreover, Globe will increase its capital expenditures for the year by $300 million to fund network expansion.
Water
Manila Water’s net income rose 6 percent in the first nine-months to P4.9 billion largely driven by strong growth of its domestic businesses, supported by the steady expansion of Manila Concession.
Manila Water’s businesses outside the Manila Concession contributed ?2.1 billion in combined revenues, 43 percent higher year-on-year. Boracay Water posted the highest revenue growth at 31 percent to P388 million and Laguna Water at 21 percent to P714 million. Estate Water, Manila Water’s private full-service water and used water operator, recorded P316 million in revenues. Together, Manila Water’s businesses outside the Manila Concession accounted for 16 percent of Manila Water’s bottomline during the period.
Total billed volume during the period was up 4 percent to 538.1 million cubic meters. Billed volume in the Manila Concession grew 4 percent to 360.3 million cubic meters on increased water connections. Manila Water maintained its operating efficiency in the Manila Concession as its non-revenue water ratio held steady at 11.7 percent. Collection efficiency remained strong at 99.9 percent.
Industrial Technologies
Early this year, Ayala set up AC Industrials to house the group’s investments in industrial technologies to take advantage of opportunities in emerging trends in the global automotive manufacturing space. Through Integrated Micro-Electronics and Ayala Automotive, Ayala is leveraging the group’s experience and expertise in automotive electronics and distributorship to assemble a portfolio of investments in vehicle manufacturing, assembly, retail, and tier 1 technologies.
On a combined basis, Ayala’s industrial technologies portfolio reached a net income of P1.5 billion in the first nine months, 25 percent higher than a year ago on solid performance of automotive dealership.
IMI registered a net income of $20.8 million (P977 million), 5 percent lower year-on-year, as productivity improvements were tempered by higher depreciation expenses. Revenues during the period were slightly lower at $615.7 million from $621.5 million as a result of slower demand in the consumer and computing segments. IMI’s operating income grew 4 percent to $28.8 million in the first nine-months of the year.
Operations from Europe and Mexico climbed 12 percent to $228.9 million attributed to robust sales of automotive body controls. IMI’s China operation posted $195.8 million in revenues, down 9 percent resulting from a strategic shift to exit certain consumer electronics business and weaker demand for telecom infrastructure platforms. Revenues from IMI’s EMS operations in the Philippines was flat at $166.6 million following end-of-support for computing peripherals.
In August, IMI acquired a 76 percent stake in German company VIA optronics, a leading optical bonding and display solutions provider, whose proprietary technology strengthens IMI’s position in offering complementary automotive camera and display monitor solutions for advanced driver assistance systems.
Meanwhile, Ayala Automotive sustained its earnings trajectory with a nearly threefold expansion in net income to P492 million in the first nine months. This was largely driven by higher dividend income from Isuzu Philippines and robust sales in the Isuzu and Honda brands.
In September, Ayala Automotive opened its flagship dealership of KTM motorcycles in Bonifacio Global City. The dealership forms part of Ayala Automotive’s partnership with KTM AG to distribute and manufacture motorcycle models in the Philippines under the KTM brand. KTM is the largest motorcycle manufacturer in Europe with market share of 9.6% in Europe and 6.2% in North America. Meanwhile, the manufacturing of the motorcycles was subcontracted to IMI with annual production of 20,000 units primarily for export to China and subsequently, to Southeast Asian countries.
Power and Transport
Equity earnings of AC Energy expanded nearly threefold in the first nine months of the year as operating levels of its power generation plants significantly improved. It recorded a net income of P1.2 billion, 28 percent lower year-on-year owing to the absence of capital gains from the partial sale of its stake in North Luzon Renewable Energy Corporation realized in the previous year.
In September, AC Energy achieved its target of 1,000MW in attributable capacity as the construction of the first unit of its 2x668MW power plant GNPower Dinginin in Bataan went full swing. To date, AC Energy has seven thermal, wind, and solar power generation assets, with five operating plants delivering 1,000MW of power to the grid. The two plants under construction, GNPower Kauswagan and GNPower Dinginin, are expected to add another 1,200MW to the grid in 2018 and 2019, respectively. Last month, AC Energy announced its aspiration of assembling another 1,000MW in attributable capacity by 2020, 60 percent of which will be renewable energy.
In transport, AC Infrastructure sustained its positive trajectory in the first nine months of the year with a net income of P59 million, driven by revenues from the three public-private partnerships in its portfolio. As of October, Light Rail Manila Corporation, which operates and maintains LRT1, has increased the number of light rail vehicles by 19 percent since it took over the system last year. The Muntinlupa-Cavite Expressway is now serving a daily average of close to 26,000 vehicles as of October, while the Beep ticketing system has sold over 2.5 million cards, accumulating around P3.9 billion in transactions across rail, bus, and tollroad systems since its launch last year.
Balance Sheet
Ayala’s balance sheet remains at a comfortable level. At the parent level, cash amounted to P33.1 billion while net debt stood at 53.4 billion as of September. Net debt-to-equity ratio during the period was 0.49 at the parent level and 0.62 at the consolidated level. Ayala’s loan-to-value ratio, the ratio of its parent net debt to the total value of its investments, stood at 8.5 percent as of September.