Month: September 2017

Chairman and CEO Jaime Augusto Zobel de Ayala took the lead in Ayala Corporation’s group-wide effort to adopt a more imaginative approach to building sustainable businesses by creating platforms where social issues are made central to business strategy, guided by the UN’s 17 Sustainable Development Goals, of SDGs.

His leadership did not go unnoticed.

The UN Global Compact, a gathering of 800 global UN, business, government and civil society leaders, recognized Ayala Corporation’s sustainability strategy by distinguishing Mr. Zobel as an SDG Pioneer. The first SDG Pioneer from the Philippines, Mr. Zobel is one of ten individuals from around the world recognized for championing sustainability through their own companies and mobilizing the broader business community to take action in pursuit of the 17 UN SDGs.

Hundreds of nominations were received from diverse regions of the world, from which 10 finalists were selected, exemplifying how business can be a force for good in addressing the challenges we face as a global society.

“Each of the 2017 SDG Pioneers is exhibiting how companies and pioneering individuals can be a force for positive change in addressing the issues we all face today,” said Lise Kingo, UN Global Compact CEO and Executive Director. “Mr. Zobel has been impactful in reaching a wider segment of the business market through innovation and diversification. He has been a Pioneer in the inclusion of long-term sustainability in business strategy and operations.”

It was Mr. Zobel’s leadership that drove Ayala to embrace shared value creation, to better integrate the developmental challenges that society faces into Ayala’s strategies and business models. Apart from reinventing its business models to meet the needs of a wider segment of the population, Ayala has entered sectors critical to national development and inclusive progress: power, infrastructure, healthcare, and education.

Sustainability now plays a significant role in the Ayala businesses. Ayala Corporation drove the shift to the integrated reporting framework, which captures in detail the group’s positive impact on society through its contribution to the SDGs. Ayala Corporation is the first company in the Philippines to produce an integrated report. Another milestone is underway, as Ayala moves to include long-term sustainability targets for its businesses—which will form part of the companies’ and management’s key result areas.

 “I believe that now, more than ever, a deeper engagement with society is indispensable to the survival and success of private enterprises. From both a practical and moral standpoint, businesses cannot thrive in an environment rife with economic inequity,” said Mr. Zobel. “Ignoring these issues threatens our ability to create long-term value and jeopardizes the sustainability of the enterprise and markets.”

The world’s largest corporate sustainability initiative, the UN Global Compact calls on companies to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals. In the Philippines, over 20 companies and non-business organization have joined the initiative, and the Global Compact Network Philippines has supported their efforts to advance sustainable business practices since 2016.

Mr. Zobel’s recognition as SDG Pioneer reinforces Ayala Corporation’s commitment to shared value creation, enhancing its business strategies and models in a way that addresses the evolving needs of Philippine society.

Jaime Augusto Zobel de Ayala recognized for work in sustainable business strategy and operations.

NEW YORK, 14 September 2017 – Ayala Corporation’s sustainability strategy has been recognized by the UN Global Compact, which named Ayala Chairman and CEO Jaime Augusto Zobel de Ayala as one of the United Nations SDG Pioneers. The first SDG Pioneer from the Philippines, Mr. Zobel is one of ten individuals from around the world recognized for championing sustainability through their own companies and mobilizing the broader business community to take action in pursuit of the 17 Sustainable Development Goals, or SDGs.

“Each of the 2017 SDG Pioneers is exhibiting how companies and pioneering individuals can be a force for positive change in addressing the issues we all face today,” said Lise Kingo, UN Global Compact CEO and Executive Director. “Mr. Zobel has been impactful in reaching a wider segment of the business market through innovation and diversification. He has been a Pioneer in the inclusion of long-term sustainability in business strategy and operations.”

His leadership drove Ayala to embrace shared value creation, to better integrate the developmental challenges that society faces into Ayala’s strategies and business models. Apart from reinventing its business models to meet the needs of a wider segment of the population, Ayala has entered sectors critical to national development and inclusive progress: power, infrastructure, healthcare, and education.

Sustainability now plays a significant role in the Ayala businesses. Under Mr. Zobel’s leadership, Ayala Corporation drove the shift to the integrated reporting framework, which captures in detail the group’s positive impact on society through its contribution to the SDGs. Ayala Corporation is the first company in the Philippines to produce an integrated report. Another milestone is underway, as Ayala moves to include long-term sustainability targets for its businesses—which will form part of the companies’ and management’s key result areas.

Each year, the UN Global Compact celebrates a group of SDG Pioneers – business leaders doing an exceptional job of taking action to advance the Global Goals. Hundreds of nominations were received from diverse regions of the world, from which 10 finalists were selected, exemplifying how business can be a force for good in addressing the challenges we face as a global society. Each Pioneer will be recognized during the UN Global Compact Leaders Summit 2017 on 21 September in New York.

A Pioneers Selection Group, comprised of experts from the UN, academia, civil society and the private sector, ranked the nominees based on a set of criteria, resulting in the ten 2017 UN Global Compact SDG Pioneers. Access the list of 2017 SDG Pioneers.

“I believe that now, more than ever, a deeper engagement with society is indispensable to the survival and success of private enterprises. From both a practical and moral standpoint, businesses cannot thrive in an environment rife with economic inequity,” said Mr. Zobel. “Ignoring these issues threatens our ability to create long-term value and jeopardizes the sustainability of the enterprise and markets.”

The world’s largest corporate sustainability initiative, the UN Global Compact calls on companies to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals. In the Philippines, over 20 companies and non-business organization have joined the initiative, and the Global Compact Network Philippines has supported their efforts to advance sustainable business practices since 2016.

The UN Global Compact Leaders Summit 2017 is a two-day gathering of the private sector, UN, Government and civil society to jump-start action to achieve the UN Sustainable Development Goals by 2030. Together, over 800 leaders from around the world are gathered in New York to identify how to unleash the business activities, thinking and innovation required for a new era of sustainability.

About Ayala Corporation

Ayala Corporation is one of the largest conglomerates in the Philippines with businesses in real estate, financial services, telecommunications, water, electronics manufacturing services, automotive, power generation, transport infrastructure, education, and healthcare. Its corporate social responsibility arm, Ayala Foundation, has programs that focus on education, youth leadership, sustainable livelihood, and arts and culture. www.ayala.com.ph.

About Jaime Augusto Zobel de Ayala

Jaime Augusto Zobel de Ayala is chairman and CEO of Ayala Corporation, one of the largest conglomerates in the Philippines, with interests in real estate, banking, telecommunications, water, industrial technologies, power, infrastructure, healthcare, and education.

Jaime is a member of various business and socio-civic organizations, including the JP Morgan International Council and Mitsubishi Corporation International Advisory Council. He chairs the Harvard Business School Asia-Pacific Advisory Board and the SMU Advisory Council in the Philippines, as well as working with the Harvard Global Advisory Council, the University of Tokyo Global Advisory Board and the Endeavor Philippines board of trustees. Jaime represented the Philippines on the Asia Pacific Economic Cooperation (APEC) Business Advisory Council from 2010 to 2015.

Jaime has received multiple recognitions for his public service and support of economic development in the Philippines, including the Presidential Medal of Merit, the Philippine Legion of Honor and the Order of Mabini.

For inquiries, contact:

Mia Bontol

Associate, Corporate Communications

Ayala Corporation

09175779582

bontol.mcu@ayala.com.ph

Ayala Corporation’s net income expanded nine percent in the first half of the year to P15.1 billion year-on-year, primarily driven by the solid contributions of its real estate and power generation businesses. Equity earnings amounted to P17.4 billion in the first semester, six percent higher from a year ago. This was underpinned by robust contributions from Ayala Land and AC Energy, which grew 17 percent and 64 percent, respectively.

In the second quarter, Ayala recorded a net income of P8.1 billion, up two percent from its year-ago level. The higher securities trading gains recognized by Bank of the Philippine Islands in the previous year tempered Ayala’s net earnings during the period.

“We are pleased with the overall strong performance of our businesses. The active portfolio management, new business initiatives, and financial discipline we employed in recent years—supported by a healthy domestic economy—continue to bolster Ayala’s growth trajectory,” Ayala President and Chief Operating Officer Fernando Zobel de Ayala said.

Real Estate

Ayala Land sustained its growth trajectory in the first semester, recording P11.5 billion in net income, an 18 percent-jump from a year ago on the continued expansion of its property development and commercial leasing businesses.

Revenues from Ayala Land’s property development business rose 32 percent to P44.3 billion, mainly driven by strong performance across its residential, office for sale, and commercial and industrial lots sales segments. Residential revenues jumped 27 percent to P36.8 billion on new bookings and project completions across all residential brands. Reservation sales expanded 11 percent year-on-year to P61.4 billion. In the second quarter alone, reservation sales reached a record P34.1 billion, up 12 percent from its year-ago level. Meanwhile, booked sales soared 22 percent from a year ago to P40.5 billion. In the first semester, Ayala Land launched P31.9 billion worth of residential and office for sale projects.

In the office for sale segment, revenues expanded 36 percent to P4.2 billion driven by bookings from the High Street South Corporation Plaza 2 project. Revenues from commercial and industrial lot sales surged more than twofold to P3.3 billion backed by lot sales in Arca South, Vermosa, and Naic.
In commercial leasing, mall leasing revenues rose 12 percent from its year-ago level to P7.9 billion lifted by the contributions of new malls including The 30th, Tutuban Center, and UP Town Center. Revenues from office leasing climbed to P2.9 billion, 14 percent higher year-on-year buoyed by contributions of newly opened offices such as the UP Town Center, UP Technohub Building P, and the Ayala Center Cebu Corporate Center. Moreover, hotels and resorts revenues improved six percent to P3.4 billion on higher occupancy and average room rates at El Nido Resorts. In addition, Ayala Land’s property management revenues grew 12 percent to P816 million driven by an increase in managed properties and higher carpark volume. Altogether, Ayala Land’s recurring income business contributed 36 percent of its net income in the first half of the year.

Banking

Continued investments to ramp up its digitization strategy coupled with lower securities trading gains tempered Bank of the Philippine Islands’ net income in the first semester to P11.7 billion, eight percent lower from its year-ago level.

Revenues ended flat at P35.3 billion as the solid growth in BPI’s core banking business balanced out a lower non-interest income. The bank posted P23.5 billion net interest income, 14 percent higher year-on-year on the back of higher asset yields and an improved loan-to-deposit ratio. Non-interest income dropped 18 percent to P11.8 billion owing to a slowdown in securities trading. The decline was partly tempered by BPI’s fee-based business, which grew 18 percent from the previous year, driven by cards and payments, service charges, and investment banking.

BPI’s loan book expanded 17 percent to P1.1 trillion, driven by corporate loans, which accounted for 79 percent of the bank’s loan portfolio in the first semester. The bank continues to improve its asset quality with gross 90-day non-performing loans ratio at 1.5 percent from 1.6 percent in the previous year, while reserve cover stood at 126 percent during the period. Total deposits grew eight percent to P1.4 trillion. The bank’s current and savings accounts ratio stood at 73 percent.

As part of its commitment to widen its reach to underbanked and underserved Filipinos, BPI relaunched in July its microfinance arm, BPI Direct BanKo to service the needs of self-employed micro-entrepreneurs (SEMEs). BPI Direct BanKo currently operates 24 branches and micro-banking offices (MBOs) with a target to open 100 new branches and MBOs by year end.

Telecom

Globe Telecom sustained its topline growth on robust demand for data-related services across its product segments, with revenues expanding five percent to P62.9 billion in the first half of 2017.

Mobile revenues rose five percent to P48.3 billion, lifted by strong demand for mobile services. Mobile data revenues jumped 13 percent as mobile data traffic surged 85 percent to 280 petabytes during the period. Meanwhile, mobile subscribers dipped three percent to 59.7 million in the first semester as a result of Globe’s shift in reporting prepaid subscribers who do not reload 120 days to 90 days of inactivity, which started in the first quarter of 2017.

Meanwhile, home broadband revenues grew eight percent to P7.7 billion, in step with a higher home broadband subscriber base which also improved eight percent to 1.2 million. In the first semester, data-related services accounted for 53 percent of Globe’s total revenues.

Higher depreciation, interest expense, and costs related to the acquisition of San Miguel’s telecom assets weighed down on Globe’s net earnings, which dropped 10 percent to P8.1 billion in the first half of the year. Excluding costs related to the San Miguel deal, net earnings would only be four percent lower.

Globe ended the first half of the year with earnings before interest, taxes, depreciation, and amortization (EBITDA) of P27.3 billion, six percent higher from a year ago. Globe’s EBITDA margin improved to 43.3 percent from 42.8 percent in the previous year.

In its drive to continue improving customer connectivity and increase data traffic, Globe in the second quarter rolled out more than 1,100 cell sites that utilize the LTE frequencies acquired from the San Miguel deal. It also deployed close to 150,000 broadband lines in the same period.

Water

The steady performance of its Manila Concession coupled with increasing contributions from its domestic subsidiaries drove the three percent increase in Manila Water’s net income to P3.2 billion in the first half of the year. Revenues rose four percent to P9.1 billion buoyed by the continued expansion of its businesses outside Metro Manila.

Manila Water’s domestic business, Manila Water Philippine Ventures, recorded an attributable net income of P306 million, up 20 percent from a year ago, on strong contributions from Laguna Water and Estate Water. Laguna Water’s net income rose 49 percent to P148 million, lifted by the expansion of coverage in Laguna province. Meanwhile, Estate Water’s net earnings jumped 69 percent to P122 million, backed by increased connections and billed volume growth. Net income from Manila Water’s non-Manila concession businesses reached P584 million, representing 18 percent of Manila Water’s consolidated net income from 15 percent during the previous year.

The Manila Concession booked a three percent increase in net income to P3 billion driven by a one percent-improvement in billed volume resulting from sustained demand of commercial customers. Operational efficiency in the Manila Concession remained strong, with non-revenue water ratio at 12.8 percent and collection efficiency at 99 percent.

On a consolidated basis, Manila Water’s billed volume rose three percent to 366.9 million cubic meters in the first half of the year.

In June, Manila Water acquired additional shares of Saigon Water Infrastructure Corporation (“SII”), bringing its total ownership of the company to 37.99 percent. The transaction is in line with Manila Water’s investment strategy in Vietnam and in Asia.

Industrial Technologies

AC Industrials registered a net income of P739 million in the first half of the year, three percent lower from the previous year, as the lower contributions of its vehicle retail business tempered the gains from the robust performance of its electronics manufacturing arm.

Its electronics manufacturing unit, Integrated Micro-Electronics, Inc. (IMI), registered a net income growth of 14 percent to US$17 million, bolstered by its organic businesses in the Philippines, China and Mexico operations, as well as fresh contributions from newly acquired businesses. IMI’s total revenues grew 22 percent to US$501 million. Newly acquired businesses VIA Optronics and STI Enterprises Ltd. posted US$72.5 million in combined revenues, with one month contribution from STI.

AC Industrials’ vehicle retail business posted P14.7 billion in revenues, up 37 percent year-on-year, mainly driven by strong sales across all brands. However, this was offset by the lower dividend income from Isuzu Philippines Corporation, resulting in a 21 percent-decline in the net income of AC Industrials’ vehicle retail segment to P319 million.

In July, AC Industrials acquired MT Technologies GmbH, a German-based automotive supplier of models, tools, and plastic parts for automotive original equipment manufacturers (OEMs) and automobile tier 1 suppliers. In addition, its manufacturing facility for KTM motorcycles in Laguna commenced operations in June. These investments form part of AC Industrials’ strategy to increase its competence and capabilities in the automotive value chain and complement existing businesses in manufacturing services and vehicle retail.

Power Generation

In power generation, AC Energy’s net income surged 64 percent to P949 million in the first semester on the back of a favorable wind regime, improved efficiencies of its operating coal plants combined with feed-in-tariff earnings from its solar plant, as well as fresh contributions from Chevron’s geothermal assets in Indonesia.

AC Energy continues to pursue domestic and foreign expansion initiatives as it targets to double its attributable power generating capacity to 2,000 megawatts by 2020. In July, AC Energy entered into an agreement with UPC Renewables for the development of small island power projects in Indonesia.

Also in July, AC Energy, together with Star Energy, transferred 99 percent of its consortium interest in ACEHI-STAR Holdings to AllFirst Equity Holdings. ACEHI-STAR is the special purpose company that signed a share sale and purchase agreement with Chevron Philippines to acquire its geothermal assets, subject to certain conditions precedent.

Infrastructure

AC Infrastructure continues to improve efficiencies in its three public-private partnership projects. Light Rail Manila Corporation, the operator of LRT-1, averaged close to 430,000 in daily ridership in the first semester. Since taking over operations in 2015, it has increased the number of light rail vehicles by 35 percent to 104. Meanwhile, the Muntinlupa-Cavite Expressway is now serving nearly 28,000 vehicles per day, a 23 percent increase from its year-ago level. In addition, the Beep ticketing system now has nearly four million cards in circulation and has processed approximately P7.2 billion in transactions across rail, bus, and retail platforms since its release in 2015.

Social Infrastructure

In healthcare, AC Health continues to widen access to affordable medicine and primary healthcare services through Generika and FamilyDOC. In the first half of the year, Generika’s revenues reached P1.5 billion, up 10 percent year-on-year bolstered by higher retail and distribution sales across its branch network. As of the first half of 2017, Generika had a footprint of 698 branches nationwide. Meanwhile, FamilyDOC opened four new clinics in Las Pinas City, Imus, Cavite and Paranaque City. Since opening its pilot clinic in 2015, FamilyDOC has served over 30,000 unique patients as of July 2017 and has a branch network of 10 clinics in the southern Greater Manila Area. FamilyDOC aims to launch 14 more clinics this year.

In education, AC Education is completing enrollment for school year 2017-2018 in both APEC Schools and University of Nueva Caceres (UNC). As of end-July 2017, enrollment in APEC schools reached 16,200 enrollees, 54 percent higher year-on-year as it welcomes its first batch of Grade 10 Junior High School students and Grade 12 Senior High School students. APEC Schools is present in 23 sites across Metro Manila, Rizal, Cavite, and Batangas. Moreover, UNC increased its student population by five percent to 8,054 despite the absence of incoming freshmen in the second year of implementation of the K-12 law.

Balance Sheet

Ayala’s balance sheet remains at a comfortable level. Cash at the parent level amounted to P12.1 billion, while net debt stood at P64.4 billion. Net debt-to-equity ratio for the period was 0.67 at the consolidated level and 0.60 at the parent level. Ayala’s loan-to-value ratio or the ratio of its parent net debt to the total value of its investments was 9.8 percent in the first half of the year.

In line with Ayala’s prudent cash and debt management strategy, Ayala’s Board of Directors approved the filing of a three-year shelf registration with the Securities and Exchange Commission of up to P30 billion debt securities in one or more tranches. The shelf registration provides Ayala financial flexibility to issue debt instruments opportunistically as market permits.