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JAIME AUGUSTO ZOBEL DE AYALA
GRI SUSTAINABILITY SUMMIT
PANEL: INDUSTRY PERSPECTIVE: PHILIPPINE BUSINESS PAVING THE PATH TO A SUSTAINABLE PHILIPPINES
OPENING STATEMENT
Monday, 08 October 2018 | Conrad Hotel

Good morning to everyone.

I congratulate GRI for organizing this summit and bringing together members of the private sector to push the topic of sustainability to the spotlight.
Let me start by thanking Tessie and Hans Sy of the SM Group for organizing this gathering. Sunny Verghese of Olam for being an extra ordinary entrepreneur and global citizen. His eloquent views on sustainability and it’s imperative for us in this day and age always inspire me. Also, a thank you to Bobby de Ocampo, Tim Mohen, and the Australian Embassy for their support of this conference.
Today, let me touch on the Ayala group’s sustainability journey—the thinking behind our sustainability philosophy, the tangible ways we are progressing to support this thinking, and some of the challenges that we face along the way.
Ultimately, all of us have a responsibility to address and contribute to addressing global issues that move beyond our corporate and national interests.
Let me start with the thinking behind our sustainability philosophy. In recent years, we have seen how the significant progress in our economy has yet to materialize in the lives of a majority of Filipinos. We have always believed that in a developing economy like ours, businesses play an indispensable role in addressing some of the most pressing development challenges. This responsibility does not only lie with governments.
To remain relevant, to continue building trust with communities, businesses must contribute to society as a whole, and ensure the progressive development of the markets they serve. In our case, Ayala has a presence in diverse industries that touch on human lives—housing, water, telecommunications, financial services, transport, healthcare, and education. By integrating societal needs into our corporate strategies, we believe we can play a role in alleviating some of the development challenges our country faces today.
It has become clear to us that businesses cannot operate in a vacuum, linked only to the community by the investments they make and the profits they generate. The role of private enterprise goes beyond that.
In recent years, broader communities and stakeholders have increasingly demanded more from private enterprises as well. We need only look at the pockets of social tension that have arisen around the world in protest of the current status quo, characterized by inequity, lack of opportunity, and the failure of institutions such as governments and the capitalist system to foster a more equitable world.

This thinking has, over time, led us to broaden our products and services to bring about greater economic and social inclusivity. Our group has identified opportunities for disruption in sectors that are undergoing massive challenges in affordability, quality, and accessibility.
On a personal note, these ideas began to percolate in my mind after I left business school in the 1980s. While I continue to place great value on the education I received, at the time, it also occurred to me that a significant component of my studies was not necessarily relevant to the needs of the Philippines. I would later meet a number of thought leaders who would develop these ideas cohesively, including Harvard professor Kash Rangan, who spoke on business at the base of the pyramid and, Michael Porter, another Harvard professor who developed the thesis on “creating shared value” and over time formed a global following around this thinking, including ourselves at the Ayala group.
Michael Porter defines “shared value” as policies and operating practices that enhance a company’s competitiveness, while advancing the economic and social conditions in the community where it operates.
Our group has embraced this philosophy and are increasingly aligning our profit goals with the needs of the communities we interact with, which is the second point I want to make.
Our real estate, banking, telecommunications, and water businesses continue to expand their offerings to reach more Filipinos, in support of our sustainability agenda.
More recently, we entered sectors and employed innovative business models that allow us to help fill gaps and meet the real needs of Filipinos: retail pharmacies and community-based, primary care clinics to fill healthcare gaps; affordable and quality education to enhance employability; and power, infrastructure, and industrial technologies to help sustain our country’s economic growth.
Let me cite a few tangible examples from the Ayala group, starting with our water unit. Manila Water has a flagship program called Tubig Para sa Barangay that delivers affordable potable water specifically to low-income communities, including informal settlers. Many people said the model would not work, as informal communities would not pay for piped-in water. However, Manila Water developed a new business model that included flexible financing options, a socialized tariff scheme, and shared accountability among neighbors. We are happy to report that Manila Water has succeeded in getting more than 1.6 million people into the program with 100 percent collection efficiency in these communities. Participants in the program now enjoy savings on their water costs, a reduction in water-borne diseases in their areas, and an improvement in the overall sanitation conditions in their communities.
The second example I want to make is in our healthcare unit. AC Health developed an innovative chain of community-based primary care clinics called FamilyDOC. This platform offers the services of an outpatient doctor’s clinic, a diagnostic facility, and a pharmacy in a single space that minimizes costs for families without jeopardizing the quality of healthcare received. Locating in high-density areas allows FamilyDOC to maximize foot traffic and build a relationship with the community. In addition, its prepaid and reloadable “health cards” and membership programs allow patients in these low-income communities to maximize the healthcare services available.

As a final example, we have entered the education space through the Affordable Private Education Centers or APEC Schools, a chain of secondary schools that provide quality and affordable education with annual school fees within reach of middle to lower income households. APEC strives to enhance the employability of students through programs co-designed with partners in the private sector, and makes use of technology-enabled classrooms that help to build skills sought by employers. It does this by balancing costs, without sacrificing the quality of education that students receive.
However, from our experience in the Ayala group, developing businesses for low-income communities presents a few unique challenges, which is the third and final point I want to touch on. This segment has inherent characteristics that tend to raise the costs of doing business and, while many of these are common to any business, they are more acute as the incomes of the target segments fall.
As we evolved and adjusted our own business models to be far more inclusive in meeting the needs of a much broader consumer segment, we have identified three key challenges to operating within the base of the pyramid.
First is the operational challenge. There are implications of affordability and access during the initial entry into low-income consumer markets. For example, lower disposable incomes limit the amount of a product that can be purchased at any one time. This is why “parceling” or purchase-as-needed small amounts have become popular in emerging markets.
Second is the more fundamental culture challenge as corporate decision-makers do not typically come from the base of the pyramid, making them a step removed from the realities on the ground.
Finally, there lies the challenge of improving the overall framework for doing business, with uncertainties in regulation and enforcement of policies increasing the complexity of developing inclusive businesses.
From these experiences, the single most important take away from us is the need for businesses to be open to experimentation: to looking at business models from a new and innovative perspective.
Through innovative and creative business models, we have sought to achieve a balance between our financial aspirations and our broader sustainability and nation-building goals. As our group constantly strives to seek ways to integrate our sustainability philosophy into the core of our businesses, the United Nations Sustainable Development Goals provided much-needed structure and spurred a natural transition to anchor our own goals to this global framework.
We believe that the SDGs capture succinctly the responsibility that we all have for each other—our collective goals to end poverty, protect the planet, and ensure prosperity for all. For businesses, they outline key metrics that we can use to measure and drive the positive impact we have on society.

Furthermore, the SDGs served as essential guide in our adoption of the integrated report framework that captures our company’s financial results along with our environmental, social, and governance or ESG performance. We believe that transitioning to this annual reporting framework in addition to our adherence to GRI standards helps our stakeholders better understand our shared value creation process and its overall impact on society and our country.
While we believe that this is a core value at the heart of corporate culture that guides all our employees, we continue to look for ways to ensure that sustainability is fully embedded into our business strategy today and in the future. As a group, we are undergoing the process of developing concrete sustainability targets to monitor more accurately our contributions to the SDGs.
In closing, sustainability is increasingly gaining prominence at the heart of our strategy, as we strive to put the resources, knowledge, expertise, and talent we have towards meeting the real needs of Filipinos. Our determination to create shared value is what I hope will define the company today and in the coming years. This is not a function of altruism, but rather a strategic imperative. Businesses cannot survive in communities rife with inequity and in a degraded environment.
Ignoring the challenges faced by the world today threatens our ability to create long-term value and jeopardizes enterprises, markets, and entire societies.
At Ayala, we will continue to do our part to work better and innovate further to reach more Filipinos, improve lives, and contribute to addressing global issues that now extend well beyond our corporate and national boundaries.

MAKATI, Philippines – October 1, 2018 House of Investments Inc. (“HI”), HI’s education holding company iPeople, inc. (“iPeople”), Ayala Corporation (“AC”) and AC’s wholly-owned education subsidiary AC Education, Inc. (“AC Education”) signed the definitive agreements for the merger of AC Education with iPeople. The merger shall be subject to the approval of the stockholders of AC Education and iPeople, and securing the necessary regulatory approvals. Post-merger, listed iPeople shall be the surviving entity, with HI and AC controlling 51.3% and 33.5%, respectively. The transaction values the combined entity at approximately Php15.5 billion.
HI and AC will share governance and management of iPeople which, as a result of this strategic partnership, will become one of the leading education groups in the country, with almost 60,000 students.
The merger will bring together the 7 educational institutions of iPeople and AC Education, which together will offer quality education to students across all income segments, with campuses in Metro Manila, Calabarzon, the Bicol Region, and Mindanao. The merger will include iPeople and its significant subsidiary, Malayan Education System, Inc. (Operating under the name of Mapua University), one of the country’s leading engineering and technical universities, a world ranked QS-3 star university and the school with the most CHED Centers of Excellence in Engineering, and its subsidiaries, Malayan Colleges Laguna, the best board exam performing private higher education institution in Calabarzon, Malayan Colleges Mindanao in Davao, and Malayan Science High School in Manila. It will also include AC Education and its subsidiaries, the University of Nueva Caceres, one of the oldest and largest universities in Bicol, National Teachers College, the country’s pioneer private teachers’ training tertiary education institution, and APEC Schools, the largest chain of private stand-alone high schools in the country.
“We are looking forward to the merger of AC Education and iPeople. Mapua’s reputation as a leading private engineering and technical university in the country, together with AC Education’s tested ability to provide affordable quality education, leading to the employability of its graduates, would enable the Yuchengco-owned House of Investments and Ayala Corporation to jointly contribute, in a bigger scale, to the Philippines and all sectors of society. Together, our schools will not only aim at educating our youth but also at preparing our graduates to become major players in sustainable businesses driven by adaptive technology,” said Mrs. Helen Y. Dee, Chairperson of House of Investments.
“We are looking forward to working closely with the Yuchengcos’ House of Investments in helping to build the nation through education. We believe that combining our resources and capabilities will allow us to, together, enable many more Filipinos to achieve their dreams of a better life for themselves, their families and communities, by arming them with the values, critical thinking, global mindset and 21st century skills that are necessary to succeed in this rapidly changing world,” said Jaime Augusto Zobel de Ayala, Chairman and CEO of Ayala Corporation.
BPI Capital Corporation acted as the exclusive financial adviser to AC Education while RCBC Capital Corporation acted as the exclusive financial adviser to iPeople.

Photo shows (L-R):

Gema O. Cheng
Executive Vice President – Chief Operating Officer, Chief Finance Officer & Treasurer
House of Investments, Inc.
Executive Vice President – Chief Finance Officer & Treasurer
iPeople, inc.     

Alfredo Ayala

President and CEO

AC Education

Renato C. Valencia
Chairman
iPeople, inc.    

Fernando Zobel de Ayala

President and COO

Ayala Corporation

Helen Y. Dee

Chairman, RCBC

Jaime Augusto Zobel de Ayala

Chairman and CEO

Ayala Corporation

Medel T. Nera
President & Chief Operating Officer
House of Investments, Inc.

TG Limcaoco

CFO

Ayala Corporation

Reynaldo B. Vea PhD
President & Chief Executive Officer
iPeople, inc.    

Atty. Solomon Hermosura

Chief Legal Officer

Ayala Corporation

Contact Information:

House of Investments, Inc.
Investor Relations Office
Ring F. Joven
Email: rfjoven@hoi.com.ph

iPeople, inc.
Investor Relations Office
Ring F. Joven
Email: rfjoven@hoi.com.ph

Ayala Corporation
Corporate Communications
Yla Patricia G. Alcantara
Email: alcantara.ypg@ayala.com.ph

MAKATI CITY – The Ayala group reached another milestone last September 21, 2018 when they launched their first Integrated Risk Management and Sustainability Summit. It was held at the Mayuree Ballroom of Dusit Thani Hotel, with the theme: Working Better by Working Together and was attended by almost 400 participants. This year’s summit aimed to start the discussion on why it is necessary to integrate the two fields and how it can be done. Speakers from international organizations gathered to give light to the questions on integration.

The integrated summit started from the thought leadership published by the World Business Council of Sustainable Development (WBCSD), which emphasized that sustainability matters have become ESG risks in the language of Risk Management. Addressing sustainability matters are in fact risk management in itself.

Another point why integration is vital is due to the accelerated pace of change in the business landscape. Such changes are brought about by various business disruptions, global megatrends like climate change or green consumerism, and a change in stakeholder mindset. The call for the integration of Sustainability and Risk Management has become greater to ensure that companies can protect themselves from emerging challenges, prosper over the long term, and continue to create value for all its stakeholders.

Ayala Corporation President and COO, Fernando Zobel de Ayala, expresses the commitment of the group on the integration, “As the world demands a more encompassing societal impact from businesses that is beyond economic success, we have recognized that environmental, social, and governance factors are fundamental elements of the Ayala group’s stewardship and are crucial drivers of our long-term value creation,” He further affirms, “We need to start looking at these two areas as interconnected systems that are part and parcel of our overall strategy, decision-making, and investment process.”

The summit brought together sustainability pioneers and business leaders. During a panel discussion, keynote speaker, Sunny Verghese, Chairman at the World Business Council for Sustainable Development and Co-Founder & Group CEO of Olam International Ltd. shared the beginning of the thinking on integration and why it is significant to organizations. He stressed that companies who want to remain relevant and reminded each participant to be the change you want to see.  

He was followed by second keynote speaker, Steve Schmida, Founder and Chief Innovation Officer of Resonance Global, who spoke about how the integration will prepare companies for globalization 3.0 wherein the whole business environment will be more volatile and fast-changing. They were joined by Ayala Corporation Chairman and CEO Jaime Augusto Zobel de Ayala for a panel discussion which was moderated by Jessica Cheam, Managing Editor at Eco-Business. 

A second panel comprised of Mohit Grover, Executive Director at Deloitte Singapore, Lars Svensson, Sustainability & Communications Director at IKEA Southeast Asia and Sustainability Manager at Ikano Group, and James Gifford, Head of Impact Investing, UBS Global Wealth Management, talked about: (1) the crucial processes and frameworks necessary to operationalize this integration, (2)  testaments to the benefits of integration, and (3) how this movement affects impact investing. Their segments were followed by a Q & A moderated by Stacey Huang, Executive Director of Pan-Asia Risk and Insurance Management Association.

The summit also welcomed special guest Jan Top Christensen, Danish Ambassador to the Philippines, and closed with a Storytellers Session with Suchitra Narayanan, Group Head of Risk and Insurance at Air Asia, and the Balangay’s Best group, both of whom shared inspiring stories of their personal journeys, the risks they faced, and their contribution to sustainability.

Ayala continues to drive sustainability in its businesses and integrating it with Risk Management is another pioneering activity by the group. As aptly put by Jaime Augusto Zobel de Ayala, “We have always believed that for [Ayala], a 185 year-old company to remain relevant, [we need to adapt] to the changing nature of the environment we’re in. Sustainability is massively important. We need to align [and respond] to the development needs of our country and help address global issues [in the process].”

To learn more, visit www.ayala.com.ph/integrated-risk-sustainability-summit

In photo (from L-R):

Jose Teodoro Limcaoco – CFO, CRO, and CSO, Ayala Corporation

Jaime Augusto Zobel de Ayala – Chairman & CEO, Ayala Corporation

Mohit Grover – Executive Director, Deloitte Singapore

Stacey Huang – Executive Director, Pan-Asia Risk and Insurance Management Association

James Gifford – Head of Impact Investing, UBS Global Wealth Management

Lars Svensson – Sustainability & Communications Director, IKEA Southeast Asia Sustainability Manager, Ikano Group

Ma. Victoria A. Tan – Group Head, Enterprise Risk Management & Sustainability, Ayala Corporation

Fernando Zobel de Ayala – President & COO, Ayala Corporation

Ayala Corporation’s net income expanded seven percent in the first half of the year to ₱16.1 billion year- on-year, lifted by the solid performance of its real estate, telecommunications, and power businesses.

Equity earnings reached ₱19.5 billion, 12 percent higher from a year ago. This was underpinned by robust contributions from Ayala Land and Globe Telecom, which climbed 18 percent and 25 percent, respectively. This was further lifted by AC Energy, whose equity earnings contribution more than doubled in the first semester.

In the second quarter, Ayala recorded a net income of ₱8.4 billion, up three percent from a year ago mainly driven by Ayala Land and AC Energy, which posted transaction gains from value realization initiatives. However, the lower fee-based income and higher operating expenses recorded by the Bank of the Philippine Islands tempered Ayala’s net earnings during the period.

“These results validate our long-term strategy to achieve a more resilient portfolio by allocating capital to new businesses from which we can derive fresh sources of growth while continuing to expand our core businesses, Ayala President and Chief Operating Officer Fernando Zobel de Ayala said. “With the steady state operations of its platforms and consistent value realization initiatives, we are happy to see AC Energy starting to provide the necessary balance to some of our more cyclical and longer gestation businesses,” Mr. Zobel noted.

Real Estate

Ayala Land sustained its earnings momentum, with net income growing 18 percent year-on-year to ₱13.5 billion primarily driven by its residential segment, supported by the commercial leasing business.

Revenues surged 25 percent to ₱80.4 billion on the back of solid property development and commercial leasing revenue growth. Property development revenues surged 27 percent to ₱55.7 billion on new bookings and project completions. Meanwhile, reservation sales grew 17 percent to ₱72.0 billion. On the other hand, commercial leasing revenues climbed 15 percent to ₱16.9 billion on higher contributions of newly opened malls, offices, and hotels.

Ayala Land also recognized revenues of MCT Bhd, Ayala Land’s equity investment in Malaysia, amounting to ₱4.0 billion as it focused on the completion of its projects in Cybersouth, an integrated development in Southern Klang Valley, and its residential project, Lakefront, in Cyberjaya.

Ayala Land’s diversification strategy continued to gain traction, shaping a more balanced portfolio. In terms of location, new estates or growth centers accounted for 55 percent of Ayala Land’s net income while the established estates (Makati, BGC, Nuvali, and Cebu) accounted for 45 percent. In terms of business line, Ayala Land’s development income (property sales and construction) accounted for 68 percent while recurring income (commercial leasing, hotels and resorts, and property management) contributed 32 percent to its net income in the first half.

Ayala Land spent ₱48.4 billion in capital expenditures in the first half of the year, comprising 44 percent of its full-year budget. Bulk of the amount was allocated to residential projects.

Banking

Bank of the Philippine Islands reported a net income of ₱11.03 billion for the first half of 2018, 5.7 percent lower year-on-year, as lower non-interest income and higher operating expenses offset growth in the bank’s core business.

Revenues increased 5.3 percent to ₱37.22 billion. Net interest income rose 11.5 percent to ₱26.21 billion on the back of a 9.3 percent increase in average asset base and net interest margin expansion of 8 basis points. Total loans climbed 15.7 percent to ₱1.22 trillion. Cost of funds, however, increased by 17 basis points partly due to higher documentary stamp tax on deposits.

On a quarter-on-quarter basis, net interest margin expanded by 15 basis points to 3.06 percent in the second quarter as a result of favorable loan repricing and liquidity provided by proceeds from the bank’s recent stock rights offer which allowed for the paydown of more expensive time deposits.

Total deposits reached ₱1.53 trillion, 7.2 percent higher than a year ago, with current account and savings account growing at a faster rate of 10.0 percent. BPI’s current and savings account ratio stood at 75.3 percent while loan-to-deposit ratio was at 79.7 percent.

Non-interest income declined 6.9 percent to ₱11.01 billion, largely due to lower income from securities trading, trust and investment management and assets sales.

Provision for loan losses amounted to ₱1.91 billion, 22.2 percent lower than the previous year.

Operating expenses reached ₱21.22 billion, 16.3 percent higher than the year prior on accelerated spending to support the bank’s digitalization strategy and the branch network expansion of BPI Direct BanKo.

Total assets stood at ₱1.90 trillion, 10.8 percent higher while total capital reached ₱239.70 billion, up by 38.2 percent on account of the recent stock rights offer. Capital Adequacy Ratio (CAR) was at 17.29 percent and Common Equity Tier 1 Ratio (CET1) was at 16.40 percent.

Telco

Globe Telecom’s service revenues grew nine percent to ₱68.3 billion as Globe continued to expand its 4G and LTE network amid growing demand for content-rich offerings and multi-media applications. As the market continues to shift from traditional services to data-related products, Globe’s data-related businesses accounted for 58 percent of its service revenues during the period.

Mobile data boosted Globe’s mobile revenues, which expanded 26 percent to ₱25.6 billion. Mobile subscribers grew nine percent to 65.1 million in the first half of the year.

Globe’s home broadband business performed well during the period, up 12 percent to ₱8.7 billion, bolstered by subscriber expansion in the fixed wireless segment. Home broadband subscribers improved 22 percent to 1.5 million from a year ago. Similarly, corporate data business rose nine percent to ₱5.5 billion on higher customer base and strong demand for various business solutions.

With topline growth and managed costs, Globe registered a 19 percent expansion in EBITDA of ₱32.5 billion, with EBITDA margin of 48 percent. On a post-Philippine Financial Reporting Standards, it posted a net income of ₱10.1 billion in the first semester, backed by the continued strong performance of data- related products combined with stable costs and expenses.

In the first semester, Globe spent ₱22.9 billion in capital expenditures to support the continued growth of its subscriber base and the growing demand for data-related services. To date, Globe has 39,614 base stations, with over 26,200 for 4G (including HSPA+, WiMAX, and LTE). Globe’s Board of Directors approved additional in-year capital expenditure of US$100 million, raising its 2018 full year capex guidance to US$950 million from US$850 million for further network upgrades.

Water

Manila Water recorded a net income of ₱3.6 billion in the first half, 10 percent higher from the previous year, driven by the Manila Concession and supported by lower depreciation expense.

Revenues rose eight percent to ₱9.6 billion on higher billed volume in the Manila Concession, which grew three percent to 250 million cubic meters on increase in billed connections. Manila Concession’s non- revenue water slightly improved to 12.1 percent in the first semester from 12.8 percent a year ago. Collection efficiency was at par with the previous year at 99 percent.

Revenues from Manila Water Philippine Ventures, which includes Clark Water, Laguna Water, Boracay Water, Cebu Water, and Estate Water climbed 14 percent to ₱1.7 billion on service coverage expansion. Its net earnings, however, was tempered by higher business development costs, declining 22 percent to ₱242 million during the period.

In June, Manila Water Philippine Ventures received a Notice to Proceed from the local government of Sta. Barbara, Pangasinan for the development and operations and maintenance of the municipality’s water supply facilities. The franchise shall be for a term of 25 years with an assumed billed volume of 16.6 million liters per day by the end of the franchise period.

Similarly, in July, Laguna Water received a Notice of Award from the Pagsanjan Water District for the design, improvement, expansion, and operations and maintenance of the water supply and sanitation facilities in the district. The concession would run for 18 years, with an estimated billed volume of 9.6 million liters per day.

Meanwhile, Manila Water’s new acquisitions overseas have started to bear fruit. Manila Water Asia Pacific, which houses Manila Water’s international businesses, registered a net income of ₱187 million, jumping 58 percent from a year ago. Equity share in net income of its overseas investments surged 86 percent to ₱339 million driven by Vietnam platforms as well as fresh contribution from East Water in Thailand. East Water, where Manila Water acquired an 18.7 percent stake last February, contributed ₱108 million in equity earnings during the period.

Power

AC Energy’s net earnings expanded more than twofold to ₱2.1 billion in the first semester year bolstered by the solid performance across its wind, geothermal, and thermal platforms. This was underpinned by services income derived from the financial close of a new power plant. Excluding the services income, AC Energy’s net profits jumped 59 percent in the first half.

Equity earnings from AC Energy’s investee companies surged 82 percent, reaching ₱2 billion in the first half. Fresh contribution from its first greenfield offshore project which started operations in the first quarter, the 75-megawatt Sidrap Wind Farm located in South Sulawesi, Indonesia, further boosted AC Energy’s equity earnings during the period.

In May, AC Energy announced its participation in the Australian renewables market through a joint venture with international renewable energy developer, UPC Renewables. AC Energy is investing US$30 million for a 50 percent ownership in UPC’s Australian business. It is also providing a US$200 million facility to fund project equity. UPC Renewables Australia is developing the 1,000 MW Robbins Island and Jims Plain projects in North West Tasmania and the 600 MW New England Solar Farm located near Uralla in New South Wales. UPC Renewables Australia also has a further development portfolio of another 3,000 MW located in NSW, Tasmania and Victoria.

Industrial Technologies

AC Industrials’ net income climbed 2 percent higher year-on-year to ₱752 million, supported by a one- time gain by its electronic manufacturing services arm, but dragged by lower net income of its automotive retail segment.

In electronics manufacturing services, IMI’s revenues surged 33 percent to US$668.8 million on strong performance of its automotive and industrial segments and contributions of acquired entities. IMI’s net income, however, was adversely impacted by higher interest expense, effective tax rate, and forex losses due to the weakness of the euro and renminbi. Net income reached US$31.6 million, including a onetime gain relating to a sale of property in China as well as a one-off employee relocation expense, also related to the property sale.

In automotive retail, net income fell to ₱119 million due to weaker sales of Honda and Isuzu partly driven by tempered consumer demand from higher automobile excise taxes. Further contributing to the decline is the timing of recognition of Isuzu Philippines Corporation’s dividends which were recorded in the first half of 2017 but will only be recorded in the third quarter of this year. Meanwhile, revenues from Volkswagen and KTM improved from the previous year.

Balance Sheet

Ayala’s balance sheet remained healthy with enough capacity to undertake investments and cover its dividend and debt obligations. As of end June this year, parent level cash stood at ₱15.7 billion while net debt stood at ₱93.5 billion. Ayala’s net debt to equity ratio ended at 0.85 at the parent level and 0.76 at the consolidated level. The company’s loan-to-value ratio, the ratio of its parent net debt to the total value of its assets, was at 11.6 percent.

The conglomerate’s peso-dollar debt split ended at 66:34 in the first half of the year. Ayala’s dollar denominated debts are fully covered by foreign currency assets. Hence, despite the weakness of peso against the dollar, Ayala did not incur materially significant debt-related foreign exchange losses.

In July, Ayala completed a share placement of 8,810,000 common shares, raising ₱8.07 billion and fortifying the company’s balance sheet. Ayala intends to use the proceeds to acquire assets needed for the business or for payment of debt contracted prior to the issuance of these shares. The sale was executed through a subscription agreement with a single long-term institutional investor.

Last July 2, 2018, Indonesian President Joko “Jokowi” Widodo led the inauguration ceremonies of the country’s first wind power project in Sindereng Rappang Regency, South Sulawesi.

President Joko Widodo speaks at the inauguration of the 75 MW Sidrap Wind Farm in South Sulawesi Indonesia

The Sidrap wind farm is AC Energy’s first offshore greenfield project and Indonesia’s first utility scale wind farm. The plant went online last March and it currently supplies green energy to the state-owned PT PLN transmission network.

Jokowi leads the ceremonial switch-on of the Indonesia’s first wind farm

As Indonesia begins to diversify its energy mix from coal, oil, and gas, the facility is a large part of the country’s energy program to increase their renewable energy output to 23% by2025. According to a report by the Indonesian Ministry of Energy and Mineral Resources, Indonesia’s clean power output is currently at 12%.

The project started in 2013 and was developed by PT UPC Sidrap Bayu Energy (UPC Sidrap), a joint venture project company of UPC Renewables, PT Binatek Energy Terbarukan, and AC Energy. UPC Sidrap completed the project well within the contractual deadlines.

AC Energy Chief Operating Advisor Patrice Clausse and UPC Executive Chairman Brian Caffyn (2nd & 3rd from Left) with members of the Sidrap Project Team  

The Sidrap wind farm is AC Energy’s second investment in Indonesia following its successful bid for the Salak and Darajat geothermal plants in West Java in 2017.  

Click here to learn more.

Makati, Philippines – Eight Ayala companies out of a total of forty-two local publicly listed companies (PLC) were recognized by the Institute of Corporate Directors (ICD) in the recently concluded ASEAN Corporate Governance Scorecard (ACGS) Appreciation Ceremony held last July 31, 2018 at the Tower Club in Makati garnering the most number of companies within a conglomerate to receive such recognition. 

Pictured here (L-R): Don Cesar Teodoro L. Sevilla II, BPI Corporate Governance Officer | Atty. Gerardo M. Lobo, MWC OIC Legal Officer | Atty. Noravir A. Gealogo, BPI Chief Compliance Officer | Mae Christine L. Go, AC Internal Audit Senior Manager | Michael Blasé V. Aquilizan, ALI Associate Manager Investor Communications and Compliance | Geodino V. Carpio, COO Manila Water Operations | Michael Anthony Garcia, ALI Deputy Compliance Officer | Atty. Solomon M. Hermosura, AC Managing Director, Corporate Secretary, Compliance Officer, and Corporate Governance Group Head | Catherine H. Ang, AC Chief Audit Executive | Ma. Luisa Chiong, CHI and CPVDC CFO and Compliance Officer | Rizza Maniego-Eala, Globe Telecom CFO | Carmina Herbosa, Globe Telecom Chief Audit Executive | Sherisa P. Nuesa, IMI Independent Director | Yolanda Crisanto, Globe Telecom Chief Sustainability Officer and Corporate Communications Group Head | Maria Virginia Tolentino-Uy, Globe Telecom Governance Ambassador | Abelyn Evangelista, Globe Telecom Manager, Sustainability

The ICD, a non-stock, non-profit organization dedicated to raising the corporate governance standards of the Philippines, hosted said event to celebrate and recognize PLCs within the country who have put in significant effort to promote and sustain good governance within their respective organizations and whose governance policies and practices have been reviewed against the ACGS following the globally accepted Organization for Economic Co-operation and Development (OECD) Scorecard principles, namely – right of shareholders, equitable treatment of shareholders, role of stakeholders, disclosure and transparency and board responsibilities . 

ICD was appointed by the Securities and Exchange Commission to serve as the domestic ranking body of the ACGS, which is part of the ASEAN Corporate Governance Initiative to assess and rank PLCs in six participating ASEAN countries (Philippines, Indonesia, Malaysia, Singapore, Thailand and Vietnam) based on international corporate governance best practices. 

For this year, eight Ayala companies were ranked by the ICD among the Top Performing Companies Under the ACGS in 2017, namely Ayala Corporation, Ayala Land, Inc. (ALI), Globe Telecom (Globe), Bank of the Philippines Islands (BPI), Manila Water Company, Inc. (MWC), Integrated Micro-Electronics Inc. (IMI), Cebu Holdings, Inc. (CHI) and Cebu Property Ventures and Development Corporation (CPVDC). 

Ayala companies were also recognized among the Top 5 Philippine PLCs by Sector. These were Ayala Corporation (Holding Firm), BPI (Financial), MWC (Industrial), Globe (Services) and ALI, CHI and CPVDC (Property).     

“Governance has always been a hallmark of Ayala. It is imperative that we continue to improve our internal systems and processes towards upholding and protecting the rights of all our shareholders, from our customers to our investors. This commitment is shared at all levels across the group. I am pleased to note that our efforts continue to go beyond mere compliance, as we actively seek ways to strengthen the governance culture within the group,” shared by Jaime Augusto Zobel de Ayala, Chairman of Ayala Corporation.

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Three-time Olympian Marestella Torres-Sunang continues to compete because of her love for country and the trust of supporters as she retains her dominant form in women’s long jump.

“Meron pa ring mga tao na tuloy tuloy ang suporta not just for me but for the whole national track and field team. At saka iyong pagmamahal ko sa laro tuloy tuloy pa rin,” said Marestella in reference to Ayala Corporation which supports the Philippine track and field team and built, through its real estate arm Ayala Land, Inc., the Vermosa Sports Hub as home to the country’s elite track and field athletes.

Marestella, who lives in Bacoor Cavite, shared that with her training now so near her home she no longer has to go through the daily Ortigas traffic just to train. This allows her more time to focus on reaching her peak form as she prepares for the Asian Games.  And since the Vermosa oval is the only IAAF certified track in the country, she is now able to accurately monitor her performance and peg her progress based on international standards. 

Along with access to a world-class track oval, Ayala also provides the PATAFA athletes a hydration program care of Manila Water Company’s Healthy Family Purified Water, as well as financial support to help improve training and recruitment programs.

The 37-year-old Marestella goes to the 2018 Asian Games in Jakarta and Palembang Indonesia to be held August 18 to September 2 as one of the country’s best hope for another Asian Games gold medal.

Indonesia’s Maria Natalia Londa won the women’s long jump gold during the 2014 Asian Games in South Korea with a leap of 6.55. Torres-Sunang beats this mark by a wide margin with a leap of 6.72 during the Kazakhstan Open July 2016 which is the national record. The feat assured her participation in the 2016 Rio Olympics.

She says her giving birth to a son and motherhood are not a hindrance. Rather she draws motivation from her family and her absence when she gave birth re-ignited her passion for the sport.

“Noong nag stop ako talagang na-mi-miss ko ang competition. Nag stop ako for one year. Wala talaga akong competition kasi nabuntis ako. So yon na-miss ko ang competition. So talagang naging maganda ang comeback ko dahil talagang naging eager ako na mag compete ulit,” said Marestela.

If anything, she says she is more motivated and more dedicated than ever before.

“Kung ano ang motivation ko noong dalaga pa ako doble ang motivation ko ngayong may asawa na ako at may anak. Ginagawa ko ito hindi lang para sa akin kundi para sa anak ko.  Gusto ko patunayan na kahit nabuntis ako pwede pa rin. Gusto ko ipakita na kahit nabuntis ka kung ang dedication mo nandoon pa rin then kaya mo itong gawin,” said Marestella.

The native of San Jose, Negros Oriental has always had to overcome plenty of doubters and obstacles in her career. She says he has never doubted her ability to succeed.

“Hindi naman naging hadlang sa akin ang mas matatangkad ang mga kalaban ko. Kasi napatunayan ko na noon pa na kaya ko mag compete against mas matangkad,” said Marestella.

The veteran has travelled the world representing the country. She is not fazed by the competition or in performing before an international audience in a world stage. She in fact welcomes the opportunity to compete against the best in the world which she says can only help her improve and be the best that she can be as an athlete.

“Nakita ako sa IAAF pag nagko compete ako pumapasok naman ako among the top sa world. Every time na mag compete ako, ako yung pinakamaliit at nananalo pa rin. Marami humahanga sa akin dahil ang liit ko pero malakas ako. So doon ako nagkaroon ng confidence. Kaya ko pala kahit maliit ako. Walang nagiging hadlang sa akin.”

No doubt the support of Ayala for PATAFA’s training and sports development program will be a big help for Marestella as she continues to dominate the local scene in her sport.

To learn more, visit www.facebook.com/AyalaCorporation/.

Bonifacio Global City, Philippines – UN Sustainable Development Goals 2017 Pioneer, Jaime Augusto Zobel de Ayala, shared the journey of Ayala on sustainability in an informal chat with an exclusive group of CEOs and high-level executives held recently at the Shangri-la Hotel at the Fort. The CEO SDG Circle Forum is one of the major initiatives of the Global Compact Network Philippines (GCNP) this year.

The GCNP is the local entity of the United Nations Global Compact, a voluntary initiative whose primary goal is to inspire and promote collaboration primarily among business corporations by encouraging the alignment of strategies and operations with ten universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals through the SDG goals and develop a sustainable community. With more than 9,500 companies and 3,000 organizations, based in over 160 countries and more than 70 Local Networks, it is spreading the word that companies everywhere — of all sizes and from all sectors — can play a role in improving the world.

In the Forum, Mr. Zobel de Ayala shared that he started with 15 to 20% of his time in the late 80’s to the non-profit sector. “I tried in my own way to start making a difference in non- business issues, issues that perhaps help the country in a broad way. I lead a number of initiatives such as chaired Children’s Hour initiative, and brought a consortium with the help of Ayala Foundation and brought computers in public schools….”

“My thinking continued to evolve: using the concept of shared value from Harvard School… about beginning to align the goals of the company with the development goals of the country.”

Mr. Zobel de Ayala continued to explain that he started to transform Ayala about 15 years ago and made it more relevant to the needs of the country, by developing products and services which also touch low income groups. He highlighted the importance of promoting the spirit of bayanihan and of aligning the goals of the corporation with the national development goals of the country because it makes the organization more relevant.

On the SDG, Mr. Zobel de Ayala said that “The SDG…… is an extraordinary framework. It’s clear. People are aligning to it globally. It’s United Nations-driven.” He felt that most companies are judged by Profit and Loss statements but it was equally important to look at how companies can contribute to issues like employment or health and be able to put a framework around it. He felt that it is time for private corporations to be recognized for such efforts.

Mr. Jose Teodoro “TG” Limcaoco, Chief Finance Officer, Chief Risk Officer, Chief Sustainability Officer and Managing Director of Ayala Corporation also joined the discussion and explained why SMEs can follow the sustainable path. With SMEs contributing to 99% of the employment of the country, Mr. Limcaoco explained that SME need only to take one or two

SDGs that are relevant to its business to start with. It is more important to find out what would work well for the business so that it can also help grow the business and the community it operates in.

Mr. Limcaoco also mentioned that sustainability can equal to profitability. This has been proven by the way Ayala has established its operations around sustainability. “It is about building business models around sustainability”, said Limcaoco.

For more information on the GCNP, please visithttps://globalcompactnetworkphilippines.orgor contact the GCNP Secretariat at 634-5722 and through email address localnetworkrepresentative@globalcompactnetworkphilippines.org.

The United Nations and the GCNP presented a plaque of recognition to Mr. Jaime Augusto Zobel de Ayala in the recently concluded CEO SDG Circle Forum. In the photo with Mr. Zobel de Ayala are (L-R) President of Dale Carnegie Training Philippines, Doodz Policarpio, UN Resident Coordinator in the Philippines and Local Network Representative, Ola Almgren, Philippines, GCNP Chairperson, Yayu E. Javier, Ayala Corp. Head of Group Risk Management & Sustainability Vickie Tan and Ayala Corp. Managing Director TG Limcaoco.

Ayala Corporation (Ayala) has reaffirmed its support to the development and training of the country’s national track and field athletes, giving them access to the facilities of its newly opened Vermosa Sports Hub in Imus, Cavite.

Ayala had recently linked up with the Philippine Athletics Track and Field Association (PATAFA) and served as title sponsor of the just-concluded Ayala Philippine Athletics Championships in Ilagan, Isabela.

“We believe in our national athletes’ potential to inspire, drive and instill collective nationalism through sports,” said Ayala’s John Philip Orbeta. “One of the biggest gaps is an internationally certified athletics facility which the Vermosa Sports Hub provides as a means to improve their performance and competitiveness.”

At PATAFA’s new official home, athletes will train in the only International Association of Athletics Federation (IAAF) certified track & field oval in the Philippines with specifications and standards equivalent to those they will compete with internationally. Aside from the existing oval and Olympic- sized pool, upon completion of the Sports Hub’s first phase, PATAFA will also have access to the 600-square meter Sante Fitness Lab, a first-of-its- kind combination of facilities in the country, which will feature a strength and conditioning fitness facility, sports rehab areas, a Sports Science Laboratory, a dance studio, a spinning class area, bike shop and services, a nutrition and fitness café, VO2 max/lactate testing, plus conference and lecture rooms. Future plans include a provision for a 3,000 seat multi- purpose indoor sports arena.

Manila Water Company, Inc., through its subsidiary Manila Water Total Solutions (MWTS), will also be supporting this project with Ayala through a hydration sponsorship of Healthy Family Purified Water to the PATAFA athletes. Healthy Family will be supplying 4,000 bottles monthly of its 500ml variant to PATAFA for the duration of their training at Vermosa.

As advocates of environmental sustainability, MWTS will also be working together with PATAFA on a program called “Toka ng PATAFA”. This program is an advocacy on environmental stewardship and responsible consumerism that helps promote the value of waste segregation through the recovery of used PET (polyethylene) bottles. This is an initiative to be spearheaded by our athletes as champions for health and wellness, as well as, staunch partners for the environment.

Ayala will provide financial support to facilitate and strengthen PATAFA’s recruitment and training programs.

“Ayala’s support will help the athletes train better, perform better and hopefully bring more medals and recognition for the country,” said PATAFA President Philip Juico.

The eagerness to help improve the skills and international ranking of our national athletes has spurred the Ayala Group to do its part in helping Filipino athletes achieve excellence in their respective sports and succeed in various international competitions.

Succeeding in today’s volatile and uncertain times requires harnessing the power of innovation and effective collaboration. Recognizing this, Ayala Corporation held an insightful forum with key partners to better understand emerging disruptive forces, and discuss how to thrive in this era of extreme change. Held on 21 June 2018 at the Shangri-la at The Fort, the Creativity and Innovation Forum (C&I) was traditionally an internal event that is part of Ayala’s ongoing initiative to institutionalize a culture of curiosity and disruptive thinking across the group. This year, Ayala engaged its key partners and friends from outside the group, recognizing that the most impactful innovations emerge from the power of creative combustion—the intersections of diverse cultures, experiences, and capabilities.

“In parallel to the challenge of adapting our organizations against disruption, we are also called to build bridges of synergy between organizations… Collaboration between and among different groups is essential in all our efforts to harness innovation and solve the world’s biggest challenges,” shared Jaime Augusto Zobel de Ayala, Chairman and CEO of Ayala Corporation.

This year’s Forum welcomed back Prof. Hitendra Patel, Managing Director at IXL Center, and Professor at Rotman School of Management (University of Toronto), who spoke about this year’s theme, Thriving in the Age of Disruption.

“You want to be the first to help drive what looks like a logical trend…and use that to create solutions,” shared Prof. Patel. “Disruptions happen very fast… you need to move faster than ever before. You need to be able to look into the future and create a picture of what it looks like. In that future world, you’ve got to see what the business impact is with the growth gap and everything else. From there, you’ll find your space to play in. And in that space, you can place teams that can run to make things happen.”

After the keynote address, Prof. Patel was joined in a panel by Rohan Sakpal, Country Managing Director (India) at IXL Center, and Prof. Joel Litman, Financial Innovation Expert at IXL Center and President and CEO at Valens Research. Vince Tobias, Head of Innovation at Ayala Corporation and Board Director at the Global Innovation Management Institute, moderated the lively discussion, where the panelists shared their thoughts on the value of innovation in building and safeguarding businesses.

Moderated by Cathy Yang, Managing Editor and Anchor at the ABS-CBN News Channel, a dynamic CEO Panel on Corporate Innovation followed to discuss how Globe Telecom, Sun Life Financial, and Pilipinas Shell—three of the country’s most forward-thinking companies—anticipate disruption, adapt their organization, and contribute towards building a Philippine Innovation Ecosystem.

Ernest Cu, President and CEO of Globe Telecom, discussed how Globe’s burning platform mentality helped the company anticipate disruptions in telecommunications, and successfully pivot Globe from being a pure telecommunications provider, to a digital lifestyle enabler powered by data. Riza Mantaring, CEO & Country Head at Sun Life Philippines Financial, meanwhile, highlighted the contributions of disciplined experimentation and adaptation to changing consumer behaviors as contributors to her company’s success despite being one of the world’s oldest companies, also in one of the world’s oldest industries. Lastly, Cesar Romero, President and CEO at Pilipinas Shell Petroleum Corporation, discussed Shell’s globally-recognized excellence principles and methodologies in forecasting scenarios, as well as how the company proactively and collaboratively responds to these forecasts.

Clearly, what used to be sources of strength are now vulnerabilities that can be exploited. What has brought success in the past may not be the same ones that will propel companies into the future. While disruption exists all around, innovation goes beyond increasing a company’s bottomline—there is a bigger, more meaningful goal as organizations respond to disruption. As such, Ayala and its partners remain committed to building a Philippine Innovation Ecosystem to drive the country forward. As Cathy Yang concluded, “Innovation in business is of critical importance—and having the courage to thoughtfully question the status quo is a good start in innovating. [There is] no room for complacency in this day and age of innovation. As they say, the only thing constant is change, so
embrace it. Onwards we go on our innovation journeys.”

from left to right: Rohan Sakpal – Country Managing Director (India) at IXL Center, Paolo Borromeo – President and CEO of AC Health, and Group Head of Corporate Strategy and Development at Ayala Corporation, Prof. Hitendra Patel – Managing Director at IXL Center and Professor at Rotman School of Management (University of Toronto), Ernest Cu – President and CEO of Globe Telecom, Riza Mantaring – CEO & Country Head at Sun Life Philippines Financial, Cesar Romero – President and CEO at Pilipinas Shell Petroleum Corporation, Cathy Yang – Managing Editor and Anchor at the ABS-CBN News Channel, Jaime Augusto Zobel de Ayala – Chairman and CEO, Ayala Corporation, Prof. Joel Litman – Financial Innovation Expert at IXL Center and President and CEO at Valens Research, Vince Tobias – Head of Innovation at Ayala Corporation and Board Director at the Global Innovation Management Institute.