Category: News

The Ayala group is entering the affordable retail healthcare space with the acquisition of a 50 percent stake in the Generika group, one of the pioneers in the retail distribution of quality generic medicines in the country with over 500 stores nationwide.

Ayala Healthcare Holdings Inc., a wholly owned subsidiary of Ayala Corporation, signed agreements today to acquire a 50 percent stake in the Generika group from the family of Mr. Julien Bello. Mr. Teodoro Ferrer and his group, who co-founded Generika with Mr. Bello, will continue to hold the remaining 50 percent ownership in Generika. Mr. Ferrer shall continue to serve as the President and Chief Executive Officer of the group.

“We are excited to be part of Generika and help address the gaps in affordable retail healthcare. We believe this is an excellent platform for Ayala to reinvent the space and serve as foundation for our emerging healthcare portfolio,” Ayala President and Chief Operating Officer Fernando Zobel de Ayala said.

“With the combined strengths and management capabilities of Ayala and Generika, we believe we can raise the level of efficiency and accessibility of this platform to better serve Filipino families by providing a wide range of quality medicines at affordable prices,” Mr. Zobel added.

“On behalf of Generika, we wholeheartedly welcome the entry of Ayala Healthcare. We are especially excited by the enhanced capability to have a meaningful impact on the health and lives of many more communities all over the country,” Mr. Ferrer said.

The Ayala group started its footprint in the healthcare sector in 2014 through QualiMed, Ayala Land Inc.’s chain of hospitals and satellite clinics, in partnership with the Mercado medical group.

Mabuhay Capital served as financial advisor to the group of Mr. Bello in its transaction with Ayala Healthcare.

Ayala executives were feted for company and individual achievements at the FinanceAsia Awards held June 4 at Fairmont Makati.

The Ayala group topped nearly all categories in the FinanceAsia poll published in March. Ayala was named Best Managed Company in the Philippines for the second consecutive year. Ayala Land, Globe, and Manila Water also figured prominently in the regional survey which covers investor relations, governance, and dividend payment policies. Ernest Cu was ranked second among Philippine CEOs and Jaime Ysmael and Delfin C. Gonzalez, Jr. were ranked first and third, respectively, among CFOs.

Members of the companies’ management teams also attended the FinanceAsia awards, which was co-presented by Maybank ATR Kim Eng and featured Asianomics Founder and Chief Economist Dr. Jim Walker as guest speaker.

For more information, visit Financeasia.com.

Ayala Corporation posted P5.0 billion in net profits in the first quarter of the year, driven by sustained positive momentum in its real estate, banking, telecom, and electronics manufacturing businesses, while new businesses, particularly in power generation, have moved to execution phase. Without the effect of the P1.8 billion divestment gains from its business process outsourcing unit in 2014, Ayala’s first quarter earnings grew 39 percent. With the divestment gain considered, net profit declined 8 percent. Ayala’s positive earnings momentum in the first quarter is further reflected in the 11 percent sequential growth from the strong fourth quarter results in 2014.

The overall strong performance of Ayala’s business units in the first three months of the year contributed a total of P6.4 billion in equity earnings, 27 percent higher year on year. Compared to net income inclusive of the net divestment gain in the same period last year, equity earnings declined 7 percent in the first quarter of the year.

“We continue to be encouraged by the strong performance of the businesses across the group. We remain optimistic that we can sustain the strong first quarter results throughout the rest of the year, and stay on track to meet our strategic goals and financial targets,” Ayala President and Chief Operating Officer Fernando Zobel de Ayala said.

Real Estate
Most of Ayala’s core businesses reported double-digit earnings growth year on year in the first quarter. Its real estate unit, Ayala Land, reported a 19 percent growth in net earnings to P4.1 billion, boosted by a 13 percent growth in real estate revenues. Recurring income for the first quarter comprised 44 percent of net income, driven by the steady performance of its malls, offices, and hotels and resorts.

Banking
In banking, Bank of the Philippine Islands’ net income climbed 36% to P4.9 billion from the same period last year. Net interest income grew by 15% year on year due to an expansion in average asset base. Non-interest income rose by 23% during the period mainly from higher securities trading gains. Core banking business remained strong, with customer loans up by 14%, while deposits grew by 17% year on year.

Telecommunications
In telecommunications, Globe Telecom’s bottomline grew very significantly by 43 percent over the same period last year to P4.2 billion. Gross service revenues increased by 13 percent driven by growth in data revenues across all major service lines. EBITDA margin increased to 42 percent from 38 percent in the previous year.

Electronics Manufacturing Services
In electronics manufacturing services, Integrated Microelectronics Inc.’s earnings increased 27 percent to P288 million vis-à-vis its first quarter last year despite foreign exchange challenges, on the back of better margins on realized cost savings and productivity. Net income margin increased by 94 basis points to 3.4 percent, mainly due to lower direct labor costs and administrative expenses year on year.

Water Infrastructure
The strong performance of these units counterbalanced results from the remaining businesses in the portfolio. In water, Manila Water Company, Inc. reported flat net income at P1.4 billion, with stronger billed volume levels offsetting higher operating expenses. Non-East Zone businesses accounted for 15 percent of total net income for the period.

Power Generation
Ayala’s recent investments in power have come into fruition and started operations. In April, AC Energy Holdings, Inc. secured the Feed-in-Tariff for the 81 megawatt windfarm of the North Luzon Renewable Energy Company and the 19 megawatt expansion of Northwind Power Development Corp. In addition, AC Energy commenced commercial operations for the first 135 megawatt unit of South Luzon Thermal Energy Corp. in April.

Balance Sheet
Ayala’s balance sheet remains healthy. As of March 31, 2015, parent company cash reached nearly P43 billion, putting its net debt-to-equity ratio at 0.23 to 1 at the parent level and 0.76 to 1 at the consolidated level.

Ayala Land, BPI, and Globe came as one in Dubai to better understand and serve the needs of overseas Filipinos in the Middle East.

Under One Ayala, the international marketing synergy program relaunched by Ayala in 2011, the three companies introduced Filipino migrant workers to the group’s quality and affordable telecommunications, housing, remittance, and investment products and services at a special event dubbed “Fiesta Dubai” held on May 8 and 9 at Al Ghurair Mall.

Ayala Land International Sales Inc. President Thomas Mirasol noted that One Ayala is the conglomerate’s way of recognizing the role of overseas Filipinos in the growth of the Philippine economy: “They have worked so hard and make us proud. The income they generate contributes directly to the country’s GDP and foreign exchange reserves. This has enabled our country to move forward and allowed millions of people to live better lives.”

BPI and ALI established representative offices in Dubai in 2011 and 2013, respectively, and Globe announced a new partnership with du, a leading telco in the United Arab Emirates, to provide cheaper calls back home. By coming together as One Ayala, the companies hope to build on synergy to better serve Filipinos based in the UAE, Saudi Arabia, and the rest of the Gulf area.

Said BPI SVP for Remittance Business Roy Emil Yu, “With One Ayala, we hope to offer a wider array to match their needs as well as the needs of their families through a central point of communication and access for customers in this part of the world.”

AC Energy Holdings Inc.’s wind farms in Bangui and Caparispisan, Ilocos Norte recently received their Feed-in-Tariff Certificate of Compliance or FIT COC from the Energy Regulatory Commission (ERC). This entitles both its 19-MW wind farm expansion in Bangui, under Northwind Power Development Corp. (Northwind), and its 81-MW wind farm in Caparispisan, Pagudpud under North Luzon Renewable Energy Corp. (North Luzon Renewables) to a feed-in-tariff (FIT) of Php 8.53 per kilowatt hour for a period of twenty years. The FIT rate covers the period October 10, 2014 to October 9, 2034 for Northwind’s 19MW and November 11, 2014 to November 10, 2034 for North Luzon Renewables’ 81MW.

In 2014, the Department of Energy issued a Certificate of Endorsement for FIT for both wind farm projects after these were commissioned and started commercial operations.

Northwind’s 19-MW expansion was completed last October 2014 and has since been delivering power to the grid. The expansion puts Northwind’s total capacity to 52MW. North Luzon Renewables also completed its 81-MW wind farm and has likewise been operational since November 2014. Combined, Northwind and North Luzon Renewables put Ayala’s total wind power capacity at 133MW, which is one of the largest in the country today.

AC Energy President & CEO, Mr. Eric Francia said, “The completion of these projects is quite timely given the anticipated tightness in power supply this year. We hope to further expand our renewable energy portfolio and help increase the share of renewables in the country’s energy mix. ”

Since 2011, Ayala has committed over US$700 million in equity to develop conventional and renewable energy sources. AC Energy has currently assembled 700+ megawatts of attributable capacity, putting the company closer towards achieving its target of assembling over 1,000 MW of attributable capacity from power plants by 2016.

AC Energy Holdings Inc. is the development arm of the Ayala group in the energy sector. The company is committed to build a portfolio of power generation assets using renewable and conventional technologies. AC Energy shall contribute to the country’s energy requirements to power the nation’s progress.

FinanceAsia, Asia’s leading financial publication, has named Ayala Corporation as the Best Managed Company in the Philippines in its 15th annual survey of top public companies in the region.

This is the second consecutive year that Ayala earned the top ranking among Philippine companies. Ayala was also named Best for Corporate Governance in the Philippines for the fourth straight year and ranked second in Investor Relations.

Other listed companies in the Ayala group also figured prominently in the survey. Ayala Land and Globe were also among the country’s best managed companies. Notably, Ayala Land topped the investor relations category and was ranked second overall and for corporate governance. Globe was named fourth best managed company and ranked fourth for investor relations and seventh for corporate governance. Ayala, Globe, Ayala Land, and Manila Water were cited among Philippine companies most committed to a good dividend policy.

The country’s best CEOs were Lance Gokongwei of Universal Robina Corporation (URC), Ernest Cu of Globe, and Napoleon Nazareno of PLDT. The country’s best CFOs were Jaime Ysmael of Ayala Land, Alvin Lao of D&L Industries, and Delfin Gonzalez, Jr. of Ayala.

Other companies that landed in the top 3 of the magazine’s “best managed” categories were URC, Metro Pacific Investments Corporation, and PLDT. D&L Industries was named best mid-cap company and Concepcion Industrial Corporation led the small-cap category.

The 15th annual FinanceAsia poll, published online on March 19, received responses from over 250 portfolio managers and buy-side analysts worldwide who cover listed companies in Asia.

For more information, you may access the FinanceAsia website at: http://www.financeasia.com.

Ayala Corporation’s net income expanded 46 percent in 2014 to P18.6 billion primarily driven by the solid performance of its real estate, telecom and electronics manufacturing units and boosted by a net gain from the sale of its business process outsourcing asset.

Without the impact of the accelerated depreciation from its telecom unit’s network transformation initiative in the previous year, Ayala’s core net income actually grew 25 percent in 2014. Ayala’s profits have been growing above 20 percent for the past three years.

Ayala’s robust earnings performance was a result of the strong equity earnings contribution from its business units, which reached P24.9 billion, a 42 percent-jump from its level a year ago. This was bolstered by equity earnings from Ayala Land Inc. which rose 28 percent and the significant improvement in the contributions of Globe Telecom Inc., which more than doubled, and Integrated Micro-Electronics Inc., which expanded threefold. In addition, the P1.8 billion net divestment gain from Stream Global Services Inc. boosted Ayala’s equity earnings during the year.

The strong equity earnings from these business units counterbalanced the relatively flat contribution from the Bank of the Philippine Islands, which registered lower trading income during the year.

“We are very pleased with the performance of our business units as they continue to benefit from the aggressive growth strategy they executed a few years ago. This has, in turn, allowed us to optimize earnings and value at the parent level. We continued to invest in new areas of growth, particularly in power generation and transport infrastructure. As our business units sustain their growth momentum and the overall business environment continues to be encouraging, we are optimistic we can achieve our net income target of P20 billion this year, a year ahead of the plan,” Ayala President and Chief Operating Officer Fernando Zobel de Ayala said.

Real Estate

As the positive momentum in the real estate sector continued, Ayala Land’s net income expanded 26 percent to P14.8 billion year-on-year. The robust performance of its property development and commercial leasing operations, which rose 21 percent and 18 percent, respectively, fuelled the 18 percent-growth in Ayala Land’s real estate revenues to P93 billion. Residential revenues reached P55.9 billion, up 26 percent from a year ago on new bookings and completion of existing residential projects. Residential sales takeup remained strong, hitting an all-time high of P102 billion, 11 percent higher year-on-year. Sales from overseas Filipinos likewise improved as it now comprise 24 percent of Ayala Land’s residential bookings, which grew 13 percent to P76.7 billion. The sale of office spaces in Bonifacio Global City and Cebu likewise fuelled Ayala Land’s real estate revenues in 2014.

The opening of new gross leasable areas, full year operations of new shopping centers and offices combined with higher occupancy and average rent bolstered the 18 percent growth in Ayala Land’s commercial leasing revenues to P21 billion. This was further lifted by its growing hotels and resorts portfolio, which jumped 40 percent to P5.6 billion year-on-year. Ayala Land continued to build up its recurring income business, with malls, office, hotels and resorts and property development and construction, accounting for 38 percent of its net income in 2014.

Its capital spending in 2014 reached a record P83.3 billion, primarily spent in project completion and land acquisitions.

Telecom

Globe Telecom posted another record net income, which more than doubled to P13.4 billion year-on-year buoyed by robust revenue growth from sustained demand for data connectivity across the mobile, broadband and fixed line businesses and the tapering of depreciation charges from its network transformation initiative. The solid revenue growth, which balanced out the subsidy and operating expenses, drove the 8 percent increase in Globe’s earnings before interest taxes depreciation and amortization (EBITDA) to P39.3 billion.

Mobile revenues, which account for 79 percent of consolidated revenues, grew 7 percent to P78.1 billion, propelled by growth in the postpaid and mass market TM brands. Globe’s postpaid revenues continued to improve at P29.9 billion, up 11 percent from the previous year. Despite yield pressures on multi-SIM incidence and value-based bucket offers, its prepaid revenues improved 5 percent to P48.2 billion. Total mobile subscriber base stood at 44 million in 2014, a 14 percent-growth from its year-ago level.

Globe’s broadband business registered a 22 percent growth to P12.7 billion as it continued to launch affordable products and competitive tablet bundles. Globe’s broadband subscriber base reached 2.8 million in 2014, a 37 percent increase from the previous year. Similarly, Globe’s fixed line revenues reported improvement with data and voice segments reporting a 17 percent and 7 percent increase, respectively.

Globe believes that despite a highly competitive market, it can maintain its revenue momentum and current overall EBITDA margin level, given (1) the inroads the company has built in establishing a track record in the data space; (2) the pipeline of programs and offers, built on the back of the portfolio of partnerships with key content providers; and, (3) the additional capacities Globe has in place coming from continued investments in its data network.

Water Infrastructure

Manila Water ended 2014 at a steady pace, registering a one percent growth in consolidated net income to ?5.8 billion primarily driven by improved billed volume and higher contribution from new businesses.

Notwithstanding the absence of a tariff adjustment, the East Zone concession posted profits of ?5.1 billion on the back of a 4 percent growth in billed volume owing to a modest increase in service connections. Manila Water sustained its nonrevenue water (NRW) in the East Zone at 11.3 percent.

Manila Water’s operating units outside the East Zone concession sustained solid growth in billed volume. Laguna Water registered a 52 percent jump in profits to ?164 million following the acquisition of the water reticulation system of Laguna Technopark Inc in January 2014 and new service connections. Boracay Water and Clark Water both posted double-digit growth, expanding 32 percent and 17 percent, respectively. Manila Water’s Vietnam-based associates, Thu Duc Water, Kenh Dong Water and Saigon Water Infrastructure Corporation, contributed a total of ?357 million in earnings. Manila Water’s new businesses accounted for 11 percent of its net income in 2014.

Through a subsidiary, Manila Water delivered its first batch of water to the Metro Cebu Water District in January 2015 under the Cebu bulk water project. It provides 18 million liters per day (mld) in the first year and 35 mld of water in the succeeding years to Cebu City.

Results of the arbitration proceedings related to the rate rebasing process in the East Zone are still pending. A resolution is expected by the end of the first quarter of 2015.

International

Integrated Micro-Electronics Inc. (IMI) recorded solid growth in 2014 with net income soaring nearly threefold to $29.1 million from its year-ago level. Revenue growth was robust, up by 13 percent, to $844.5 million, outpacing the global electronics manufacturing services, which posted around 6 percent growth. Strong demand from the telecom, automotive and storage device markets helped lift IMI’s revenues in 2014.

IMI successfully completed its follow-on offering in December 2014. It listed 215 million common shares, raising ?1.6 billion in proceeds and increasing its public float level to 19 percent.

In business process outsourcing, LiveIt Investments Ltd. reported significant net income, mainly attributable to the divestment of Stream, which resulted in a P1.8 billion net gain for Ayala.

Banking

The strong performance of these businesses balanced out the decline in the net income of Bank of the Philippine Islands (BPI). BPI reported a net income of P18 billion in 2014, a 4 percent decline from the previous year. This was largely due to a 5 percent decline in non-interest income as a result of a sharp contraction in trading gains compared to the previous year as the bank reduced its reliance on securities trading.

The bank’s core lending business, however, continued to drive growth with net interest income growing 15 percent to P34.8 billion. Net loans expanded 27 percent to P800 billion year-on-year. Deposits jumped 19 percent from a year ago to P1.2 trillion. The bank registered a current and savings account ratio of 69 percent.

BPI’s operating expenses rose 12 percent attributed to the bank’s investment in infrastructure and technology as it positions itself for future growth. Cost-to-income ratio stood at 53.7 percent in 2014.

Despite the increase in its loan portfolio, the bank maintained strong asset quality and remained well capitalized in 2014 with gross 90-day non-performing loans (NPL) level dropping to 1.5 percent of total loans in the fourth quarter of 2014 from 1.78 percent the previous quarter. BPI’s reserve levels also improved to 109.3 percent of NPLs in the fourth quarter of 2014 from 107 percent the previous quarter. Equity capital stood at P144 billion, resulting in BASEL III capital adequacy ratio of 14.2 percent in 2014.

Power Generation and Transport Infrastructure

Ayala continued to ramp up its power generation and transport infrastructure units in 2014. In power, Ayala assembled 700 megawatts of attributable capacity in both conventional and renewable power generating assets. This translates to over $700 million in equity committed over the past three years in the power sector, underscoring the conglomerate’s commitment to help augment the country’s power requirements which is vital to sustaining economic growth.

In transport infrastructure, Ayala was awarded two public-private partnership projects (PPP) in 2014 together with various strategic partners. The consortium comprising the Ayala and First Pacific groups won the Automated Fare Collection System project as well as the LRT 1 Cavite Extension project together with the Metro Pacific and Macquarie groups. The conglomerate has committed around US$200 million in equity for these projects including its first PPP project, the Muntinlupa-Cavite Expressway (MCX), formerly known as Daang Hari Connector Road.

Balance Sheet and Capital Spending

Ayala parent company ended the year with a gross debt of P101 billion and cash of P48.3 billion. Its balance sheet remains comfortable with parent company net debt to equity ratio at 0.24 to 1 and consolidated net debt to equity ratio at 0.85 to 1.

Last year, Ayala raised debt and equity capital for its expected pipeline of new projects. It raised a total of $1.3 billion in proceeds through the issuance of exchangeable bonds, reissuance of preferred shares, loan drawdowns and an equity placement. This healthy balance sheet and cash position allow Ayala to pursue investments as well as cover its dividend and debt obligations comfortably.

At the parent level, Ayala has set aside P21 billion in capital spending in 2015 to fund its growing pipeline of power generation and transport infrastructure projects, among others. The Ayala group has earmarked P185 billion in combined capital expenditures this year mainly to support the massive expansion plans of its real estate and telecom units.

The above statement pertains to the disclosure submitted today, March 10, 2015, to the SEC, PSE, PDEx by Ayala’s group head for Corporate Strategy and Development Paolo F. Borromeo.

Ayala Education has partnered with Arellano University to offer a junior college program in the latter’s Pasig campus starting June this year.

In ceremonies held at the Arellano Pasig campus, LINC@Arellano junior college program (LINC@Arellano) was formally launched with Ayala Education CEO Fred Ayala, Arellano Chairman & CEO Francisco P. V. Cayco, officials from Arellano and the local government, teachers and staff, and hundreds of students in attendance.

LINC@Arellano is open to all Grade 10 graduates and is an early implementation of the Department of Education’s K to 12 Senior High School Program. LINC stands for Learning with Industry Collaboration.

Said Fred Ayala, “Ayala Education aims to deliver high quality, affordable education that can significantly enhance the career potential of students, by equipping them with practical skills through programs designed in close partnership with prospective employers.”

Through LINC, he added, students would be prepared to pursue a college degree while also being ready to enter the workforce through an entry-level job.

Cayco underscored the importance of “bridging the gap” between academic curriculum and industry needs. “The partnership with Ayala Education through LINC is one of the biggest opportunities afforded Arellano University. What this program can do is open the doors for all the students as far as opportunities in the field of accountancy and business management are concerned,” said Cayco.

Ayala Education, a unit of Ayala Corporation, sought a partnership with a recognized leader in the academe such as Arellano, which was founded in 1938 and is one of the largest universities in the country with over 30,000 students.

LINC is the Ayala conglomerate’s second venture into education. The group earlier teamed up with the UK-based Pearson, the world’s largest education provider, to roll out starting last year a chain of private high schools in Metro Manila under the new brand Affordable Private Education Center (APEC) Inc.

The Ayala group has earmarked P185 billion in capital expenditures this year as it continues to support the massive expansion plans of its core businesses, particularly its real estate and telecom units, while continuing to ramp up its investments in power generation and transport infrastructure.

A bulk of this amount is allotted to Ayala Land, Inc., which has set aside a record P100 billion to bankroll its aggressive expansion program in line with its “2020 Vision” business plan. The plan will support Ayala Land’s target to post an average growth of 20 percent annually with an end goal of reaching P40 billion in net income by 2020 from P11.7 billion in 2013.

In addition, a large portion of the conglomerate’s capital spending this year will be via Globe Telecom, Inc., which has programmed ? around P29 billion in 2015 primarily for data-related initiatives and LTE network infrastructure upgrades. ?With P8 billion from its planned capital expenditures in 2014 slid?ing into the first half of this year largely due to timing issues?, Globe’s total capital spending ?will be ?a?bou?t P37 billion in 2015.

At the parent level, Ayala Corp. will deploy P21 billion primarily to support investment programs in power generation and transport infrastructure. The rest of the amount will be deployed to fund the growth initiatives of the other business units, including Manila Water Company, Inc., Bank of the Philippine Islands, and Integrated Micro-Electronics, Inc.

“We started an aggressive growth strategy a few years back and we continue to undertake value enhancing opportunities amidst this sustained momentum in our economy. Each of our business units are seizing investment opportunities within their individual spaces under this positive environment,” Ayala Corporation Chairman and CEO Jaime Augusto Zobel de Ayala said. “In particular, we continue to strengthen our positions in power and transport infrastructure—two sectors that are presenting opportunities for investments with potential to become new growth platforms for Ayala,” Mr. Zobel added.

“We have seen robust growth in our earnings in the first three quarters of 2014 and we are optimistic that our fourth quarter growth will be at an even faster pace. We remain positive about the country’s overall macroeconomic environment this year as reflected in the aggressive capital spending we have planned out,” Ayala Corporation Chief Finance Officer Delfin Gonzalez noted. The company will release its full year financial and operating results next month.

For the first nine months of 2014, Ayala registered a net income of P14.1 billion, a 35 percent growth from the previous year primarily driven by the robust performance of its real estate, telecom and water units.

In a disclosure made today to the Securities and Exchange Commission, Philippine Stock Exchange, and Philippine Dealing and Exchange Corporation, Ayala Corporation said that GNPower Kauswagan Ltd. Co., a limited partnership owned by AC Energy Holdings, Inc., a fully-owned subsidiary of Ayala Corporation, the Philippine Investment Alliance for Infrastructure (PINAI) Fund, and Power Partners Ltd. Co., has signed definitive documentation for the financing to commence the phased construction of a 4 x 135MW coal-fired power plant in Kauswagan, Lanao del Norte.

The total project cost will be funded by both debt and equity. The debt will be financed by a syndicate of domestic banks with additional debt from international banks.

The plant will help alleviate the tight power supply situation in Mindanao. Construction of the plant is scheduled to start in early 2015.

A copy of the disclosure signed by Ayala’s group head for corporate strategy and development Paolo F. Borromeo may be found on the PSE Edge Portal.