Ayala Corporation’s net income in the first quarter of 2011 grew by 16% to P2.45 billion. This was driven by the robust revenue and earnings growth of its real estate business, the solid growth of its banking operations, the sustained turnaround of its telecom unit and healthy core earnings of its water business. These business units accounted for the bulk of equity earnings. Total equity earnings during the quarter rose by 16% year-on-year.
“We are pleased with the growth momentum of the majority of our domestic businesses,” said Ayala president and chief operating officer Fernando Zobel de Ayala. “Their continued expansion across new and existing markets across the country will translate to increased market presence, greater exposure across a broader more diverse customer base, and a higher earnings growth trajectory for the group moving forward.”
Ayala Land, Inc.’s earnings in the first quarter of the year reached P1.6 billion, 36% higher than same period last year. Revenues reached P10.6 billion, up 15% year-on-year driven by robust residential and higher commercial leasing revenues. Residential revenues grew by 18% fuelled by the strong take-up and bookings across all residential brands. The company launched a total of 4,511 units during the quarter mostly from Alveo and Avida. Commercial leasing revenues increased by 16% largely from the 11% growth of shopping center revenues and the 25% rise in office leasing. Both posted higher lease rates as well as improving occupancy rates. Revenues from its hotels and resorts portfolio improved by 16% with the consolidation of its acquisition of 60% of El Nido Resorts which added 150 island resort rooms to its current portfolio. New projects are scheduled to come on stream. It recently opened Abreeza Mall, a 53,000-square-meter shopping center at the heart of Davao. It also broke ground on its new hotel, Kukun, in Cagayan de Oro.
Bank of the Philippine Islands registered first quarter net income of P2.9 billion, up 4% year-on-year. Revenues rose by 5% due mainly to higher interest income which rose by 15% to P6.3 billion as average asset base expanded by 12%. Loan growth remained healthy with net loans up 13% due to strong middle market/SME and consumer loans which rose by 22% and 15%, respectively. Corporate loans likewise grew albeit at a milder pace of 6%. Non-interest income, however, contracted by 9% due to lower gains from securities trading and foreign exchange and miscellaneous income. The bank’s total resources increased by 9% to P761 billion as deposits grew by 8% to P604 billion, while assets under management increased by 40% following its acquisition of the trust and investment management business of ING N.V. Manila.
Globe Telecom sustained its turnaround and posted record quarterly revenues of P16.5 billion in the first quarter, 8% higher year-on-year. The growth was driven by the continued uptick in its mobile business as well as the sustained growth momentum of the broadband segment. Mobile revenues rose by 4% driven by a 10% growth in postpaid revenues and a 2% increase in prepaid. Broadband and fixed-line revenues grew by 26% with broadband achieving a 52% increase year-on-year. Globe’s mobile subscriber base further increased to 27.3 million, a 14% expansion year-on-year while broadband subscribers rose by 40% to nearly 1.2 million. Subscriber growth improved with the launch of new and relevant services that allowed subscribers greater flexibility to customize their plans. Globe’s net income of P3 billion was the highest in the past seven quarters and was also 30% higher than the prior quarter.
Manila Water’s net income declined by 3% to P816 million largely as a result of mark-to-market losses realized on its bond. Excluding this, core income was up 14% to P1.2 billion. Revenue growth was healthy, up 5% to P2.7 billion due to an 11% increase in tariff and a 6% increase in household connections. Operating expenses increased mildly by 4% with well-controlled overhead and manpower costs. Non revenue water of 11.9% was better than same period last year of 14.2%. Manila Water continues to invest in the development of sewage and septage treatment facilities and is expanding aggressively outside its concession zone.
Ayala Automotive’s net income fell by 63% due to lower vehicle sales of its Honda dealerships, which declined by 27%. Ayala’s Honda dealerships remained the market leader with a 46% share of network sales. Its Isuzu dealerships recorded a 4% growth in sales and registered a percentage point improvement in market share to 32%.
Ayala’s international businesses showed healthy topline growth. Its electronics business, Integrated Micro-Electronics, Inc. registered a 35% growth in revenues to US$123 million but net income declined by 88% to US$374 thousand. The increase in turnkey operations which now account for 82% of revenues combined with higher direct material cost contributed to the margin pressure and earnings decline. Moreover, a one-time FX gain in 1Q10 contributed to the year-on-year decline in net income.
Its BPO unit LiveIt, also showed improvement. The combined revenues of LiveIt’s investee companies grew by 9% to US$243 million in the first quarter, and their EBITDA grew by 45% to US$22.5 million. LiveIt recorded operating net income of US$0.6 million, versus an operating net loss of US$3.1 million in the same period last year. In April, investee company HRMall, which offers outsourced HR services, acquired Los Angeles-based IQ BackOffice, which delivers finance and accounting BPO services and enables HRMall to offer a full range of highly efficient, market leading back office solutions to medium-sized clients globally.
AG Holdings also reversed losses incurred in the same period last year and reported a net income of P258 million in the first quarter. Its Asian operations posted a net income due mainly from gains realized from the exchange in ownership in Arch Capital and Arch Capital Asian Partners with The Rohatyn Group. Its US operations, however, continued to lose in the absence of any meaningful recovery in real estate markets in the U.S.
Outside of its current portfolio of businesses, Ayala recently made an initial foray in the power sector as it seeks to assemble a portfolio of power assets across various technologies. Following its joint venture with Mitsubishi Corporation for the development of solar energy in the Philippines, it acquired a 50% stake in Northwind Power Corporation, the operator of the first wind farm in Southeast Asia. It also forged a joint venture agreement with Sta. Clara Power Corp. for the development of run-of-the-river hydroelectric projects across the country.
Zobel commented that these investments will ultimately form part of a portfolio that balances renewable and conventional energy sources to meet the country’s need for base load capacity.
Ayala ended the quarter with cash of nearly P28 billion. It also recently successfully issued a P10 billion multiple put bond as it tapped sources of long-term funding in view of potential investments it is eyeing in the power and transport infrastructure sectors.
The above press statement pertains to the disclosure made today, May 13, 2011, to the Securities and Exchange Commission, Philippine Stock Exchange, and Philippine Dealing and Exchange Corporation, by Ayala managing director and head of corporate strategy and development, John Eric T. Francia.