Ayala Corporation’s net income reached P3.5 billion in the first quarter, 42% higher compared to the same period last year. This was driven by a 35% increase in equity earnings as its real estate, banking, and water businesses registered strong double-digit growth in earnings in the first three months of the year. Significant improvements in its electronics and business process outsourcing businesses also helped lift earnings during the period.
Real estate unit, Ayala Land, Inc., maintained solid growth posting a 31% increase in net income to P2.1 billion. This was underpinned by strong revenues and net income margin improvement. Revenues grew by 17% to P12.4 billion with double-digit increases across all business segments. Residential and property development revenues grew by 18% on the back of strong take-up of Ayala Land Premier, Alveo and Avida residential products, which combined, nearly doubled versus the first quarter of last year. Revenues from its commercial leasing and hotels and resorts businesses also grew by 21% and 16%, respectively, as it continued to expand gross leasable area. Ayala Land remains on track with its 37-billion peso capital expenditure program this year for project completion and land acquisitions.
Its banking unit, Bank of the Philippine Islands (BPI), registered a net income of P5.8 billion, significantly ahead of the previous year’s P2.8 billion. This was fuelled by its core banking business as well as securities trading gains. Loans grew by 20% as lending remained brisk across all customer segments, while the bank’s 30-day non-performing loan ratio improved further to 2.0%. BPI’s deposits grew by 7%, putting total assets under management to P716 billion, up 15% year-on-year. Net interest income grew by 8% aided by a 14 basis point improvement in net interest margin. The bank’s earnings were further enhanced by trading gains amounting to P3.7 billion as the bank sold some of its securities in inventory. BPI is set to pay a special cash dividend of P0.50 per share in addition to its regular cash dividend of P0.90 per share for the first half of the year.
Telecom unit, Globe Telecom (Globe), continued to build on the momentum it achieved over the past six quarters. Consolidated revenues in the first quarter reached a new all-time high of P20.2 billion, 6% higher year-on-year. Its mobile business performed strongly driven by robust demand for its postpaid and prepaid services. Globe’s broadband business also continued to grow with revenues up 13% year-on-year. Its new mobile and broadband services attracted subscribers which resulted in higher net adds during the period, pushing mobile subscriber base to 31 million, up 14% versus last year, and broadband subscribers to 1.5 million, 26% higher versus the same period last year. Operating expenses and subsidy were higher driven by the growth in postpaid customers and expenses related to the Company’s network modernization program. This, coupled with higher financing and other non-operating charges, resulted in a 10% decline in reported net income. Core net income, which excludes foreign exchange and mark-to-market charges and one-off items, was 7% lower at P2.7 billion.
Its water unit, Manila Water Co., Inc. posted a net income of P1.3 billion, 64% higher than the same period last year. This was a result of higher revenues due to strong sales in the East Zone and the impact of the tariff increase implemented at the start of this year. Revenues grew by 28% with new businesses in Laguna, Boracay and Clark contributing nearly 5% of total. Operating expenses, however, increased by 23% due to higher power and overhead costs as the company continued to expand its water and wastewater network coverage and pursued new business initiatives. Manila Water was recently awarded the bulk water supply project in Cebu and was also recently awarded the right to purchase a 49% stake in Kenh Dong Water Supply which owns and operates major water infrastructure in Ho Chi Minh City in Vietnam.
In the meantime, Ayala’s international businesses reported improvements in performance during the quarter. Its electronics unit, Integrated Microelectronics, Inc. (IMI) posted a 128% growth in net income year-on-year as revenues grew by 24%. This was attributed to the company’s business expansion in Europe and Mexico and reduced operating expenses.
The investee companies of its BPO holding company, LiveIt, likewise improved results with combined revenues of US$255 million, of which LiveIt’s share was US$83 million, up 12% versus the prior year. Greater scale and cost efficiencies resulted in its share of EBITDA growing by 18% to US$7 million, and in the further reduction of its net loss, which was primarily due to acquisition related charges.
Ayala Corporation president and chief operating officer Fernando Zobel de Ayala noted, “We are encouraged by the sustained growth trajectory of our core businesses and the improving performance of our international businesses. Domestic consumption remains robust which continues to benefit our core businesses. We continue to pursue our capital investment and expansion plans, taking advantage of this favourable macro-economic environment and ensure we sustain our growth momentum moving forward.”
Ayala is looking to participate in selected infrastructure projects under the government’s public private partnership (PPP) program. The company recently partnered with Metro Pacific Investments Corp. to jointly pursue light rail transit projects in Metro Manila after winning the first road project under the PPP program.
It was also recently awarded by Ho Chi Minh City Infrastructure Investment Joint Stock Company (“CII”), the right to purchase a 10% stake in CII. CII is a leading player in the infrastructure sector in Vietnam with a portfolio of strategic infrastructure assets, including water treatment plants and toll roads serving Ho Chi Minh City and surrounding areas.
Ayala recently raised P10 billion through a corporate bond issue to gear up for potential capital requirements.
Ayala ended the quarter with cash at the parent level of nearly P14 billion and net debt to equity of 0.23 to 1. The company’s share price has risen by 47% year-to-date, closing yesterday at P458.80 per share.
The above statement pertains to the disclosure made today, May 11, 2012, to the Securities and Exchange Commission, Philippine Stock Exchange, and Philippine Dealing and Exchange Corporation, by Ayala chief finance officer Delfin C. Gonzalez, Jr.