Ayala Corporation’s (Ayala) net income in the nine months ended September rose by 20% year on year to P10.4 billion. Netting out the impact of the accelerated depreciation as a result of the network modernization of Globe Telecom, core net income rose at an even higher rate of 32% to P12.3 billion. The growth was driven by its real estate and banking units, the steady performance of its water business, and the sustained improvement in profitability of its international businesses. The strong performance of these business units resulted in equity earnings reaching P13.9 billion, 26% higher year on year.
Ayala President and Chief Operating Officer Fernando Zobel de Ayala commented, “Overall, we are pleased that all our key business units are able to sustain their strong earnings growth trajectory. The economy continues to support much of this momentum with both consumer and business confidence largely upbeat. This has, in turn, allowed our business units to continue to expand aggressively in their respective sectors and tap new customers particularly in underserved markets. We remain committed to invest in the country’s growth prospects as we support infrastructure development in the country. This is particularly critical in light of the massive destruction caused by the recent earthquakes in Cebu and Bohol as well as super typhoon Yolanda. The Ayala group has been engaged in relief and rehabilitation efforts at various levels across its business units.”
For year-to-date ended September, Bank of the Philippine Islands (BPI), contributed nearly half of equity earnings as its net income registered a 19% jump year-on-year to P15.8 billion. BPI’s performance was underpinned by a 12% growth in revenue as net interest income and non-interest income improved, while operating expenses increased by a much slower pace of 6.7%. Total bank deposits continued to expand reaching P889 billion by the end of the period. Business activity was brisk across corporate, middle market, and consumer segments, which reflected in the bank’s healthy 15% loan growth. Notwithstanding the expansion in loans, non-performing loan ratio improved further to 2.1%. BPI remains well capitalized with a Capital Adequacy Ratio (CAR) of 16.1%. It recently announced its plan to raise P25 billion in a stock rights offering, proceeds of which will be used to support the bank’s strategic growth initiatives. The bank’s performance over the nine-month period resulted in a Return on Equity of 20.5%.
Its real estate unit, Ayala Land, Inc. (Ayala Land) continued to maintain strong momentum. Year-to-date earnings rose by 30% to P8.6 billion, putting it on the verge of exceeding its five-year target to hit P10 billion in net income by 2014. Consolidated revenue reached P57.7 billion, up 38% compared to the same period last year driven by the upbeat performance of all key business lines. Residential revenue rose by 23% due to strong bookings across all residential brands. The company’s five residential brands altogether launched 11,787 units in the first nine months, with average monthly sales take-up reaching an all-time high. Commercial leasing revenue grew by 22% to P13.1 billion, while its services business generated P17.2 billion in revenue, 18% higher year-on-year. Ayala Land continues to expand in many parts of the country as it develops new townships across key metros. This ensures a pipeline of development projects that will sustain its growth in the years ahead.
Its water business, Manila Water, registered P4.3 billion in net income in the first nine months which was 9% higher versus the same period last year. Revenue rose by 6% to P11.5 billion driven by moderate billed volume growth, improvement in average tariff resulting from the CPI adjustment, and higher contribution from the operating subsidiaries. As of the end of September, Manila Water has been able to provide 917,000 water service connections from 889,000 in September last year in the East Zone, while it continues to make investments to ensure consistent water supply to nearly 100% of its customers. It also continues to invest in its new businesses outside the East Zone, particularly in Boracay, Clark, and Laguna where it has increased water connections to reach more customers while significantly reducing non-revenue water. Manila Water is also in the process of constructing its bulk water supply project in Cebu which is targeted to start operations in June 2014. In the meantime, the company’s international operations under Thu Duc Water BOO and Kenh Dong WS JSC have also contributed positively, accounting for 5% of net income. The Company is still awaiting final result of its 2013 Rate Rebasing exercise via an Arbitration process as stipulated in Concession Agreement in the East Zone. The Company has elevated the Rate Rebasing Determination in the East Zone to the Appeals Panel duly constituted under the Concession Agreement.
In the meantime, Manila Water is actively engaged in the relief efforts to help victims of Typhoon Yolanda. It has dispatched 9,000 Baso Water or potable water in sealed plastic cups together with relief goods for distribution to the typhoon victims particularly in badly hit towns of Tanauan, Dulag, Tolosa, and Palo in Tacloban. The company is also working closely with government authorities for possible deployment of a mobile water treatment plant to provide clean and potable water to severely affected communities.
Ayala’s telecom unit, Globe, sustained its growth momentum with consolidated service revenue up 10% to P67 billion driven largely by its mobile business. Mobile revenue expanded by 8% with postpaid delivering a solid growth of 20%, while prepaid held steadily. Revenue from the broadband and fixed line data segments also contributed to the top line growth. Globe’s mobile subscribers reached 36.5 million, a 14% expansion year-on-year. The continued growth in the postpaid subscriber base is attributed to the success of its customizable plans, the bundling schemes for the latest smartphone devices, as well as the expanded sales channels led by the Globe concept stores. Globe’s broadband subscribers also grew by 15% year-on-year to 1.9 million with broadband revenue expanding by 22% from a year ago. Fixed line data also sustained momentum with revenue up 12%. Globe’s reported net income reached P3.5 billion. Excluding the impact of the accelerated depreciation as a result of its ongoing network modernization program, core net income grew by 9% to P9.5 billion.
Globe sustained multiple damages to its cellsites in the Visayas region following the devastation brought by Typhoon Yolanda. Ongoing restoration efforts have yielded close to 50% of its communication lines in the Visayas which was serviceable as of November 11. A total of 520 2G/3G sites have been reactivated since the onslaught of the typhoon. Globe restored one serviceable site in Tacloban, the hardest hit province in the region. Globe is accelerating repair and rehabilitation efforts in partnership with key government institutions including the Phil. Air Force and the Phil. Navy to transport heavy network equipment, fiber optic cables and communication poles. Aside from Tacloban, some of the critical sites restored were in the provinces of Iloilo, Ormoc, Roxas, Leyte, and Boracay. Parallel to these efforts, Globe is also mobilizing Libreng Tawag and Libreng Charging stations to augment communication needs of residents in the typhoon-ravaged areas.
Ayala’s international businesses have sustained improvements in profitability.
Its electronics unit, Integrated Microelectronics, Inc. (IMI) reported net income in the first nine months of US$5.3 million, up 6% versus the same period last year, while revenue rose by 10% to US$547.1 million. IMI continued to grow steadily despite the weak global economic environment as it benefitted from the diversification strategy it undertook in previous years.
In the meantime, its business process outsourcing unit, LiveIt, achieved continued growth in revenue and profitability. For the first nine months of the year share of revenue increased by 14% year-on-year to US$288 million while share of earnings before interest, tax, depreciation and amortization (EBITDA) grew by 19% year-on-year to US$26.4 million.
The Ayala group has invested nearly P76 billion of its P 135.8 billion capital expenditure program allotted for this year. At the parent level, Ayala has committed P10 billion in investments thus far which includes its acquisition of an additional 10% stake in BPI and its initiatives in various power generation projects.
The company recently announced the issuance of P10 billion preferred shares, proceeds of which will be used to pre-pay higher costing debt and ensure sufficient funding source for its planned investments. At the end of September Ayala parent company had nearly P33 billion in cash and a low net gearing level with net debt to equity of 0.28 to 1.
The above statement pertains to the disclosure made today, November 14, 2013, to the SEC, PSE, PDex, by Ayala CFO Chito Gonzalez.