Ayala 1Q13 Net Income Up 29% to Php4.5B

Makati—(PHStocks)—Ayala Corporation’s earnings in the first quarter of the year reached P4.5 billion, 29% higher than net income in the first quarter of last year. Core net income, which excludes the impact of Globe Telecom’s accelerated depreciation, grew even higher to P5.2 billion, a 49% increase year on year. The strong earnings momentum was driven largely by its banking unit, Bank of the Philippine Islands (BPI), which delivered a record net income for the quarter combined with Ayala’s increased equity stake in the bank. Its property unit, Ayala Land, Inc. (Ayala Land), likewise posted robust earnings growth during the period in review. Both units accounted for 88% of equity earnings during the quarter.

BPI posted a net income of P8.4 billion for the first quarter, 43% higher than last year’s P5.8 billion. The bank’s total revenues grew by 21% driven largely by significant trading gains. Net interest income increased slightly as the bank’s average asset base expanded by 15%. Net loans grew by 19% year-on-year to P514 billion at the end of the quarter with growth noted across all market segments. Notwithstanding the strong lending activity, the bank’s NPL ratio continued to decline to 2.1% from 2.5%.

Property unit Ayala Land’s net income grew by 30% to P2.8 billion on the back of sustained revenue growth. Ayala Land’s total revenues for the first quarter reached P18.5 billion driven by the steady completion and higher bookings of its residential projects. Revenues were likewise boosted by the sale of commercial lots from the recently acquired FTI property. Its commercial leasing businesses also contributed significantly with revenues from both shopping and office leasing up 7% and 13%, respectively as a result of higher occupied gross leasable area and lease rates. The opening of new hotels and resorts also pushed hotel revenues up 86% year-on-year. Ayala Land continues to pursue a robust pipeline of development projects. A total of P10.3 billion in capital expenditure was spent during the quarter for project completion and land acquisition. Recently, Ayala Land sealed several joint venture agreements to develop significant size properties in prime areas in Cebu and Davao.

Its telecom unit, Globe Telecom, maintained its revenue momentum in the first quarter. Consolidated service revenues grew by 6% to P21.4 billion driven by the steady growth of its mobile, broadband and fixed line data businesses. Mobile revenues rose by 3% as Globe continued to expand its subscriber base which now totals 35.1 million, up 13% year on year. Broadband revenues also increased by 23% year on year with subscriber base likewise expanding by 17% to 1.7 million. Globe remains on target with its network and IT modernization program with the first phase, which included the change-out of various cell sites nationwide, completed. The network modernization, however, resulted in higher depreciation charges during the period which brought reported net income down 76% year-on-year to P656 million. Excluding the impact of the accelerated depreciation, Globe’s core net income rose by 13% to P3.1 billion.

Manila Water posted revenues of P3.6 billion, 6% higher year on year. Cost of services and operating expenses, however, increased at a much faster rate of 11% due to water and wastewater expansion. Combined with higher depreciation and interest expense, which rose by 20% and 17%, respectively, net income for the quarter remained steady year on year at P1.3 billion. New concessions outside the East Zone continued to post significant earnings gains with Boracay Water up 26%, Clark Water up 24%, and Laguna Water up 98% year on year.

In the meantime, Ayala’s international businesses saw continued growth despite the sluggish global economic conditions.
Integrated Micro-Electronics, Inc. (IMI) saw consolidated revenues grow by 9% year on year despite slower demand for electronic products in the Eurozone, the US, Japan, and China. However, net income declined to US$253 thousand from US$854 thousand due to lower capacity utilization, particularly of its facilities in China.
Its international business process outsourcing operations under LiveIt achieved continued growth and margin improvement. LiveIt’s share of revenues from its investee companies reached US$ 93.2M, up 13% versus last year, while share of EBITDA grew to US$ 8.3M, up 8% due mainly to higher revenues and improved profitability at Stream and Affinity Express. This resulted in a reduction in LiveIt’s net loss by US$1.5M. Performance of its major investee companies is expected to further improve in the second half of 2013.

Ayala President and Chief Operating Officer Fernando Zobel de Ayala said, “We are pleased to see the sustained strong performance of our key business units. The positive macroeconomic conditions continue to present opportunities for further investment and expansion in each of our businesses. We continue to take advantage of these and have set group-wide capital expenditure of P136 billion this year to pursue our growth objectives.”

Ayala Corporation maintains a very solid financial position with consolidated cash of P88 billion and debt of P173 billion as of the end of the quarter. Cash at the parent company alone stood at nearly P38 billion at the end of the quarter with parent debt at P70 billion. Gearing ratios remain highly comfortable with consolidated debt to equity ratio at 1.3 to 1 and parent net debt to equity of 0.25 to 1. The company’s market capitalization has risen by 28% year-to-date to P392 billion, making it the second largest among listed Philippine conglomerates.

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