Ayala Corp. (PSE: AC) has reported net income of PhP11.2 billion in 2010, up 37% YoY. Its real estate, banking, water, and auto business all posted record earnings during the year, which cushioned lower earnings of its telecom and electronics manufacturing units. Earnings were boosted by a PhP3.6 billion net gain due to the revaluation of the company’s stake in Manila Water Company Inc. (PSE: MWC) following its purchase of an additional 11% stake, and in its BPO holding company, LiveIt, after the buy-in of a private equity firm in one of its investee companies. These revaluation gains were in turn partly offset by impairment provisions and restructuring costs at its international real estate unit, AG Holdings.
Ayala President and Chief Operating Officer Fernando Zobel de Ayala said, “We are pleased with the record performance and strong growth trajectory of most of our domestic businesses. This reflects our ability to take advantage of the strong economic recovery and capture opportunities in this new growth cycle. Our international businesses, however, continued to feel the lingering effects of the global downturn but should be well-positioned for the turn of the global economy.”
Ayala Land achieved record earnings of PhP5.4 billion on all-time high revenues of PhP37.8 billion—35% higher than prior year and 13% above the previous record high in 2008. Growth was driven by all business lines. Take-up values of residential units across all brands grew significantly with incremental contribution from its fourth residential brand, Amaia. Its leasing revenues rose by 13%. Revenues from shopping centers grew by 3% while the office segment rose by 21%. Occupied gross leasable area expanded for commercial center and offices by 5% and 35%, respectively, while rental rates increased slightly. In the meantime, revenues from its new foray in hotels and resorts also rose by 33%, reflecting the consolidation of the acquisition of 60% of El Nido Resort in Palawan. This year Ayala Land is allotting PhP33 billion in capital expenditure to increase project launches and further capture the strong demand for its real estate products within and outside Metro Manila.
In banking, Bank of the Philippine Islands (PSE: BPI) had another strong year with net income reaching a record P11.3 billion, up 33% for the second consecutive year. Solid business growth and trading gains both fuelled the rise in earnings. Revenues rose by 13% with net interest income up 10% to PhP24 billion driven by a 12% increase in its average asset base. Non-interest income was up 18% due to higher gains from securities trading as well as fee-based income. Loan growth was strong across all segments. Gross loans grew by 16% as all market segments sustained double-digit growth. The bank’s total resources reached PhP877 billion, up 21% while deposits grew by 24% to PhP720 billion as the bank introduced new deposit products to address the needs of its various customers. Combined with assets held in trust of PhP486 billion, the total funds managed by the bank reached PhP1.2 trillion. BPI’s performance resulted in a 2.6 percentage point improvement in return on equity which reached 15.3% at year-end.
In telecom, Globe Telecom Inc. (PSE: GLO) posted consolidated service revenues of PhP62 billion in 2010, slightly below prior year’s PhP62.4 billion due to intense competition. Performance in the fourth quarter was strong with quarter-on-quarter service revenues up by 7%. This was led by the surge in postpaid plan subscriptions and the increased usage and top-ups in both the Globe Prepaid and TM brands. Globe ended the year with a total SIM base of 26.5 million, 14% higher than in 2009. Steady gross adds and declining churn led to net SIM adds of 1.1 million in 4Q10, the highest since 2Q08. Postpaid net adds also hit a new 7-year high in the fourth quarter resulting in nearly 1.1 million postpaid customers by year-end. Its broadband and fixed line service business also grew with full year revenues up 32% compared to 2009. Globe net income of PhP9.7 billion was 22% lower than prior year, but reflects an improvement from prior quarters. Globe’s capital expenditure reached PhP19.5 billion in 2010 mainly to improve network performance, increase mobile and broadband capacities, and improve customer service capabilities.
Its water business under Manila Water posted net income of PhP3.99 billion in 2010 as a result of steady growth in water sales volume and a one-time downward adjustment on its depreciation expense. Billed volume grew by 3.5% despite the El Nino condition which impacted the water allocation for Metro Manila’s requirements during the year. The company’s investments in the water network contributed to improving non-revenue water further to 11% in 2010 from 15.8% the prior year. This enabled the company to ensure 24/7 delivery of water service to its customers despite the effects of El Niño. In 2010 Manila Water invested at total of PhP9.6 billion to further improve the reliability and expand coverage of its water and wastewater networks. Manila Water aims to invest more than PhP10 billion annually for the next two years for the development of new water sources, network reliability improvements, as well as construction of several sewage treatment plants. Expansion continues beyond the East Zone both within the Philippines and overseas.
Ayala’s automotive dealerships posted revenues of PhP11.5 billion, up 6% versus prior year. Net income rose by 30% to PhP299 million. Ayala remains one of the largest vehicle distributors in the country, capturing 50% of Honda network sales and 30% of Isuzu sales nationwide.
Ayala’s overseas businesses continue to be impacted by the lingering effects of the global downturn in Europe and the U.S. Its electronics manufacturing business, Integrated Microelectronics Inc. (PSE: IMI) revenues grew by 4% to $412 million, driven mainly by the sustained strong performance of its China operations. Net income reached US$4.7 million, a 53% decline versus prior year, partly driven by the global downturn. However, excluding one-off expenses, earnings were up 27%, remaining profitable despite the challenging market environment. Following the acquisition of a 56% stake in PSi Technologies Inc., IMI continues to look for acquisition opportunities to build on its existing capabilities.
Livelt, Ayala’s holding company for its business process outsourcing investments, reported a net profit of $4.9 million in 2010, as a revaluation gain realized on one of its companies more than offset an operating net loss of $15.7 million, which was primarily due to Stream and Integreon. Livelt’s investees recorded a significant improvement in the second half of the year as the improving global economy resulted in higher transaction volumes for their clients. The combined revenues of Livelt’s companies grew to $473 million in the second half of 2010, up 9% over the first half of the year, and their combined EBITDA grew to $39 million, up 65% over the first half.
Its international real estate investments continue to see strong performance of its Asian portfolio with projects in Macau, Thailand, and India receiving strong market reception. However, its US portfolio remained weak as a result of the credit contraction, persistent high unemployment, and weak consumer spending in the U.S. The Company booked impairment provisions on some of its US investments that contributed to AG Holdings losses during the year.
Ayala maintains a very strong financial condition, ending the year with cash level of PhP29 billion and net debt-to-equity of 0.12:1. It is eyeing investments in the infrastructure and power sectors. On a group-wide basis, capital expenditures are expected to reach PhP79 billion this year, 21% higher than capex in 2010, reflecting the group’s optimism on the country’s renewed growth prospects.