Makati–(PHStocks)–Ayala Corp. (PSE: AC) has posted consolidated unaudited reported net income of PhP9.4 billion in 2011. This is 16% lower than reported net income in 2010, which included an extraordinary net gain of PhP3.6 billion versus only PhP611 million this year. Excluding extraordinary gains this year and last year, net income grew by 16% year-on-year. The strong growth in recurring earnings was driven by core businesses in real estate, banking, and water as well as improvements in its international real estate business and BPO businesses.
Most of the company’s core business units posted record earnings in 2011. Ayala Land Inc. (PSE: ALI) achieved a record net income of PhP7.1 billion, 31% higher than prior year on the back of strong double-digit revenue growth across all business segments and margin improvements.
Banking unit Bank of the Philippine Islands (PSE: BPI), posted an all-time high net income of PhP12.8B in 2011, a 13% increase over 2010 earnings. This was underpinned by strong net interest income growth and higher net interest margins. The bank’s net loans grew by 20% as top-tier corporates, middle market and SMEs and consumer loans expanded at double-digit rate.
Telecom unit Globe Telecom Inc. (PSE: GLO)outperformed the industry as core net income grew by 11% to PhP10 billion. Globe’s revenues reached an all-time high of PhP67.8B up 9% from last year and ahead of industry’s 2% growth. This was driven by the market’s positive reception of its product and technology innovations and service enhancements.
Finally, water unit, Manila Water Co. Inc. (PSE: MWC) also posted an all-time high net income of P4.3 billion, 7% higher than prior year as billed volume continued to improve and as it connected more households into the system. Its new businesses in Laguna, Boracay, Clark, and Vietnam have likewise contributed positively to earnings.
Earnings of Ayala’s international real estate business turned positive in 2011 from gains realized from the exchange in ownership in Arch Capital and Arch Capital Asian Partners with The Rohatyn Group in the first quarter of last year. 2010 also included provisions for certain assets in its US operations.
The four investee companies under BPO holding company, LiveIt Investments, achieved combined revenues of $1 billion of which LiveIt’s share was $318 million, up 16% versus the prior year. Greater scale and cost efficiencies resulted in its share of EBITDA rising by 63% to $25 million, and in the significant reduction of its net loss, which was primarily due to acquisition related charges.
The weak global economic environment, however, impacted the earnings of its electronics unit, Integrated Micro-Electronics Inc. (PSE: IMI). While IMI’s revenues grew by 40%, its net income declined by 30% as a result of margin pressures from rising direct labor and materials cost.
“We are pleased with the solid performance of our core businesses in real estate, banking, telecom, and water,” said Ayala President and COO Fernando Zobel de Ayala. “Their growth momentum has been very positive and they remain dominant in their respective industries despite intense market competition across these sectors. The robust consumption trend and the healthy macro-economic fundamentals have created a very favorable operating environment. We expect the growth trajectory of our businesses to continue as we aggressively expand our products and services to address the needs of a still largely untapped segment of our population. We also expect our international businesses to improve their profitability moving forward as they benefit from scale following their acquisition initiatives the past years and as they benefit from cost optimization efforts.”
The Ayala group has allotted PhP91 billion for capital expenditures this year, an increase of 38% from capital expenditures last year. The bulk of this year’s allotment is for real estate development, network improvement in its telecom unit, and acquisitions as well as investments in its water business.
Last year, parent company Ayala established a platform for its new businesses in the power and transport infrastructure space. In 2011, the holding company committed capital of close to PhP7 billion for the development of projects in solar, wind, hydro, and thermal power generation, as well as for the construction of a four-lane 4-kilometer road that will link Daang Hari road in Cavite to the South Luzon Expressway under the first public-private partnership (PPP) project of the Aquino government. Ayala is eyeing other projects in the PPP list expected to be rolled-out this year, particularly rail, road, and airport-related projects.
The company has taken an aggressive stance in terms of expansion in the Philippines across multiple sectors, signifying its increased level of commitment to the country’s continued development. It has strong capacity to make these investments. Ayala ended 2011 with a very strong balance sheet with parent company cash of PhP18 billion and a very low gearing ratio with parent net debt-to-equity of 0.24 to 1. Return on equity was at 9%.
Ayala’s share price has risen year-to-date by 34% to PhP417 per share as of the close of trade 8 March 2012, outperforming the Philippine Stock Exchange composite index which rose by 13% over the same period.