AEV earns P17.7 billion net income in 2015

Aboitiz Equity Ventures, Inc. (“AEV” or “the Company”) saw its 2015 consolidated net income decline by 4% YoY (year-on-year) to P17.7 billion from P18.4 billion in 2014. This translates to P3.18 in earnings per share. Power accounted for 73%, followed by the Banking and Financial Services, Food, Land, and Infrastructure SBUs (strategic business units) with income contributions of 14%, 9%, 3%, and 1%, respectively.

For the period ending December 31, 2015, the Company incurred a non-recurring loss of P602 million (versus last year’s gain of P436 million), which mainly resulted from the mark-to-market revaluation of the Power business unit’s consolidated dollar-denominated assets and liabilities. Adjusting for these one-off’s, AEV’s core net income amounted to P18.3 billion, which was 2% higher than last year.

Strategic Business Units

Power

Aboitiz Power Corporation’s (AboitizPower) income contribution to AEV increased by 6% YoY, from P12.7 billion to P13.5 billion.

AboitizPower’s income performance recorded a 5% YoY increase, from P16.7 billion to P17.6 billion. This translated to earnings per share of P2.39. . Adjusting for its non-recurring mark-to-market loss of P762 million (versus last year’s loss of P136 million), the Company’s core net income for 2015 amounted to P18.4 billion, up by 9% YoY.

AboitizPower’s generation group accounted for 79% of earnings contributions from AboitizPower’s business segments, recording an income share of P13.9 billion for 2015, up 3% YoY. Netting out one-off items, AboitizPower’s generation business generated P14.8 billion for the period, which was 9% higher than last year. The growth was attributable to the higher sales volume from the coal and large hydro groups that offset the decrease in revenues from the geothermal group due to steam decline. Moreover, the impact of Magat, Binga, and Therma Marine plants’ income tax holiday expiration were offset by the large hydro group’s lower financing cost and the geothermal group’s and oil business unit’s lower operating expenses.

For full year 2015, AboitizPower’s attributable net generation rose by 11% YoY, from 11,272 GWh to 12,550 GWh, as electricity sold through bilateral contracts, which made up 91% of total energy sold during the period, expanded by 18% to 11,383 GWh. On the other hand, spot market sales decreased by 28% from 1,612 GWh to 1,168 GWh.

In terms of capacity, higher sales through bilateral contracts and ancillary services resulted to a 6% YoY increase in AboitizPower’s attributable sales to 1,900 MW.  The new capacities from Therma South and Hedcor Sabangan, along with the higher ancillary revenues of the large hydros and higher dispatch of the oil business unit, more than offset the decrease in APRI’s available capacity due to steam decline. Meanwhile, ancillary sales improved by 41% due to better water inflows as compared to the previous year. The completion of the construction of the 14-MW Sabangan run-of-river hydroelectric and 260-MW (net) Davao Coal resulted to an increase in the Company’s net attributable sellable capacity to 2,532 MW.

Likewise, power distribution group’s earnings share for full year 2015 increased by 19%, from P3.2 billion to P3.8 billion. This is equivalent to 21% of income contributions from AboitizPower’s business segments. The group’s gross margin on a per kWh basis in 2015 decreased to P1.61 from P1.71 a year ago. This was brought about by the continued operations of Davao Light’s embedded plant to meet the shortfall in the Mindanao grid. Growth in demand from lower margin industrial customers also contributed to the decline in per kW margins. The overall improved performance of the group was mainly from higher attributable electricity sales which increased by 6% YoY, from 4,480 GWh to 4,759 GWh as energy sales grew across all customer segments as well as the full-year contributions from LiMA EnerZone which was acquired last year.

Banking & Financial Services

Union Bank of the Philippines’ (UnionBank) income contribution to AEV decreased by 22% YoY, from P3.2 billion to P2.5 billion.

Strong growth in recurring net income partially offset the absence of trading gains, resulting in full year 2015 earnings falling to P5.3 billion as compared to the P6.8 billion posted the previous year.  This translated to return on average equity and return on average assets at 10.2% and 1.2%, respectively.

As of end-December 2015, UnionBank’s total resources remained steady at P433.3 billion, mainly as the Bank re-balanced its asset portfolio by growing customer businesses and rationalizing liquid assets funded by high cost deposits. Loans increased by 29% to P179.6 billion.  Investment securities, which are mostly at amortized cost and providing steady stream of cash flows, increased by 26% to P101.6 billion.  Due from banks and interbank loans, declined by 40.5% to P106.6 billion as the Bank deliberately let go of its investments in low-yielding assets that are funded by high cost deposits.  As a result, high cost deposits declined by 8.0% to P165.2 billion, while demand and savings deposits (which are considered low cost deposits) increased by 11.3% to P146.4 billion, resulting for average CASA ratio to improve to 37.6% in 2015 from 30.2% in 2014.  The Bank’s capitalization remained more than adequate to support the growth of its business segment, with a capital adequacy ratio of 16.2%.

AEV’s newly-acquired company, Petnet, Inc. (PETNET) only began contributing last June of the year and posted income contribution of P8.2 million for the period in review.

Food

AEV’s non-listed food subsidiaries (Pilmico Foods Corporation, Pilmico Animal Nutrition Corporation and Pilmico International PTE Limited) recorded a stellar 31% growth in 2015 NIAT to P1.7 billion. This is a P400 million earnings improvement from last year’s P1.3 billion. The increase was propelled by the spectacular performance of Feeds-Philippines whose income contribution more than doubled from P11 million to P849 million. Feeds-Vietnam, which celebrated its first anniversary last August, delivered P85 million to the bottomline.  Flour earnings contribution was flat at P556 million. The growth in income of both the Feeds Philippines and Feeds Vietnam businesses was able to boost Food Group’s income contribution for the period despite the decline in Farms contribution to the bottom line. Farms’ income contribution fell 42% to P220 million on lower prevailing market selling price of live hogs.

Land

AEV’s land subsidiary, Aboitiz Land, Inc.’s (AboitizLand) total earnings and income contribution to AEV decreased by 15% YoY, from P633 million to P536 million.

AboitizLand posted revenues of P2.6 billion at the end of 2015. The industrial business unit accounted for 52% contribution to revenues (P1.3 billion), while the residential business unit stood at 43% (P1.1 billion). This year’s growth was driven by the industrial business unit, which has consistently topped its target, as well as the 8% increase in sales coming from the residential business unit. The rest of the revenues amounting to P120 million came from the commercial business unit and other revenue streams.

AboitizLand is positioned for a more exciting 2016 as various projects in the pipeline are being prepared for launch. To support growth initiatives, the company is targeting a P4.6 billion CAPEX in 2016, almost three times the CAPEX spent in 2015. About 29% of total CAPEX will be spent for land acquisition and 65% on project development, as the company prepares for growth.

Infrastructure

AEV’s newly-acquired company, Republic Cement and Building Materials, Inc. (Republic) only started contributing last mid-September of the year and posted income contribution of P194.4 million for the period in review.

“The income contributions from our infrastructure and offshore food businesses affirm our growth strategy to diversify our earnings base through our fifth business leg, infrastructure, as well as gradually expand overseas, not just locally,” Erramon I. Aboitiz, AEV President and Chief Executive Officer, said.

“We will continue to pursue selective PPP leads as the government opens up unique opportunities in key infrastructure segments. We expect to invest time and resources in finding the right local and international partners that can provide the market and technical know-how, in addition to our local market knowledge and industrial expertise,” Aboitiz added.