AEV Income for the First 9 Months Up 12% to P18 bn
Manila, Phils. – Aboitiz Equity Ventures, Inc. (AEV) ended the first nine months of 2012 with a consolidated net income of P18 billion (bn), up by 12% year-on-year (YoY) from P16 bn. This translates to an earnings per share of P3.26. Among AEV’s strategic business units (SBUs), the power unit continued to account for the lion’s share of the company’s income, at 78%, followed by the banking and food units with income contributions of 17% and 5%, respectively.
The company incurred a non-recurring gain of P894 mn (versus last year’s non-recurring loss of P28 mn), as a result of the revaluation of group-wide dollar-denominated liabilities and placements. Meanwhile, the power SBU booked a non-recurring net loss during the period as the recorded gains on the redemption of shares made by its associate companies was countered by the following: 1) higher fuel cost booked by its geothermal plants due to reimbursements made to its steam supplier; 2) the downward revenue adjustment of a wholly-owned subsidiary as a result of an ERC ruling regarding its ancillary services contract, and 3) the debt prepayment cost incurred at the Parent level. AEV’s share in the aforementioned one-offs amounted to P513 mn, which places AEV’s core earnings for the period ending Sept. 30, 2012 at P17.6 bn, higher by 14% YoY.
For the third quarter alone, AEV registered a consolidated net income of P6.2 bn, increasing by 7% YOY from P5.8 bn. Out of the total earnings contributions from the company’s SBUs, power accounted for 76%. The income share of the banking and food SBUs were at 18% and 6%, respectively.
For the three-month period in review, the revaluation of dollar-denominated liabilities and placements across the AEV group resulted to a non-recurring gain of P169 million (mn), versus last year’s P138 mn. In addition, the company had to book a net total of P296 mn in non-recurring costs to account for its share in the power SBU’s one-off expenses relating to a downward revenue adjustment. The adjustment resulted from a recent ruling by the industry regulator regarding the tariff structure for the ancillary services contract of one of its subsidiaries and debt prepayment costs incurred at the Parent level. Adjusting for these, AEV closed the quarter with a core net income of P6.3 bn, up by 9% YoY.
Power
Aboitiz Power Corporation (AboitizPower) contributed P14.1 bn, vis-a-vis last year’s P12.4 bn. When adjusted for non-recurring items, AboitizPower recorded a 16% YoY expansion in its earnings share, from P11.9 bn to P13.7 bn.
Higher average selling prices and increased net generation resulted to a 12% YoY hike in the earnings contribution of the power generation business for the period in review, from P11.7 bn to P13.2 bn.
As of Sept. 30, 2012, AboitizPower’s average price for its power increased by 6% YoY. This was mainly driven by a 38% YoY increase in the average selling price of electricity at the Luzon Grid’s Wholesale Electricity Spot Market. Supply of power in Luzon was limited given higher outage levels during the period in review. The Luzon Grid, meanwhile, recorded a 5% YoY expansion in its recorded peak demand, with the hotter climate as one of the factors pushing up demand level to almost 7,800 megawatts (MW).
AboitizPower’s attributable net generation rose by 10% YoY, from 7,175 gigawatt hours (GWh) 7,903 GWh, as electricity sold through bilateral contracts expanded by 15% YoY. In terms of capacity, the company sold, on an attributable basis, 1,562 MW. This was 12% higher than last year’s given increased capacity sales through bilateral contracts.
The partial completion of the rehabilitation of the Binga (2 of 4 units) hydropower plant coupled with the commercial operation of the 4-MW Irisan Greenfield hydropower plant resulted to a marginal increase in AboitizPower’s attributable capacity to 2,353 MW as of end-September 2012.
“AboitizPower is committed to support the country’s growth by providing power when needed, at a reasonable cost and with the least adverse effect to the environment. The company aims to achieve a sustainable balance between People, the Planet and Profit. We are adding capacity or rehabilitating existing plants to ensure the economic growth of our country,” said Erramon Aboitiz, AEV president and CEO.
Expansions in volumes and margins resulted to a 25% YoY increase in the earnings share of AboitizPower’s distribution group for the first nine months of 2012, from P1.3 bn to P1.7 bn. Total attributable electricity sales increased by 6% YoY, from 2,764 GWh to 2,935 GWh.
Demand from all customer segments continued to grow with the industrial segment recording a 7% YoY expansion in volume sales, while residential and commercial accounts registered 5% and 3% YoY growth, respectively. Meanwhile, the group’s gross margin improved by 13% YoY mainly due to the implementation of the distribution utilities’ approved rates under the Performance Based Regulation (PBR). Another driver for the group’s enhanced gross margin was the reduced systems loss, with VECO in particular reducing its level of system loss by 0.7 percentage points, as a result of initiatives implemented during the period in review.
“We will continue to focus on revenue protection efforts to control systems losses. In our quest to continuously raise the bar, we will also pursue upgrading our facilities and infrastructure to provide an even more reliable and efficient distribution network,” Aboitiz added.
Financial Services
AEV’s banking SBU contributed P3.1 bn for the first nine months of 2012, up by 15% YoY from P2.7 bn.
Union Bank of the Philippines (UnionBank) ended the period with an earnings contribution of P2.8 bn, up by 19% YoY. This was on the back of higher net interest income and hefty trading gains booked during the period.
Net interest income improved by 5% to P5.5 bn, as the 22% improvement in funding costs from interest bearing liabilities more than offset the 6% drop in income from earning assets.
Total other income increased by 10% to P8.2 bn from P7.5 bn a year ago primarily driven by higher trading gains. Premium revenues fell by 9% to P1.2 bn on lower sales of its subsidiary’s pre-need plans. Operating expenses amounted to P6.6 bn, 6% higher than last year’s P6.2 bn, mainly on higher salaries and employee benefits, and taxes and licenses. Corresponding to the lower sale of pre-need plans, trust fund contribution dropped by 9% to P1.1 bn.
UnionBank’s asset base stood at P227.8 bn with a deposit base of P155.9 bn and a loan book of P90.9 bn. The bank’s total capital adequacy ratio (CAR) and Tier 1 ratios further strengthened to 20.5% and 17.7%, respectively.
“We are seeing our efforts of building a great retail bank bear fruit. The double-digit growth in our consumer loans drove the increased profits of UnionBank. We expect this to continue to propel the bank’s bottomline moving ahead.” Aboitiz said.
AEV’s non-listed thrift bank, City Savings Bank (CitySavings), posted a 12% YoY decline in earnings contribution of P318 mn during the first nine months of 2012. Gross interest income grew by 17% YoY to P1.6 bn. This was mainly attributable to the strong growth in the bank’s interest income on loans, which increased by 39% YoY to P985 mn from P710 mn a year ago.
CitySavings’ ongoing expansion program led to an increase in operating expenses of 33% YoY, which was the main cause for the bank’s reduced profitability. Its loan book of P12.6 bn and total resources of P15.9 bn was higher by 27% and 22%, respectively, vis-à-vis yearend 2011 levels. NPL ratio as of end-September 2012 was at 1.47% while the NPL coverage ratio further improved to 116% from 101% of the previous quarter. Total capital funds stood at P2.1 bn, with a capital adequacy ratio of 15.1%.
Food
Pilmico Foods Corporation recorded a 3% YoY decline in its income contribution to AEV, from P937 mn to P906 mn. Nevertheless, this is significantly better than the 20% decline in net income contribution reported during the first half of 2012. Higher overall sales were countered by decreasing margins resulting from softer prices and an uptick in input costs for the feeds and swine divisions.
Financial Condition
As of Sept. 30, 2012, AEV’s consolidated assets amounted to P211 bn, up by 5% from the yearend 2011 level. Cash and cash equivalents was at P30.8 bn, 4% higher than the yearend 2011 level of P29.5 bn. Consolidated liabilities amounted to P106.3 bn, while Equity Attributable to Equity Holders of the Parent increased by 11% to P85.4 bn. Current ratio remained at 3.0x (similar to the yearend 2011 level), while net debt-to-equity ratio was at 0.5x (versus year-end 2011’s 0.6x).
Other Developments
Acquisition of AboitizLand.
On Sept. 27, 2012, the AEV Board of Directors approved the proposal to acquire 100% of affiliate Aboitiz Land, Inc. (AboitizLand) at the transaction cost of P3.2 bn. The transaction is expected to be completed in November upon the execution of the requisite Share Purchase Agreement and other collateral contracts through its subsidiary, Cebu Industrial Park Developers.
AboitizLand, a wholly-owned subsidiary of Aboitiz and Company, Inc., is one of the country’s leading Cebu real-estate developers with investments in residential, commercial, and industrial developments. AboitizLand is also the developer and operator of two economic zones, the Mactan Economic Zone II in Barangay Mactan, Lapu-Lapu City, and the West Cebu Industrial Park in Balamban, Cebu.
Buyback of UnionBank and AboitizPower shares
As of Sept. 30, 2012, AEV has acquired close to 8 million additional shares in UnionBank through the market. This increased the company’s total shareholdings in the bank to 44.52% from 43.27% at the start of the year.
During the same period, AEV also acquired around 31.7 million additional shares in AboitizPower through the market, increasing its total shareholdings to 76.83% from 76.40% at the start of 2012.
