AEV posts P11.9 billion net income in first nine months

Aboitiz Equity Ventures, Inc. (AEV) reported a 17% year-on-year (YoY) consolidated net income decline from P14.3 billion to P11.9 billion from January to September 2015. This translates to P2.14 in earnings per share. Power accounted for 75% of the total earnings contributions, followed by the Banking and Financial Services, Food and Land Strategic Business Units (SBUs) with income contributions of 12%, 11%, and 2%, respectively.

During the nine-month period, the Company incurred a non-recurring loss of P623.2 million (versus last year’s gain of P379.6 million), which resulted from the revaluation of the Power SBU’s consolidated dollar-denominated liabilities and placements. Adjusting for these one-off’s, AEV’s core net income amounted to P12.5 billion, which was 10% lower than last year.

Strategic Business Units

Power

For the first nine months of 2015, Aboitiz Power Corporation (AboitizPower) reported an income contribution of P9.4 billion, registering a 7% decrease when compared to previous year’s P10.1 billion. When adjusted for non-recurring items, the Power SBU recorded a 3% YoY decline in its earnings share, from P10.3 billion to P10 billion.

As of end-September, AboitizPower’s attributable net generation rose by 9% YoY, from 8,395 GWh to 9,161 GWh, as electricity sold through bilateral contracts, which made up 90% of total energy sold during the period, expanded by 16% to 8,254 GWh. On the other hand, spot market sales decreased by 28% from 1,266 GWh to 907 GWh.

In terms of capacity, higher sales through bilateral contracts and ancillary services resulted to a 5% YoY increase in AboitizPower’s attributable sales from 1,782 MW to 1,866 MW.  Meanwhile, improving water levels boosted ancillary sales improved by 38%.

As part of the Company’s ongoing capacity expansion program, Unit 1 of Davao Coal, with a net sellable capacity of 130 MW, began commercial operations last September 18 while Unit 2 is expected to be commissioned within the first half of 2016. Construction has also commenced for the Company’s 59-MW Negros Solar Energy Project.

AboitizPower recently disclosed that it entered into agreements to explore and develop a potential 2×55 MW geothermal plant with PT Medco Power Indonesia in East Java Province, Indonesia and a potential 127 MW hydropower generation project with SN Power AS and PT Energi Infranusantara along the Lariang River in Central Sulawesi, Indonesia.

SN Aboitiz Power-Magat, Inc. also signed a Memorandum of Agreement with the National Irrigation Administration (NIA) for the construction of an 8.5 MW hydroelectric power plant along the Maris Main (South) Canal in Magat.

Meanwhile, the power distribution group’s earnings share for the first nine months of 2015 increased by 6% to P2 billion. Spearheaded by a 9% growth in industrial sales, total attributable electricity sales increased by 7% YoY, from 3,299 GWh to 3,546 GWh.

The group’s gross margin during the period, however, decreased by 3% YoY from P1.68 per kWh to P1.64 per kWh. The drop mostly came from Davao Light & Power Company, Inc., which incurred higher direct cost due to the lag in recovery of pass through charges and the additional cost for running its embedded plant during the period.

Banking and Financial Services

Union Bank of the Philippines’ (UnionBank) income contribution from January to September recorded a 40% decrease YoY, from P2.4 billion to P1.4 billion. The decline was essentially due to trading losses coupled with the increase in operating expenses. This performance translated to annualized return on average equity of 7.9% and return on average assets of 1.1%.

By end-September, net interest income grew by 8% to P8.6 billion boosted by higher interest income on loans and other receivables coupled with relatively flat funding cost. Total other income, meanwhile, slid by 22% to P4.6 billion due to trading losses amounting to P0.2 billion as compared to P1.7 billion trading gains posted in the same period last year.

Food

AEV’s non-listed food subsidiary, Pilmico Foods Corporation (Pilmico), recorded a stellar growth of 46% YoY in the first nine months, from P942.2 million to P1.4 billion. The increase was propelled by the spectacular performance of Feeds-Philippines whose income contribution more than doubled from P282.2 million to P573.7 million. Its international arm Feeds-Vietnam, which turned a year last August, added P90 million to the bottom line.

Flour’s earnings also strengthened by P112.5 million to P526 million due to the 5% increase in sales volume amplified by higher non-core income from the sale of by-products. The growth in income of both the Feeds and Flour businesses were able to boost the Food Group’s income contribution for the period despite the decline in Farms contribution to the bottom line. Farms’ income contribution fell by 27% to P179 million on lower prevailing market selling price.

Land

AboitizLand Inc. (AboitizLand) registered a YoY decline of 56% in its net income contribution for the period from P565.4 million to P249 million. Lower sales in Lima Land industrial lots and higher manpower cost due to organizational expansion prompted a 20% decrease in consolidated revenue amounting to P1.7 billion.

The company spent P1.4 billion in capital expenditures during the first nine months of this year, the bulk of which was spent on project completion (63% of the total), while the remaining balance was used for land acquisition and other initiatives. AboitizLand will employ more capital expenditure this year to sustain the company’s growth trajectory in the coming years.

Other Developments

Meanwhile, AEV’s newly acquired companies – PetNet, Inc. (PetNet) and Lafarge Republic, Inc. (LRI), which only began contributing last June and mid-September of the year respectively, posted income contributions of P14.7 million and P22.4 million for the period in review.

“Despite the slight slide in profits, our strategic growth plans – whether at home or abroad – remain intact. Our recent foray into infrastructure through LRI, for instance, represents an excellent opportunity to be involved in nation building and participate in the robust growth expectations in that sector,” said AEV President and Chief Executive officer Erramon I. Aboitiz said.

“We believe progressive infrastructure is what will propel our country’s economic growth and what will ultimately lead to a better life for our fellow Filipinos. Overseas, we remain on the lookout for growth opportunities that fit into our investment parameters, ensuring that will deliver value to our stakeholders,” he added.

About Aboitiz Equity Ventures

Aboitiz Equity Ventures, Inc. (AEV) is the publicly listed holding and investment company of the Aboitiz Group with major investments in power, banking, food, land, and infrastructure. AEV is recognized as one of the best-managed companies in the Philippines and in the region, and is acknowledged for its good corporate governance.