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Aboitiz Equity Ventures bullish as PH welcomes new leadership

The conglomerate reports P5B net income for Q1 and eyes further growth in all its core businesses.
By Lynda C. Corpuz |
FOR RENEWABLE ENERGY. President Benigno Aquino III and Aboitiz Equity Ventures (AEV) President and CEO Erramon Aboitiz (3rd from right) lead the ceremonial switch-on during the inauguration of the 59MW San Carlos Sun Power Inc. Solar Power Plant in San Carlos Ecozone, Barangay Punao, San Carlos City, Negros Occidental. AboitizPower contributes majority to AEV's income.  Photo by Joseph Vidal / Malacañang Photo Bureau



With a P5-billion ($107.81-million) net income from the first quarter of 2016, publicly listed holding and investment company Aboitiz Equity Ventures, Inc (AEV) is bullish that its growth will continue, on the backdrop of an economy which fate is being watched as the country recently elected its new president.


At the company’s annual stockholders meeting on Monday, May 16, AEV President and CEO Erramon I. Aboitiz said they are very upbeat about the country’s economy and that their businesses are well positioned for growth.


“The incoming president (Davao City Mayor Rodrigo Duterte) is going to inherit a government that’s in a very good financial position,” he said.


Related: Duterte’s 8-point economic plan revealed


Aboitiz added that AEV is hoping to have the largest percentage of their growth in infrastructure projects, especially if the new administration will continue the outgoing leadership’s plan to increase spending in infrastructure to 5% of the country’s gross domestic product, plus the roll out of the government’s private-public partnership (PPP) program.



“If the economy grows 6% to 8%, I think all of our businesses will grow quite nicely,” he added.


AEV reported a 24% jump in this net income from January to March this year mainly due to the strong performance of its power, banking and financial services, and infrastructure businesses.



Acquiring assets

Aboitiz Power Corporation (AboitizPower) contributed P3.9 billion ($83.88 million) to the group’s income, 15% higher versus 2015’s P3.3 billion ($70.98 million). Its income performance recorded a 15% year-on-year increase from P4.3 billion ($92.48 million) to P5 billion ($107.54 billion), while its core net income for the first quarter of 2016 amounted to P4.8 billion ($103.24 million) or up by 10% year-on-year.


The business unit is also on track to expand its power generation capacity to 4,000 megawatts (4,000 MW) by 2020. It is also expecting full-year contribution from Therma South’s baseload plant in Davao, the second unit which went online in February.


As for renewable energy, AboitizPower inaugurated on April 19 its 59-MW solar power plant in San Carlos City, Negros Occidental. AEV’s board also approved the sale of its equity interests in Aseagas to Aboitiz Renewables, Inc, which will build plants that produce renewable energy from organic waste. The business unit’s renewable energy portfolio currently comprises 40% of its total net sellable capacity (currently at 3,350 MW to date).



AboitizPower President and Chief Operating Officer Antonio R. Moraza said Monday that renewable (energy) is something close to their heart and “we’ll continue to pursue that vigorously. We’re also exploring geothermal.”


Aboitiz said AboitizPower is looking into acquiring Chevron’s Philippine and Indonesian geothermal assets.


US-based Chevron is selling assets, cutting jobs worldwide, and slashing capital spending to save cash, measures to preserve its dividend amid weak oil prices. Chevron has a 40% interest in Philippine Geothermal Production Co, which produces steam energy for third party-owned geothermal power plants and have a combined capacity of 692 MW.


Asked about Duterte’s pronouncements to improve economic growth in Mindanao by channeling more investment there through improved power supply and infrastructure, Moraza said, “growth is normally never instantaneous. Even if the incoming president is from Mindanao and even if he desires to pour in more (investment in the region), it would still take years before you can feel its effect.”




Tapping the middle class

Union Bank of the Philippines (UnionBank), meanwhile, posted P837 million ($18 million) in income contribution during the first quarter of the year, attributed to the strong growth in net interest income and fees.


UnionBank Chairman and CEO Justo A. Ortiz said on Monday that they are continuing to expand their retail business. In particular, its City Savings thrift bank continues to grow its shares aggressively. The bank also eyes to build a small and medium industry credit portfolio.


Ortiz said the bank is also starting to look at mobile and digital collaboration with FinTech companies, especially that the middle class, particularly the younger segment of it, prefers mobile as a channel for their banking and financial needs.


“(Mobile) is still a very small part of our business but it’s clearly something we’re aware of. It’s something we have to embrace, be comfortable of, to learn, to build relationships with potential competitors, but [they could also] help us build a better customer experience,” Ortiz noted. 




Growth contributors

AEV’s non-listed food subsidiaries (Pilmico Foods Corporation, Pilmico Animal Nutrition Corporation, and Pilmico International Pte Limited) posted though a 6% decline year-on-year in its first quarter income, contributing P389 million ($8.37 million) from P416 million ($8.95 million). But Feeds Philippines’ bottom line improved by 39% to P203 million ($4.37 million) due to strong volume and lower raw material prices.


Pilmico Foods Corporation President and CEO Sabin Aboitiz shared on Monday that they are experiencing double-digit growth in Vietnam, particularly on the export side. They have also started exporting flour to five different countries in the Indo-China region. “That will keep us busy in the next two to three years,” he said.


Asked about their partnership with Ayala Land Inc, Aboitiz Land President and CEO Andoni F. Aboitiz said they will break ground for the estate portion of the planned urban enclave in Mandaue City, Cebu on Monday, June 6.


He also confirmed that Landmark will be the anchor tenant of the planned mall within the enclave. Both parties will build a 15-hectare mixed-use community in the Mandaue City, consisting of residential, retail, and office components.



AboitizLand total earnings and income contribution to AEV for the first quarter went down by 38% year-on-year from P80 million ($1.72 million) to P50 million ($1.08 million).


AEV’s infrastructure company, Republic Cement and Building Materials, Inc. (RCBM), which started contributing mid-September last year, posted an income contribution of P391 million ($8.41 million) for the period in review.




Lynda is the editor in chief of Follow her on Twitter, @lyndaccorpuz and LinkedIn,

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