A 41% increase in UnionBank’s net income contribution to parent firm Aboitiz Equity Ventures, Inc. failed to offset the lower contribution from Aboitiz Power Corporation in the first three quarters of 2019.
AEV’s net income from January to September 2019 was ₱15.7 billion, 9% lower than the ₱17.3 billion recorded in the same period of 2018.
Its power unit, Aboitiz Power Corporation, contributed P10.4 billion, 19% or P2.4 billion lower than the P12.8 billion in 2018 for the same period. AboitizPower accounts for 60% of total income contributions.
Union Bank of the Philippines’ (UnionBank) income contribution was ₱4.2 billion, 41% or P1.2 billion more than the ₱3 billion in the same period in 2018. Banking and financial services account for a quarter, 25%, of total income contributions.
AEV said in a statement that it recognized non-recurring losses of ₱155 million, lower than the previous year’s ₱407 million, representing net foreign exchange and derivative losses.
Without these one-off losses, AEV said its core net income was ₱15.9 billion, 10% lower from ₱17.7 billion in 2018, for the January to September period.
The company recorded consolidated earnings before interest, tax, depreciation, and amortization (EBITDA) of ₱44.8 billion, a 2% decrease from the ₱45.5 billion last year.
“Despite challenges in our power business, better operating performance in our non-power businesses provided resilience to our investment portfolio. As we fund our growth projects, we look to further broaden and strengthen our diversification in the Philippines and overseas,” said Erramon I. Aboitiz, AEV president and chief executive officer.
On a stand-alone basis, AboitizPower’s core net income for the first three quarters of 2019 was ₱13.7 billion, a 26% decrease year-on-year.
Including non-recurring losses of ₱220 million for the first nine months of 2019, AboitizPower’s net income was ₱13.5 billion, 19% lower compared to the corresponding period last year.
This was primarily due to the higher volume and cost of purchased power, lower spot market revenues, and lower plant availability.
In a separate statement, AboitizPower said spot market prices were high in the first half of 2019, during which the company purchased replacement power due to outages and contracting ahead in preparation for Therma Visayas, Inc.’s incoming capacity.
Plant availability was also lower versus the same period in 2018 due to outages from the company’s coal facilities.
“It has been a tough year for AboitizPower with the supply issues that resulted in the high cost of replacement power for our customers. The company has also generated lower revenues from the spot market due to challenges that caused some of our power plants to shut down,” said Emmanuel V. Rubio, AboitizPower chief operating officer.
“Despite this, our customer base continues to grow, which underscores the consumers’ trust and confidence in AboitizPower. Moreover, we remain confident that with our incoming capacities, we will surpass our 2020 target of 4,000 megawatts attributable capacity, ensuring sustainable growth for the company, our shareholders, and the customers and communities we serve,” Rubio added.
Income from the generation and retail electricity supply businesses accounted for 80% of total income contributions from AboitizPower’s business segments, which declined 18% to ₱12.6 billion during the first nine months of 2019.
Banking & Financial Services
On a stand-alone basis, UnionBank and its subsidiaries recorded a net income of ₱8.5 billion in the first nine months of 2019, 40% higher compared to the ₱6.1 billion recorded in the same period last year.
The growth was primarily driven by robust revenues coming from the sustained double-digit growth in earning assets as well as strong trading gains for the first three quarters of 2019.
Contribution from AEV’s non-listed food subsidiaries Pilmico Foods Corporation, Pilmico Animal Nutrition Corporation, and AEV International Pte. Ltd. (AEVI) amounted to ₱1 billion in the first nine months of 2019, a 31% decrease from the ₱1.5 billion recorded in the corresponding period in 2018.
This was due to declines from the feeds and farms business segments, which fell due to higher manufacturing costs and operating expenses, and decreased margins following increased feeds costs and lower live hog selling prices, respectively.
AEVI subsidiary Pilmico International Pte. Ltd., however, delivered a net income of ₱683 million in the first nine months of 2019, 84% higher due to higher full nine-month income contributions from Gold Coin Management Holdings and Pilmico Vietnam Feeds.
Gold Coin was acquired during the second quarter of 2018. Pilmico Vietnam benefited from better selling prices and lower raw material cost.
In the first nine months of 2019, 31% of the food group’s total earnings were generated offshore, an increase from 17% the previous year.
For the infrastructure group, Republic Cement & Building Materials, Inc.’s income contribution to AEV for the first three quarters of 2019 amounted to ₱631 million, 186% higher than the ₱221 million reported in the same period last year.
This was primarily due to improved control on production costs, increased private sector demand, and the completion of several debottlenecking projects.
AEV’s non-listed real estate segment, comprising Aboitiz Land, Inc. (AboitizLand) and its subsidiaries, reported a consolidated net income of ₱829 million for the first nine months of 2019, 106% higher than the ₱404 million recorded in the same period in 2018.
This was mainly due to fair valuation gains on investment properties recognized in the third quarter of 2019 which were not present in the same period last year.
The food units account for 6% of total income contributions while land contributes 5% and infrastructure, 4%.
AEV’s share prices went down by 3.8% to P54.4 apiece on November 6, 2019, shortly after the release of its earnings report.
AboitizPower shares also declined by 3% to P39.15 apiece on November 6, 2019. (Ventures Cebu)