Conglomerate Ayala Corporation is expected to report improved third quarter earnings on the back of strong gains in its property and banking subsidiaries, company managing director Rufino Luis Manotok said.
The trend is likely to continue in the last quarter of the year, despite challenges brought about by higher oil prices, the implementation of an expanded value-added tax and persisting political uncertainties, he said.
"We’re definitely ahead of last year on both the third quarter and the three quarters," Manotok told XFN-Asia in an interview.
"We should also be able to sustain the healthy income differential manifested in the second quarter."
Last year, the Philippines’ largest conglomerate reported net profit of
P951.7 million in the three months to September, making a nine-month profit of P3.6 billion.
In the first half of this year, net profit jumped 49 percent to
P3.7 billion as robust earnings from its banking business and extraordinary gains helped offset a decline in income of telecommunications unit, Globe Telecom Inc.
Second quarter net profit came in at
P1.16 billion, compared to P1.62 billion in the same period in 2004.
The company will report its third quarter earnings on Nov 11.
Manotok said units Ayala Land Inc and Bank of the Philippines have been the major drivers of the group’s earnings this year, with Globe, usually a major profit contributor to the group, taking a backseat as higher expenses and slower subscriber growth hit results this year.
"In terms of net profit, our historical high was around
P7.3 billion in 1996 or 1997. We’re getting there," Manotok said, but declined to say whether that could be breached this year.
Ayala Corp’s net profit rose 130 percent to
P7.1 billion in 2004, the highest level in six years.
Manotok is confident that rising oil prices and the expanded sales tax, coupled with the neverending political noise, will not severely impact the conglomerate’s bottom line nor its units’.
"I don’t think these would have any major effect on us to the extent that our sales or our profits would drastically be cut," Manotok said. "People learn to adjust and at the end of the day (the expanded VAT) is a bitter pill which everyone has to swallow."
The new VAT law, to be implemented from Nov. 1, expands the current 10 percent VAT to include previously exempt sectors such as oil, electricity and transportation. It also gives President Gloria Arroyo authority to raise the VAT to 12 percent come January next year and increases the corporate income tax to 35 percent from 32 percent.
"The political noise has been there since the second quarter. But it has been business as usual for us," Manotok said, referring to the almost daily protest rallies urging Arroyo to step down.
Meanwhile, Manotok said the company is looking at possibly prepaying some debts should the opportunity arise. Around $112 million of Ayala Corp’s $550 million debts are to mature next year, he said. (XFN Asia)
"We’ve got excess cash," Manotok said. "Just to give you an idea, we had cash position of
P16.5 billion or roughly $300 million at end-June, fully covering our maturity next year. That means theoretically we don’t need to borrow."
Ayala Corp whose interests include electronics and water distribution is also planning to expand into the power business.
"Yes, we are looking at the power sector," Manotok said. "It is a major area in the Philippines, which we, as one of the largest conglomerates in the country should be compelled to look into."
He did not say whether the company would go into electricity distribution, generation or transmission.
Ayala Corp is also looking at the business process outsourcing sector, currently a sunshine industry in the country, Manotok added.
