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JG Summit plans 28% capex rise focused on petrochemical, airline expansion

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JG Summit Holdings, Inc. is increasing its capital expenditures (capex) this year, banking on a growing economy in expanding its petrochemical, airline, property, food and beverage and banking businesses.

The conglomerate said at its shareholder meeting late Thursday it has a capital spending budget for 2019 of P87.5 billion, up 28% from a year earlier.

“We expect to spend higher in 2019 with a budget of P87.5 billion for the full year, which will mostly (finance) the completion of our petrochemical expansion project,” JG Summit President and Chief Executive Officer Lance Y. Gokongwei said.

About P32.4 billion will go to JG Summit Petrochemical Corp., which Mr. Gokongwei said will focus on expanding its naphtha cracker plant and polypropylene facilities.

“The Philippine economy continues to be quite buoyant. The demand for resin tends to grow faster than economic growth, especially in a country like ours where the middle class is growing significantly. We think there’s going to be, in the medium term, a significant market in the Philippines for plastics and the like,” he told reporters after the meeting.

He added the company intends to branch out into other products. “We’ll be the first facility in the Philippines to have the butadiene and BTX (benzene, toluene and xylene) production facilities. That will help expand the value added in the Philippines,” he said.

Cebu Air, Inc., which operates budget carrier Cebu Pacific, will take the next biggest share of JG Summit’s capex at about P27.1 billion. Robinsons Land Corp. will be allocated P18.1 billion, and Universal Robina Corp. P9.1 billion.

Mr. Gokongwei said the remaining units of JG Summit will have “quite minimal” spending in 2019.

The conglomerate also noted it has P24 billion worth of debt at the parent company level that will be maturing in August. Mr. Gokongwei said the company is looking to refinance about P15 billion of that balance either through bonds or a bilateral agreement with banks.

“We don’t anticipate any issues; a couple of banks have already offered to fund us on a bilateral basis. So we’re exploring that. We’re also exploring going to the bond market to refinance the P15 billion. The rest will be paid down via excess cash that we’ve generated in the year,” he said.

Mr. Gokongwei also said the group expects to see banking unit, Robinsons Bank, mature into a “universal bank” within the next few years. He added once it reaches that point, the company is likely to conduct an initial public offering for the business.

“We’re aware of the need to be a bigger bank, so we’re always on the lookout for M&A (mergers and acquisitions). But whether we do it through M&A or organically, I’m pretty confident in five years we will be a universal bank. Because our capital is already P16 billion,” he said.

Robinsons Bank currently has around 150 to 160 branches nationwide, and Mr. Gokongwei said the group intends to grow this to at least 200 branches and to increase the bank’s capital to P20 billion. — Denise A. Valdez





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