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Tax court drops utilities firm’s bid for review

THE COURT of Tax Appeals (CTA) En Banc has dismissed the petition for review filed by First Philippine Utilities Corp. for lack of jurisdiction over the case.
In the decision promulgated Sept. 4, the court stated that it only has jurisdiction over cases that have already been decided and not in “interlocutory orders.”
The First Philippine Utilities filed the petition at the CTA En Banc seeking the reversal of the resolutions of the CTA Second Division dated Feb. 27, 2017 and May 4, 2017 which denied its motions to declare the alleged deficiency tax for the taxable year 2009 as null and void amounting to P289, 733,393.79 as assessed by the Bureau of Internal Revenue.
“The Court En Banc finds the filing of the instant case premature, and must perforce be dismissed for lack of jurisdiction,” the decision read.
The court has cited a previous Supreme Court decision that the CTA En Banc “has jurisdiction over final order or judgment but not over interlocutory orders issued by the CTA in division.”
According to the cited Supreme Court decision on the case titled Commissioner of Internal Revenue vs. Court of Tax Appeals and CBK Power Co. Ltd., a “‘final’ judgment” is an order which “finally disposes of a case” and leaves “nothing more to be done by the Court in respect thereto.”
An interlocutory, on the other hand, is an order that does not finally dispose a case and continues the “task of adjudicating the parties’ contentions and determining their rights and liabilities as regards each other, but obviously indicates that other things remain to be done by the Court.”
“And in instances where an interlocutory order is appealed before the Court En Banc by way of a Petition for Review under Section 4(b) of Rule 8 of the Revised Rules of the Court of Tax Appeals, the Court En Banc has no jurisdiction to review said interlocutory order/s issued by the Court in Division because the Court En Banc may only review decisions, resolutions, or orders of the former in a case that has been resolved with finality and in effect already finally disposed of,” the decision added.
The decision also stated that the corporation is aware that the resolutions assailed are interlocutory because the court still proceeded with trial, until the case was submitted for decision on Nov. 16, 2017, after the issuance of a Feb. 27 resolution which denied the corporation’s omnibus motion.
The May 4 resolution, likewise, is an interlocutory order because it denied a motion for reconsideration on the Feb. 27 resolution.
Section 1, Rule 1 of the 1997 Rules of Civil Procedure, interlocutory order is among which no appeal should be taken from.
Rules of Civil Procedure Section 1, Rule 50, which is also applicable to Revised CTA Rules, states that an “the fact that the order or judgment appealed from is not appealable” is a ground for dismissal.
First Philippine Utilities is a subsidiary of First Philippine Holdings Corp., which is listed in the Philippine Stocks Exchange. — Vann Marlo Villegas

T-bill rates seen to rise

RATES OF Treasury bills (T-bill) on offer today will likely climb as demand is seen to remain subdued as investors await rate hikes from the local and US central banks.
The Bureau of the Treasury (BTr) is offering P15 billion worth of T-bills on Monday. Broken down, the Treasury plans to raise P4 billion through the three-month papers, P5 billion via the six-month T-bills and another P6 billion in one-year debt.
Traders interviewed before the weekend said yields on the T-bills on offer today will pick up from the previous auction.
The Treasury partially awarded the T-bills it placed on the auction block last week, raising just P13.47 billion out of total tenders amounting to P21.9 billion.
At that auction, rates of the three-month, six-month and one-year papers rose to 3.549%, 4,353% and 5.137% respectively.
At the secondary market on Friday, yields on the 91- and 182-day papers were quoted at 3.5332% and 4.4497%, respectively, while the 364-day T-bills fetched a 5.1748% yield.
A bond trader said rates of the T-bills may climb by 10-15 basis points (bp) from the previous auction as demand is expected to diminish.
“Most likely the tendered volume will be smaller. It has been that way for about three weeks. The demand should be lower and yields should be higher,” the trader said in a phone interview.
Another trader concurred, saying the T-bills will likely fetch rates 5-10 bps higher from last week’s offer as investors await the policy actions of the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve later this month.
“It’s more of the monetary policy meetings, both of which the BSP and the Fed will be hiking,” the first trader said.
Earlier this month, BSP Governor Nestor A. Espenilla, Jr. hinted on another round of tightening, saying the central bank will “take strong immediate action” to respond to the emerging threats to prices and inflation expectations.
Inflation quickened to 6.4% in August due to higher food and oil prices. This was faster than July’s 5.7% and August 2017’s 2.6%.
Meanwhile, a September Fed rate hike has been almost fully priced in by the market as the benchmark 10-year US Treasury on Friday passed the 3% mark for the first time in more than a month at 3.003%, Reuters reported.
“For the BSP, it’s more of a 50bp hike, but a 25bp hike is also possible. Definitely, there would be a hike the way I see it,” the first trader said. “For the Fed, it’s priced in already.”
Aside from another round of tightening, the second trader attributed the climb in yields to the weakening peso.
The local currency has been hovering its 13-year lows for the past few weeks, closing Sept. 12’s session at P54.13 against the dollar.
“In terms of currency play given the weak peso, the tendency of the investors is to move out of short-tenored securities to sell pesos and to buy dollars,” the trader said.
The Treasury is raising P300 billion from the domestic market this quarter through auctions of securities, offering P195 billion in T-bills and another P105 billion in T-bonds.
The government plans to borrow P888.23 billion this year from local and foreign sources to fund its budget deficit, which is capped at 3% of the country’s gross domestic product. — Karl Angelo N. Vidal with Reuters

Philam Life plans microinsurance venture

By Karl Angelo N. Vidal, Reporter
THE PHILIPPINE American Life and General Insurance Co. (Philam Life) is looking at venturing into the microinsurance business as it works towards narrowing the protection gap among Filipinos.
In an interview, Philam Life Chief Marketing Officer Leonardo D. Tan, Jr. said offering microinsurance products “has been part of the plan” of Philam Life.
“That has always been part of the plan. It’s just a matter of timing and prioritization,” Mr. Tan told BusinessWorld on the sidelines of the life insurer’s product launch in Makati City on Thursday.
Mr. Tan added that Philam Life might need to team up with certain firms that specializes the microinsurance segment.
“But microinsurance might entail a different distribution platform. That’s where probably be need to partner with certain institutions who have a captive markets when it comes to that segment.”
The life insurer is looking to help narrow the country’s protection gap or the amount of insurance needed by Filipinos.
Mr. Tan said the country currently has a protection gap of around P1.5 trillion which could balloon up to P2.7 trillion by 2020 if not addressed.
Rather than expanding its distribution network, Mr. Tan noted that Philam Life is now focused on improving customer experience.
“For so many years, [it] has been distribution-centric, so our expansion right now is actually how to improve the customer experience,” he said. “What we want to do is improve that entire journey from learning, buying, after-sales, claiming and hopefully referring us to our customers’ friends and family.”
Philam Life added it is using digital platforms to “enhance the experience of the customers” as it veers away from the strategy of other life insurers using e-commerce platforms as a distribution channel.
“In Asia, face-to-face transaction is still important since insurance is highly emotional… Digital will form a part, but customers will still opt to sit down with advisers and have that honest conversation.”
Currently, Philam Life has 8,000 agents. Aside from this, the branches of its bancassurance partner Bank of the Philippine Islands (BPI) also serve as distribution channels.
“You can expect more groundbreaking products. What’s important is you keep on innovating,” Mr. Tan added.
On Thursday, Philam Life launched “Active Joint Critical Protect,” a health and life insurance product that protects two related individuals.
Data from the Insurance Commission as of end-2017 showed Philam Life and its bancassurance affiliate BPI-Philam Life Assurance Co. posted a combined total premium income of P40.2 billion, making the Philam Group the biggest life insurer in the country.
It is serving almost 600,000 individual policyholders and over 2.2 million insured group members.

Bench and CCP join forces to create the terno for the 21st century


IF THE spirit of the Filipina could be contained in one item, perhaps it’s in the terno. The popular adage goes that the Filipina spent 300 years in a convent, and 40 years in Hollywood, and it’s evident in the manner by which the terno falls on the body. The length and the sleeves suggest a certain demureness, but the flamboyant butterfly sleeves achieve a certain sense of pride and action, while the flattering, form-fitting cut and silhouette suggests a confident woman with an ability to stand tall.
The Cultural Center of the Philippines (CCP), in cooperation with clothing conglomerate Bench, has been hard at work with 30 regional designers and several mentors, including Inno Sotto, JC Buendia, Len Cabili, and Cary Santiago. Since last year, this project, called Ternocon, has seen sewing machines whirring in the CCP. The project finally comes to a close on Nov. 11 with a fashion show at the CCP Main Theater. According to Cris Millado, Vice-President and Artistic Director of the CCP, the fashion show will showcase not only the best of Philippine fashion, but also the nation’s performing arts: the Philippine Philharmonic Orchestra and the Philippine Madrigal Singers will perform as the dresses (numbering 90) move on the runway, while several dance performances will be interspersed in between. “What we bring in is to engage it with performance,” said Mr. Millado. It’s the design coming alive onstage on the bodies of performers.”
Ben Chan is founder and Chairman of the Suyen Corp., which holds his namesake brand Bench, along with international brands Aldo, Pedro, Charles and Keith, and American Eagle in the Philippines. Bench by itself is a local brand, but is in itself highly westernized, to the point of getting international endorsers to promote its clothing. But according to Mr. Chan himself, the soul of the company is still Filipino.
“It’s our advocacy,” he said in an interview with BusinessWorld, responding to a question about the company’s collaboration with the CCP. “We wanted to promote anything local, even if we brought in… other foreign brands. We still believe in anything that is local, that hopefully, can go global.”
Speaking about the urgency of teaching young designers about the terno, he said, “It’s something that if you don’t do it now, it just might go away.”
“It’s about history,” said Mr. Millado about educating younger designers about the terno. “I believe you should have a solid background of your history: history that makes your identity specific and unique, which sets you apart.”
“If you look at the silhouette of the terno… to a certain degree — a lot of critics say — it even constricts movement. To me, it puts the body in a certain state of gracefulness, where your body, to a certain degree — it’s not limited — but your movement becomes so nuanced, shaped by that whole silhouette,” he noted.
The terno, then, is not just about a matter of national dress, or Filipino pride: it’s a matter of presenting yourself and your own values. Mr. Millado said, “Sometimes, how we move, how we relate to people depends on how we suit ourselves.” — Joseph L. Garcia

Sugar planters offer concessions on imports, retail prices

SUGAR PLANTERS have offered to sell refined sugar at P48 per kilo, and agreed to the import of up to 300,000 metric tons of sugar to bring down retail prices, Agriculture Secretary Emmanuel F. Piñol said in a statement Sunday.
Mr. Piñol said the planters want to confine the imports to the consumer market only.
“The sugar planters said that they will not ask for royalty payments unlike in previous importations,” Mr. Piñol added.
Mr. Piñol said the Sugar Regulatory Administration (SRA) has issued import permits to planters associations only for the permits to be sold on to traders, allowing some of the latter to control the price of imported sugar.
The Philippine Chamber of Commerce & Industry (PCCI) has called on the SRA through the Department of Agriculture (DA) to allow domestic food processors to import 50% of their sugar requirements, or an initial volume of 100,000 metric tons.
“Imported sugar-based food products from ASEAN now enjoy preferential tariffs of 5% under the ASEAN Free Trade Agreement (FTA). These food processors buy their sugar at the equivalent of P26 to P28 per kilo. These ASEAN products have been coming into the country and threatening similar domestic products with sugar inputs priced from P60 to P65 per kilo,” PCCI Agriculture Committee Chairman Roberto C. Amores said in a statement.
“There are approximately 4,000 to 5,000 domestic food processors using sugar as an ingredient, who are part of more than 90% of MSMEs (micro, small, and medium enterprises), and benefiting 50 to 60 million consumers and stakeholders that would bear the brunt of high cost of sugary products, compared to the 50,000 to 60,000 farmers, who can be shifted to high-value crop production. We sincerely hope that the SRA will heed our request to import,” Mr. Amores added.
Asked if it is possible to agree to the request, Mr. Piñol replied, “[It] depends if we have shortages. We cannot just import sugar if there is no shortfall in production,” he said.
“We do not want to jeopardize the interests of our sugarcane farmers by carelessly allowing importation beyond what is actually needed,” Mr. Piñol added.
In a statement on Sunday, SRA Board Planters’ Representative Emilio Bernardino L. Yulo said that in their decision to allow the importation, they require the SRA to still be in charge of the situation, and emphasized that the imported sugar should only benefit the consumers.
“We have agreed to a calibrated and pre-emptive importation program if the situation so warrants, provided that the Sugar Regulatory Administration will be on top of the situation and provided further that it will continue to exercise its mandate as provided for by law. However, and as stressed by Secretary Manny Piñol in his announcement, this measure will directly benefit only the consuming public,” Mr. Yulo said.
“Sugar milling season has already started and we are confident that we have enough sugar supply in the country, but we are agreeable to this measure in order to avoid a situation similar to what has happened to the rice industry recently,” Mr. Yulo added.
According to the latest data of the Philippine Statistics Authority, sugarcane production was reduced by 26.2% year-on-year to 6.44 million metric tons in the three months to June.
The decrease was due to reduced planting area due to low sugar prices in the Western Visayas; smaller cane due to reduced fertilizer application in Central Visayas; and a reduced harvest due to an early cut-off of milling operations in Northern Mindanao.
According to PSA data, 49.6% of sugarcane production came from the Western Visayas, followed by Mindanao at 15%. Central Visayas and Calabarzon accounted for 13.3% and 10.4%, respectively. — Reicelene Joy N. Ignacio

ABS-CBN launches indoor theme park

ABS-CBN Corp. is expanding its portfolio with the introduction of a new indoor theme park that banks on its line of business as a media company.
The company on Sunday launched ABS-CBN Studio Experience (ABS-CBN Studio XP), a 1,400-square meter amusement park inside Ayala Malls TriNoma.
The new venture joins KidZania Manila in ABS-CBN’s theme parks under its consumer products and experiences business segment.
Cookie S. Bartolome, head of ABS-CBN’s themed experience, told reporters in a media launch on Friday that while ABS-CBN Studio XP costs “significantly lower” than KidZania, it is eyed to one day be a key driver in boosting revenues.
“We’re able to serve the market that KidZania is not able to serve here, so it’s complementary to that business,” she said.
She said for senior and junior high school students, especially those pursuing the Humanities and Social Sciences (HUMSS) track, the park is a good immersion should they decide to pursue media arts because it is a hyper real experience.
The ABS-CBN Studio XP features a total of 15 attractions grouped into three studios: fantasy, reality and retail. The fantasy studio is an augmented reality set-up that mimics experiences and stunts of action stars; the reality studio replicates shows such as “The Voice,” “Minute to Win It” and “Pinoy Big Brother” and allows visitors to take part in the show; and the retail studio showcases various ABS-CBN souvenirs and merchandise.
The themed store also has an 80-seater, four-dimensional (4D) theater for screening of short films and shows, or hosting live events. It could be used as an “interactive multiplayer hub” for game simulation with themes from shows “Ang Probinsyano” and “La Luna Sangre.”
Ms. Bartolome said if the ABS-CBN Studio XP in TriNoma becomes successful, it might be expanded or replicated via similar experience stores in other locations.
“We just wanna see first how the business goes in terms of the mix between retail and attractions,” she said.
“So we’re trying to understand what can drive the [revenue] — can attraction drive it or will the attraction drive the retail revenues?” she said.
A ticket to ABS-CBN Studio XP costs P375 for guests visiting for the first time and P350 for succeeding visits.
In the first half, ABS-CBN reported a 41% plunge in net income to P849.88 million due to higher production costs in the second quarter. KidZania Manila, which follows a similar product pattern as ABS-CBN Studio XP, contributed P231 million in revenues during the semester. — Denise A. Valdez

Peso to drop on trade clash

THE PESO is expected to weaken due to US-China trade tensions.

THE PESO will likely weaken against the dollar this week amid safe-haven buying due to continuing trade tensions between the United States and China.
The peso ended last week at P53.97 versus the greenback, recovering by 10 centavos from the P54.07-per-dollar finish the previous day due to slower-than-expected US inflation figure.
Week on week, the peso declined from its P53.73 finish on Sept. 7.
A foreign exchange trader said before the weekend that the peso will likely trade lower as the level of resistance at P54.10 will likely hold.
“For [this] week, I think the resistance of P54.10 will hold, so we might see the pair trading lower,” the trader said in a phone interview.
Meanwhile, Land Bank of the Philippines market economist Guian Angelo S. Dumalagan said the dollar might appreciate this week on the back of renewed trade tensions between Washington and Beijing as well as “generally upbeat” US data.
In a report from Reuters, US President Donald J. Trump is expected to announce new tariffs on about $200 billion on Chinese imports as early as Monday.
Mr. Trump has already directed his aides to proceed with tariffs despite the attempts of Treasury Secretary Steven Mnuchin to restart trade talks with China.
“Such announcement, which may be released on Monday or Tuesday, could complicate or even derail high-level US-China talks later this month,” Mr. Dumalagan said in an e-mail.
Apart from this, Mr. Dumalagan said the dollar may get additional boost from last Friday’s “generally upbeat” US economic reports.
“While US retail sales grew less than expected in August 2018, consumer sentiment picked up the following month, suggesting a possible acceleration in consumer activity across all major socioeconomic groups,” he added, noting that this may amplify views of another round of tightening from the US Federal Reserve.
The dollar may continue its uptrend until Friday due to lingering geopolitical noise as well as caution ahead of the policy meetings of the Fed and Bangko Sentral ng Pilipinas (BSP).
“The BSP is expected to hike rates by about 25-50 bps in order to address concerns on elevated domestic inflation, while the US central bank is widely expected to increase rates by 25 bps in response to rising inflation and a tightening labor market,” Mr. Dumalagan said.
He also noted that expectations of a hawkish move from the BSP may temper the dollar’s gain.
For this week, the trader expects the peso to move between P53.85 and P54.10, while Mr. Dumalagan gave a P53.80-P54.30 range.
“The factors that could reverse or soften the dollar’s projected upward bias include surprising positive developments on the US-China trade conflict and unexpected hawkish moves from the [Bank of Japan],” the market economist added. — Karl Angelo N. Vidal with Reuters

London Fashion Week: Victoria Beckham, Burberry headline

A MODEL presents a creation from the Burberry collection during a catwalk show for the Spring/Summer 2018 collection on the second day of The London Fashion Week Women’s in London on Sept. 16.

LONDON — London Fashion Week kicked off Friday with all eyes on Victoria Beckham, who debuted at the event on the 10th anniversary of her label’s launch, and on Burberry’s new star designer Riccardo Tisci.
The ex-Spice Girl, celebrating a decade since her brand’s 2008 unveiling in New York, has since defied the naysayers and won her peers’ respect.
The Briton now heads a fashion empire valued at £100 million ($131 million) by the industry press, although her appearance in London is Beckham’s first at the country’s premiere fashion show.
“Ten years ago, when Victoria Beckham started, many saw her as just another example of a celebrity wanting to have a fashion range with no formal fashion training,” University of Westminster Professor Andrew Groves told AFP.
“Through hard work and determination she has proved those early critics wrong.”
‘VB’ ON PICCADILLY
Ahead of her homecoming of sorts, the 44-year-old mother-of-four featured on London’s legendary Piccadilly Circus advertising screens, fulfilling a childhood dream.
The designer’s show, scheduled for Sunday, is expected to attract a host of VIPs, starting with the Beckham tribe — her husband David and their four children.
British Vogue magazine, which features them on its October cover, was hoping some former bandmates would also attend.
“Fingers crossed for some Spice Girls on the front row,” it wrote.
The other big highlight of London’s week, dedicated to the spring-summer 2019 collections and which ends on Tuesday, will see Tisci present his much anticipated first collection for Burberry.
The Italian designer, formerly of Givenchy, replaced Christopher Bailey as chief creative officer of the luxury British fashion house in March and will showcase on Monday.
He was credited with reviving Givenchy during his 12-year tenure there, by cultivating links with celebrities.
His arrival at Burberry is intended to reinvigorate the brand following disappointing profits in recent years.
Burberry is relying on Tisci, praised for his ability to blend street-wear with high fashion, to re-energise its high-end presence.
“Riccardo’s creative vision will reinforce the ambitions we have for Burberry and position the brand firmly in luxury,” chief executive Marco Gobbetti said in a statement.
AVOIDING BREXIT DAMAGE
Naomi Braithwaite, senior lecturer in fashion marketing and branding, Nottingham Trent University, told AFP that Tisci “seems a perfect choice for Burberry.”
“His tendency to not be afraid to take creative risks and innovate (are) characteristics that have underpinned Burberry’s philosophy in the last few years,” she said.
Originally from Taranto, a port city in southern Italy, Tisci trained at Central Saint Martins, a top arts and design college in London.
He has already started to make his own mark on the venerable British brand since arriving, recently unveiling on Instagram a new company monogram.
A white “B” is interwoven with red ribbons to form the initials of Thomas Burberry, who founded the fashion house in 1856.
But Friday, it was all about color: lemon, pink, and mint green for Ireland’s rising star Richard Malone, who is just 26, and lavender and anise of Turkey’s Bora Aksu.
Former Lady Gaga designer Nicolas Formichetti, who came up with the singer’s famous meat dress, mixed sportswear and sequins to create a festive wardrobe for Nicopanda.
Inspired by pop culture of the 1990s, it featured a translucent cowboy hat and star-studded beach shorts.
Not to be outdone, Pam Hogg made her mark with a vibrant show inspired by ancient Egyptian queens, replete with golden robes and towering headwear, some of which looked to be a take on the Bearskin hats worn by the Queen’s Guards.
“It was fantastic,” Hogg said of the show and the reception.
British Fashion Council chairwoman Stephanie Phair could not avoid mentioning the elephant in the room: Britain’s impending departure from the European Union in March next year.
Phair said the industry needed to open a dialogue with the British government about preparations to ensure global-facing fashion brands can continue to operate smoothly amid Brexit.
“To argue the case where damage could be done is something the British Fashion Council already does every day,” she said. — AFP

AboitizPower in talks to sell Aseagas biomass plant

ABOITIZ Power Corp. is in talks with two interested parties for the sale of the 8.8-megawatt (MW) biomass power plant in Lian, Batangas under subsidiary Aseagas Corp., which it wrote off for P3.7 billion in January this year.
“We’re talking to two interested parties — one local and one foreign,” Emmanuel V. Rubio, AboitizPower chief operating officer told reporters, adding that the foreign entity “would probably look into a partnership with a local.”
“I’m aiming before the close of 2018 for this option,” he said.
In January, the company announced that it would be permanently stopping the operations of the biomass power plant because of the lack of organic materials to produce electricity. It said its top consideration was to balance the interests of stakeholders, including those of Aseagas’ employees.
In December last year, AboitizPower said the plant had temporarily ceased operations because of the unavailability of organic effluent wastewater from its supplier Absolut Distillers, Inc. for conversion into clean and renewable energy.
Mr. Rubio said this time Absolut would again be the source of the feedstock for the power plant.
“At that time when we decided to close it, the feedstock is a bit erratic,” he said.
He said the company had been given assurance that there would be available feedstock from Absolut, which he said had expanded as well. He also said that the company had not closed its doors to a joint venture.
“But if we can sell it, if we can close it within the year, we’d do that. Pero (But) if not, we’ll be operating it again. We’ll see, we’re not closing [that] option,” he said.
Mr. Rubio declined to give details of the discussions nor the expected value of Aseagas because of a non-disclosure agreement, but said talks with the interested parties had advanced.
“We have the draft proposals and agreements. It’s being reviewed now. One is doing due diligence,” he said. “If they’re interested it will happen.”
He said the other option is to run the biomass plant again. “It’s always there. The plan is there,” he said.
The total value affected as a result of the plant’s closure included Aseagas’ invested equity of P3.45 billion and the company’s estimated remaining obligations of around P250 million.
AboitizPower acquired the biomass plant in July 2016, building up its renewable energy footprint, which covers large hydro, run-of-river hydro, geothermal and solar.
The deal was through Aboitiz Renewables, Inc., the listed company’s holding firm that houses its investments in renewable energy. AboitizPower acquired the Aseagas facility from parent firm Aboitiz Equity Ventures, Inc.
The acquisition, which marked AboitizPower’s entry into biomass technology, followed the company’s foray into solar power with the inauguration in April 2016 of San Carlos Sun Power, Inc.’s 59-MW peak solar power plant in Negros Occidental.
The biomass plant had been expected to start operating and delivering power to the Luzon grid before October 2016. It was supposed to power about 22,000 households while producing 33 tons per day of liquid carbon dioxide for the industrial and beverage industries.

Second round of tariff-related aid to US farmers seen

CHICAGO — A second round of tariff-related aid to U.S. farmers could be announced in December, according to a white paper released by the U.S. Department of Agriculture on Thursday.
The government model used to account for growers’ losses may factor in new tariff levels enacted against trade partners, such as China or the European Union, according to the paper. It does not state how much money could be directed to farmers, or how such funds would be split up.
The aid package, originally announced at $12 billion in July, includes cash payments for farmers of soybeans, sorghum, corn, wheat, cotton, dairy and hogs.
The USDA said in August that its farm aid package would — in the first part — include $4.7 billion in direct payments to farmers to help offset losses from retaliatory tariffs on U.S. exports this season.
It also includes $1.2 billion in government purchases of fruits, nuts, rice, legumes, beef, pork and milk for distribution to food banks and nutrition programs, as well as some $200 million for a trade promotion program to develop new markets.
“The second part will be announced, if necessary, in December and may account for other factors, such as new tariff levels, regional basis effects, or other market conditions that may have mitigated some of the trade damages,” according to the paper. — Reuters

OUTLIER: URC weighed down by margin pressures as competition tightens

By Mark T. Amoguis, Researcher
MARGIN pressures and limited upside in the short-term sent investors in food and drinks conglomerate Universal Robina Corp. (URC) into selling mode, making it one of the most actively traded stocks last week.
During the week of Sept. 10-14, a total of P1.498 billion worth of 10.263 million URC shares exchanged hands, data from the Philippine Stock Exchange showed.
On a week-on-week basis, its share price went down by 2.48% to P141.30 apiece last Friday from the P144.90 closing price on Sept. 7. Year to date, the stock price slashed 8.25%.
“For consumer companies [like URC], most of the selling is really because of the margin pressures. URC cannot compete with other brands if they will pass on the import cost to the consumers, so they have to absorb some of the additional cost on their part,” said Rachelle C. Cruz, research analyst at AP Securities, Inc.
“The issue concerning the company is the competition. The peso is depreciating against the dollar. So what does it mean for URC? It means higher raw material cost,” she said.
Ms. Cruz added: “Currently, URC is trading at forward PER (price-to-earnings ratio) of 30.5 times and their average PER is 30.4 times for the past five years. That might explain the selling because upside is already limited.”
“What the investors are waiting for to come back… is mostly a recovery in terms of margins because URC is suffering from margin pressures due to intense competition especially on the coffee side.”
The URC’s coffee segment, which includes its Great Taste and Blend 45 coffee brands, was not the only one reeling from the intense competition in the instant coffee market segment. For one, Nestlé Philippines, Inc. was also complaining that it is competing at a disadvantage with Indonesia’s Kopiko, which imports its three-in-one coffee mix. Nestlé and URC source their sugar requirements locally and pay twice the world market prices.
In its latest unaudited financial statements, URC’s sales showed a 5.88% increase to P64.372 billion in the first half of 2018 from P60.795 billion in 2017’s comparative six months. Its bottom line during the period, however, was down by 22.74% to P4.934 billion from P6.386 billion previously due to lower operating income and foreign exchange gains.
The company has three core businesses — commodity food products, agro-industrial products, and branded consumer foods (BCF). The revenue posted by the BCF’s domestic businesses fell 1.85%, weighed down by the “lower volume and unfavorable mix in the coffee category.”
Ms. Cruz noted URC’s acquisition of the milling and refining assets owned by Roxas Holdings, Inc. and its subsidiary Central Azucarera Don Pedro, Inc. in Nasugbu, Batangas as one of the strategies being undertaken by the company in order to compete in terms of prices.
The transaction is currently under review of the Philippine Competition Commission.
Still, URC’s stock price rallied following the news of the acquisition as noted by Jeng T. Calma, trader at A&A Securities, Inc. wherein prior to the move, the stock’s price has “consolidated for too long” from its June low of P111.30. As the news broke, the URC stock’s price rallied to as high as P153.4 apiece on Sept. 10.
Even with last week’s net selling, Ms. Calma considered URC’s current stock price of P141.3 to be “attractive” compared to last week’s intraday high of P153.4.
For this week, she expects URC to trade within the support and resistance levels of P140 and P150, respectively.

Yields on gov’t debt climb

YIELDS ON government securities (GS) rose last week as traders remained cautious on growing expectations of rate hikes from the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP).
On average, GS yields went up by 25.20 basis points (bp) week-on-week on Friday as bond prices dipped from previous levels, data from the Philippine Dealing and Exchange Corp. as of Sept. 14 showed.
With the exception of the 91-day Treasury bills (T-bills), all tenors saw their yields go up in the secondary market. At the short end, the 182- and 364-day T-bills climbed by 26.61 bps and 26.83 bps to yield 4.4497% and 5.1748%, respectively, while the rate of the 91-day T-bill fell by 54.72 bps to 3.5332%.
In the belly of the curve, the four-year Treasury bond (T-bond) posted a 54.11-bp increase to yield 6.8018% followed by the five-year T-bonds, which saw its rate climb 43.93 bps to 7.0089%. The two-, three- and seven-year debt papers followed, gaining 6.87 bps (5.7348%), 24.52 bps (5.7689%) and 13.44 bps (6.7534%), respectively.
At the long end, the 10- and 20-year T-bonds saw their rates go up by 88.44 bps (7.5571%) and 21.93 bps (7.6589%), respectively.
“GS yields increased this week due to widespread expectations of another US and PH rate hike this month,” said Guian Angelo S. Dumalagan, market economist at Land Bank of the Philippines (LANDBANK).
“Yields jumped the most [last] Monday after the US non-farm payrolls report beat market expectations. Trade tensions abroad merely tempered the rise in domestic interest rates,” he added.
Carlyn Therese X. Dulay, first vice-president and head of institutional sales at Security Bank Corp., shared the same assessment, adding that the rejection of all bids by the Bureau of the Treasury (BTr) for the reissued 10-year Treasury bonds last week “led [the] market to be defensive in prices across the curve in the secondary market.”
The BTr opted to reject all bids for its P15-billion offer of reissued 10-year bonds last Tuesday as tenders put forward by banks totalled P12.737 billion, below the amount the government wanted to borrow.
Had the BTr accepted all offers, the papers, which have a remaining life of nine years and six months, would have fetched an average rate of 7.64%, soaring by 129 bps from the 6.35% recorded in the bond offer in May.
The Treasury also rejected all bids for the 10-year papers when they were offered last July 3.
Meanwhile, economic managers are scrambling for solutions to curb inflation after it accelerated to 6.4% last month — its fastest pace in nine years. Even with elevated inflation being caused by supply-side issues, the central bank is widely expected to raise rates by another 50 to 100 bps by year-end to curb inflation expectations. The BSP has already raised rates by 100 bps since May.
Meanwhile, at the external front, market players are expecting another interest rate hike by Fed officials later this month. Fuelling these expectations was the increase in US non-farm payrolls — one of the metrics used in guessing the direction of US monetary policy — by 201,000 in August versus the 190,000 figure expected by economists. Given the low unemployment rate and increasing inflation rate in the US, Fed officials have been hawkish on the direction of monetary policy there.
For this week, Mr. Dumalagan said GS yields are expected to climb further given the sustained hawkish views on the monetary policy actions by the Fed and the BSP. “Trade concerns may still introduce some volatility,” he added, referring to the persisting trade tensions between the US and China.
For Security Bank’s Ms. Dulay, yields are expected to “trade within range” ahead of today’s T-bill auction, “which market expects to print 10-20 bps higher than previous auction levels.”
The Treasury is offering P15 billion worth of T-bills today. Broken down, the Treasury plans to raise P4 billion through the three-month papers, P5 billion for the six-month papers, and P6 billion in one-year T-bills. — Marissa Mae M. Ramos

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