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Fitch: Rate hikes could weigh on growth

By Melissa Luz T. Lopez, Senior Reporter
THE CENTRAL BANK’s stronger tightening step last week could initially dampen growth, a Fitch Ratings analyst said, although robust domestic demand should continue to support expansion.
Stephen Schwartz, head of sovereign ratings for Asia Pacific at Fitch, said gross domestic product (GDP) growth could take a hit following an aggressive rate hike from the Bangko Sentral ng Pilipinas (BSP) at its Aug. 10 policy meeting.
This comes after a disappointing six percent GDP expansion in the second quarter.
“As you note, the Q2 GDP outturn was below expectations, and [Thursday’s] 50bp rate hike by the BSP could put some further downward pressure on growth for the remainder of the year,” Mr. Schwartz said in an e-mail interview when sought for comment.
Economic expansion eased to its weakest pace in three years due to slower growth in consumer spending, even as this was offset by a surge in state spending.
By industry, exports contracted from a year ago while farm output stood flat, the Philippine Statistics Authority announced Thursday last week.
That same day, the BSP tightened rates by 50 basis points in a bid to temper inflation expectations, even as it acknowledged that supply pressures — which are beyond the central bank’s scope — have been driving prices higher.
Despite this, the Philippines will remain a growth leader in Asia Pacific even though the government’s 7-8% target may be missed this year.
“Nevertheless we still expect the Philippines to be a strong growth performer this year and next, due to a combination of strong domestic demand and a still-resilient external environment despite rising risks from the escalation in trade tensions between China and the US,” the credit analyst added.
As of its last review, Fitch expected the Philippine economy to grow by 6.8% this year, faster than 2017’s 6.7% pace.
Actual GDP growth averaged 6.3% last semester, as the first-quarter place was revised lower to 6.6%.
In December, Fitch upgraded the Philippines’ credit rating to “BBB” — or one notch above minimum investment grade — with a “stable” outlook. This was affirmed early July in the face of strong growth prospects, although the debt watcher flagged rising inflation, rapid bank lending and a wider trade gap as key risks to the outlook.
Fitch analysts had then flagged that the Philippine economy is facing “overheating” risks, but said the BSP’s policy tightening moves may help contain such risks.
The BSP introduced back-to-back rate hikes in May and June of 25bp each, before whipping up a tougher response last week as inflation continues to surge. Prices of widely used goods jumped by 5.7% in July to mark a fresh multiyear high, which pulled the year-to-date average increase to 4.5% against the central bank’s 2-4% full-year target range.
The BSP now sees full-year inflation averaging 4.9% this year and 3.7% next year.
BSP Governor Nestor A. Espenilla, Jr. has said that the Philippine economy is robust enough to “accommodate a further tightening” in interest rates.
SEEKING A ‘DELICATE BALANCE’
In a separate statement issued yesterday, the inter-agency Financial Stability Coordination Council (FSCC) said its members were working to “strengthen” long-term finance through various policies geared to ensure the country’s resilience amid “volatile” times.
“Financial markets are extraordinarily volatile this year and the FSCC continues to assess the possible impact to the Philippines of changing macro-financial conditions,” said Mr. Espenilla, who heads the FSCC as chairman.
“The challenge is to intervene early enough so that systemic risks do not build up but not too early that they derail our own growth momentum. We continue to be cognizant of this delicate balance, nurturing innovations and ideas while providing appropriate prudential oversight.”
The FSCC held its quarterly meeting yesterday. It is composed of the BSP, the Department of Finance, Bureau of the Treasury, Insurance Commission, Philippine Deposit Insurance Corp. and the Securities and Exchange Commission.

DoF says 7.7% GDP expansion this semester ‘still possible’

Capital formation was a silver lining in the latest economic growth data.

A BLISTERING 7.7% gross domestic product (GDP) expansion this semester — needed for the economy to hit the bottom of an official full-year target for 2018 — may still be “possible” on the back of strong capital formation, according to a senior official of the Department of Finance (DoF).
“While the [second-quarter’s six percent] growth rate was disappointing to us because it’s slower than what we thought we will achieve, there is that silver lining in the growth performance. The fastest growing sector is capital formation. It’s more than 20% and, because of that, we believe that in the future quarters we will be able to perform better,” Undersecretary Gil S. Beltran, the DoF’s chief economist, told reporters on Monday.
“Once the factories… the machines that were purchased in the second quarter will be operational, we expect that the growth will accelerate in the future quarters.”
Philippine Statistics Authority data show that gross capital formation grew 20.7% in the second quarter.
The 6.6% and six percent first- and second-quarter GDP growth rates, respectively, fueled a 6.3% first-half expansion that compares to the government’s 7-8% target for 2018.
“Still possible but difficult. If we get 30-40% increase in capital formation in the third or fourth quarter,” he said when asked if 7.7% overall economic expansion is doable.
Mr. Beltran said that an above-seven percent growth rate “is not new,” noting that it was reached during the presidency of Gloria M. Macapagal-Arroyo, how speaker at the House of Representatives.
“We have to push capital formation further because during those years that we achieved 7.7-7.8% growth, we had a 30-40% increase in capital formation. So we will need to work harder,” he said, adding this should offset agriculture’s marginal growth.
Asked whether overall price spikes could pull down economic growth, Mr. Beltran said inflation’s recent surge made a marginal dent on household consumption in the second quarter.
“What was affected is just consumer spending. It’s a slowdown of 0.1 percentage points. First quarter household consumption: it was 5.7% in the first quarter and went down to 5.6% in the second quarter,” he recalled. “Actually we have grown at very high rates in the past even with a higher rate of inflation.”
Inflation clocked in at a fresh multi-year-high 5.7% in July, bringing the year-to-date pace to 4.5% against the central bank’s 2-4% full-year target range for 2018. — Elijah Joseph C. Tubayan

Executive-House budget impasse elevated to Duterte and Arroyo

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‘I think the President needs an explanation — a very clear explanation — of why people who may be considered his closest allies have rejected it outright.’ — Presidential Spokesperson Herminio L. Roque, Jr.

IT may take a sitting President and a former president-turned Speaker to break the current deadlock between the Executive and the House of Representatives over the P3.757-trillion national spending plan proposed for next year.
“[T]here’s another meeting tonight… with the President (Rodrigo R. Duterte)… I think it will be attended by Speaker (Gloria M.) Arroyo,” House Appropriations committee Chairman Karlo Alexei B. Nograles said in a press conference on Tuesday afternoon, noting that a meeting that he held that morning with Budget Secretary Benjamin E. Diokno and Senate Finance committee chairman Loren B. Legarda failed to break the impasse.
The office of Ms. Arroyo — herself a former president whose term saw budgets reenacted after proposed spending plans failed to secure legislative approval or be signed into law — confirmed her appointment with Mr. Duterte. Mr. Duterte greeted Ms. Arroyo at the start of his keynote at an event with some business leaders in Malacañang yesterday evening.
Mr. Nograles opposes the Executive’s shift to a “cash-based” system for the proposed national budget — characterized by allocations for projects that can be auctioned off within a year — from the existing “obligation-based” framework that provides funds for projects that can be auctioned off over a two-year horizon, after noting that the proposal for 2019 is even less than this year’s P3.767-trillion spending plan.
But state economic managers have argued that, on a cash basis, this year’s national budget is less than what they submitted to Congress for 2019.
SENATE SUPPORTS PALACE
The Senate, meeting in a caucus anew on Tuesday afternoon, straddled the opposing camps, saying it supports the Executive’s cash-based system after announcing on Monday that the chamber will have to wait for the budget to emerge from the House, as required by law.
“The entire Senate, in caucus, have agreed to support the President’s budget re[garding] cash-based obligations,” Senate President Vicente C. Sotto told reporters in a mobile phone message yesterday evening, admitting that this position puts his chamber at odds with the House.
Saying “[t]he Senate supports a cash-based budgeting system that will help discipline the bureaucracy [and] address the problem of underspending,” Ms. Legarda said in a separate text that “[t]he Senate Committee on Finance will continue to conduct budget hearings based on the 2019 National Expenditure Program that was submitted to Congress and we will introduce amendments as necessary.”
Recalling his meeting with Mr. Diokno in the morning, Mr. Nograles said in Tuesday’s briefing: “Right now, parang ang dating is nagha-hardline sila (Right now, it seems the Executive has taken the hard line),” adding he was “hopeful na mabi-break pa rin ang impasse. I’m not closing my doors or any windows. I’m keeping my lines of communication open.”
Mr. Diokno has warned that Congress’ failure to approve the national budget in time for year-end enactment would trigger automatic reenactment of this year’s spending plan for use in 2019 —mid-term election year — with Malacañang calling the shots on allocations. Mr. Nograles has insisted there is still time to make amendments in the spending proposal, while a Senate caucus on Monday yielded a decision to await the outcome in the House.
On Tuesday, Mr. Nograles warned that a reenacted budget would be more costly, since it would require a supplemental budget for items — including succeeding tranches of salary standardization for state workers — not covered in 2018.
In a briefing in Malacañang on Tuesday, Presidential Spokesperson Herminio L. Roque, Jr. reminded Mr. Nograles that he was standing in the way of “the President’s budget… not the Secretary’s budget”.
“This is not the Secretary’s budget. This is the President’s budget. So I think the President needs an explanation, very clear explanation of why people who may be considered his closest allies have rejected it outright,” Mr. Roque said.
“[W]e’re also reminding them that there’s a concept of political allies and political enemies, and majority and minority. The concept of being in the majority is that you want to support the administration. And when you reject the project outright, it’s not something you expect from an administration party.” — Charmaine A. Tadalan, Arjay L. Balinbin and CAA

Kick-start your dream venture with a personal loan

Entrepreneurship is alive and well in the Philippines, with micro, small and medium-sized enterprises (MSMEs) growing by the day as more Filipinos engage in the activity.
According to data from the Department of Trade and Industry, there were 911,768 MSMEs operating in 2016, accounting for 99.57% of all registered businesses. This figure was 1.7% higher than in 2015, when 896,839 MSMEs were recorded and constituted 99.5% of all commercial establishments.
Likewise, a 2017 survey of 106 chief executive officers and founders of start-ups by Isla Lipana & Co. (PricewaterhouseCoopers Philippines), QBO Innovation Hub and IdeaSpace Foundation Inc., noted that more start-ups were being established in recent years. More than half of the respondents opened their ventures between 2016 and 2017.
The road to entrepreneurship
According to an earlier survey of more than 2,500 adults by the members of the Philippine GEM (Global Entrepreneurship Monitor) National Team, necessity is what drives majority of entrepreneurs amidst few available job opportunities. Entrepreneurship, the survey pointed out, is seen by society as a reliable means of improving one’s lot.
Necessity alone is not enough, though. A key ingredient for entrepreneurial success is passion – passion to make a difference, passion to make the world a better place, passion to change the world. The findings of a 2011 study published in the Emerald Insight strongly suggest that the grounds for a globally successful creative venture require the passion of at least one inventor entrepreneur.
That passion can be so intense that salaried employees choose to quit their day jobs. Those who can’t afford to do so try a different tack – they transform their passion into a sideline, preserving the security of salaried employment and the joy of doing what they love.
But the road to entrepreneurship – as anyone who has dived into it can attest – is paved with daunting hindrances that prompt aspiring business owners to shelve the idea or entirely abandon the plan altogether  . The two aforementioned studies drew attention to what is perhaps the most daunting of them all – money.
An overwhelming majority of the start-up executives polled by Isla Lipana identified capital as the top challenge that they had to address when they were starting their businesses. One of the two top barriers to entrepreneurship among the youth, the GEM survey noted, is access to funds. (The other is lack of business skills.) Experts who were separately polled cited lack of financial support allowing access to capital as the leading obstacle to getting into entrepreneurship.
Seeking financial help
Using one’s personal savings is  a common practice among the newbies to the field. Others also seek financial support from family and friends. But more often than not, these sources are barely enough. This is where banks come in. They offer very useful loans that budding entrepreneurs can tap into with ease.
For instance, one of the most prominent banks in the country, Citi Philippines has made taking out personal loans a breeze. Loan approval can be processed in as fast as 24 hours, provided that the borrower submits the few required documents, including the filled-out application form, a pay slip or an income tax return, and a valid government-issued ID. It is important to mention that neither collateral nor a guarantor is necessary – things that, although critical in other transactions, may severely slow down the application process. The loanable amount is as high as P2 million, and paying the loan off can take one to five years.
To begin the process, one needs to fill out Citi’s online application form. The borrower will then receive a call from a sales officer to verify the application. Only after that will the borrower be asked to submit the documents.
Financial institutions like Citi are exactly what aspiring entrepreneurs need. The loans they provide remove the financial obstacle that can oftentimes feel too obstinate to overcome, allowing entrepreneurs to kick-start and grow their dream ventures.

AEV, Ayala submit unsolicited proposal for national ID system

A CONSORTIUM which includes the Ayala and Aboitiz groups submitted to the government an unsolicited proposal for the design and development of the national identification (ID) system.
In separate disclosures to the stock exchange on Tuesday, conglomerates Ayala Corp. (AC) and Aboitiz Equity Ventures, Inc. said they have partnered with Unisys Philippines for the “national identity infrastructure solution.”
“Please be informed that a consortium comprised of Unisys Philippines, AC Infrastructure Holdings Corp. and Aboitiz InfraCapital, Inc. has submitted an unsolicited proposal under RA 7718 (BOT Law) to the Philippine Statistics Authority (PSA) on August 13, 2018 for the design and development of a national identity infrastructure solution, which is intended to collect, store, maintain, manage, and authenticate identity information of individuals,” AC told the stock exchange.
Unisys Philippines is a global information technology company, which provides security software and services; digital transformation and workplace services; among others. According to its website, it has worked with the PSA to “reduce service time and maintain document integrity.”
The PSA is the government’s primary implementing agency for the Philippine Identification System Act (PhilSys), which was signed into law by President Rodrigo R. Duterte on Aug. 6.
“The 17-year proposal provides an expedient, comprehensive and long-term solution that will enable the government to realize the full potential of its strategic programs by providing a safe and secure identification and benefits payment mechanism for individuals transacting with the government,” AC said.
One of the goals in creating a national ID system is to “curtail bureaucratic red tape, promote the ease of doing business, (and) also avert fraudulent transactions,” Mr. Duterte earlier said.
The national ID is set to be fully implemented by next year.
The PSA is supposed to conduct test runs of the national ID in selected regions for the next months before 2019. It said in an earlier statement the pilot tests is intended to “lay down the registration process prior to the full 5-year implementation starting 2019.” — Denise A. Valdez

Jollibee Q2 income jumps 15% amid expansion

STRONG sales from its fastfood businesses in the Philippines and abroad helped lift Jollibee Foods Corp.’s (JFC) earnings 15% higher in the second quarter.
In a regulatory filing, JFC said its net income attributable to equity holders of the parent company jumped 15% to P2.25 billion during the April to June period. This brought the first half figure to P4 billion, up 16% year-on-year.
Basic earnings per share for the second quarter rose 14.4% to P2.071 and by 15.1% to P3.728 for the first six months.
System-wide sales, a measure of all sales to consumers from both company-owned and franchised stores, added 27% to P53.93 billion in the second quarter.
For the first half, system-wide sales rose 23% to P99.91 billion, “driven by store network growth, continued strong same store sales growth, the consolidation of Smashburger and impact of currency exchange rate changes.”
JFC consolidated Smashburger, its US-based burger chain, starting April 17. Excluding Smashburger, system-wide sales increased by 18.1% in the second quarter, and by 19% in the first half.
System-wide sales in all regions were strong during the April to June period, led by the North America business which surged 195.6% due to Smashburger; and Europe, Middle East and Asia (excluding Philippines) which rose by 46%.
The foreign business now accounts for 26.8% of JFC’s global system-wide sales.
“Philippine brands reported a 15.8% growth in system-wide sales compared to the second quarter of 2017 from new stores which added 7.8% and continued strong same store sales, which grew by 8% driven by price adjustments implemented in July 2017 up to June 2018 and more products purchased by customers. JFC also attributes the strong same store sales growth to it continuous product improvement, new product introductions, marketing campaigns and restaurant renovations,” the company said.
JFC’s consolidated revenues, which include sales by company-owned stores, fees from stores operated by franchisees and commissary sales to stores operated by franchisees, increased by 24% to P40.3 billion in the second quarter, and by 21% to P75.1 billion in the first half.
Consolidated cost of sales went up 25% to P33 billion for the second quarter, while increasing 22% to P61.6 billion in the first half.
“In addition, the upward price adjustments implemented by the domestic brands in July 2017 to June 2018 helped mitigate the impact of high raw material prices caused by increase in commodity prices and depreciation of the Philippine peso. As a result, product gross profit margin of the Philippine business decreased only slightly in the second quarter and was flat in the first six months of 2018 compared to the same periods of 2017,” JFC said.
The fastfood giant opened 192 stores, comprising 115 in the Philippines and 77 overseas in the quarter ending June 30. It also closed 63 stores, including 33 in the Philippines, during the same period.
As of end-June, JFC had a total of 4,279 stores, 20% higher compared to the number of stores at the end of June 2017. Smashburger increased the JFC store network by 349 stores or 10%.
Aside from Jollibee, JFC’s brands include Chowking, Greenwich, Red Ribbon, Mang Inasal and Burger King in the Philippines. In China, JFC operates Yonghe King, Hong Zhuang Yuan and Dunkin’ Donuts. — CRAG

DMCI profit hits P5 billion in Q2

DMCI Holdings, Inc. registered a net income of P5 billion in the second quarter, up by nearly 39% compared with the P3.6 billion posted a year ago, with most of its business segments performing well except for the power business.
Consolidated revenues during the quarter hit P23.9 billion, higher by 31% from P18.3 billion in the same three months last year, the Consunji-led firm said on Tuesday.
In the first half, net income reached P9.2 billion, an increase of 21% compared with the P7.6 billion in the same period last year due to the higher contributions from the firm’s coal and nickel mining, real estate, construction and water businesses.
“All of our businesses fared well except for our power subsidiaries,” said DMCI Holdings Chairman and President Isidro A. Consunji said in a statement.
He said the unplanned and prolonged outages of Sem-Calaca Power Corp. and Southwest Luzon Power Generation Corp. “cut into the profitability” of parent firm Semirara Mining and Power Corp. (SMPC).
Consolidated revenues during the semester reached P44.2 billion, up 19% from P37.1 billion during the same period last year.
“DMCI Power [Corp.] continues to implement a lower provisional tariff for its Aborlan power plant because its motion for recomputation is still under review with the Energy Regulatory Commission (ERC),” Mr. Consunji said.
DMCI Holdings’ core net income during the first half rose by 10% to P8.6 billion from P7.8 billion a year ago. It excluded the P715-million one-time gain of the sale of an undeveloped lot by DMCI Homes, Inc. and a P69-million one-off refinancing cost of Maynilad Water Services, Inc.
For the second quarter alone, the firm’s core net income rose by 16% to P4.2 billion from P3.6 billion.
SMPC recorded a 3% rise in net income contributions to P4.6 billion from P4.5 billion because of higher coal sales and coal prices.
Excluding the one-time gain, DMCI Homes contributed P1.7 billion in earnings, up 7% from P1.6 billion in the previous year. The improvement was attributed to a 12% growth in revenues and a 4% rise in reservation sales.
Mr. Consunji identified the non-recurring gain as the sale of a 1.9-hectare property near the LRT Balintawak station. He said the asset was sold at a price more than three times the acquisition cost.
The net income contributions of affiliate Maynilad went up by 16% to slightly more than P1 billion from P877 million due to a 3.4% increase in billed volume and a 2.8% inflationary tariff adjustment.
Construction arm D.M. Consunji, Inc. booked a 36% increase in net income share to P676 million from P497 million after the “higher accomplishment in building projects and the realization of variation orders from projects nearing completion.”
Off-grid energy supplier DMCI Power contributed P214 million in net earnings, up 6% from P228 million last year.
“The decrease mainly resulted from the lower-than-expected provisional tariff granted to its Aborlan power plant in Palawan,” the company said.
Attributable net income from DMCI Mining Corp. jumped 309% to P221 million from P54 million, “fueled by higher shipments from the old stockpile and shipment of more high-grade nickel ore,” the holding firm said.
Other income during the first half more than doubled to P88 million from P27 million due to higher interest income.
On Tuesday, shares in DMCI Holdings fell by 3.52% to close at P11.50 each. SMPC also slumped by 1.88% to P31.30 each. — Victor V. Saulon

Robust sales boost SSI bottom line in Q2

EARNINGS of SSI Group, Inc. increased by 8% during the second quarter, fueled by a 13% growth in same-store sales.
In a regulatory filing, the listed specialty store retailer said its second quarter net income went up to P150.4 million year-on-year as strong sales growth and rationalized expenses helped offset the effects of a weaker peso.
This brought its first half net income 3% higher to P283.3 million.
Revenues increased by 14% to P4.67 billion during the April to June period, and by 11% to P9.3 billion for the first six months of 2018.
SSI said its same-store sales growth (SSSG) stood at 13.4% and 11.6% during the second quarter and the first half, respectively.
“SSI experienced robust growth in net sales during the first half of the year driven by strong consumer demand. This is reflected in the very strong performances of the Group’s brands under the luxury, bridge, and casual categories. This is despite the fact that the Group’s total selling space decreased by 7.4%,” the company said.
As of end-June, its store network stood at 616 covering 124,333 square meters, versus 665 stores covering 133,816 sq.m. a year ago. During the April to June period, SSI Group opened four stores and closed 14 stores.
Fast fashion accounted for the bulk of SSI’s first-half sales at P3.33 billion, up 5% year-on-year. This was followed by luxury & bridge lines at P2.23 billion, surging 24%.
SSI’s portfolio had 100 brands as of end-June, including Prada, Gucci, Zara, Gap, Old Navy, Burberry, Marks & Spencer, Lacoste, Muji and Payless.
Operating expenses rose 2% to P1.74 billion during the second quarter, bringing the first-half figure to P3.45 billion, up 0.7%.
“Operating expenses as a percentage of net sales significantly improved to 37.3% as compared to 40.9% in 2017. Operating expenses increased at a slower rate than sales as the Group continued to benefit from its store rationalization program and from its focus on maximizing scale and improving cost efficiencies,” SSI said.
SSI expects sales to peak during the fourth quarter, as consumers shop more ahead of the Christmas and New Year holidays.
“We saw double digit same store sales growth during the 2nd quarter of the year as our brand portfolio and store network continued to benefit from resilient mid and high end discretionary spending and we expect that margins will continue to firm up as the year progresses,” Anthony T. Huang, SSI Group president, was quoted as saying in a separate statement.
SSI is planning to open e-commerce sites for the brands Lush, Dune and Aeropostale as well as re-launch its marketplace ssilife.com.ph within the second half. — CRAG

DoubleDragon profit surges in 2nd quarter

DOUBLEDRAGON Properties Corp. on Tuesday said its second quarter consolidated net income more than doubled to P513.5 million, boosted by rental revenues from its community malls and offices.
In a statement, DoubleDragon said its consolidated net income jumped 144% to P513.5 million during the April to June period, from P210.7 million a year ago.
For the January to June period, the listed property developer reported its consolidated net income surged 234% to P1.26 billion.
Recurring revenues increased by 216% to P883.29 million for the three months ending June 30, fueled by the 358% surge in rental revenues to P749.95 million.
During the first half, consolidated revenues went up 123% to P3.63 billion, while recurring revenues rose 199% to P1.41 billion. Rental income also more than quadrupled to P1.16 billion.
“Recurring revenues now accounts for 39% for the first half of 2018 vs. only 29.0% during the same period last year as the Company becomes closer to its goal of becoming a 90% recurring revenue company by 2020,” DoubleDragon said.
DoubleDragon Chief Investment Officer Hannah M. Yulo said this is the first time the value of its investment properties exceeded the P50 billion mark, now at P51.2 billion as of end-June.
“Our financials are now clearly harvesting the hard work we have put into intricately building a valuable leasing portfolio. These are solid revenue contributions that are recurring in nature and will continue to grow organically as we increase our rental yields,” she was quoted as saying.
DoubleDragon targets to have a leasable portfolio of 1.2 million square meters (sq.m.) by 2020. This will include 700,000 sq.m. from 100 CityMalls, 300,000 sq.m. from Metro Manila office projects, and 100,000 sq.m. from 5,000 hotel rooms under the Hotel 101 and JinJiang Inn Philippines brands.
“The reason why we are so fixated in hitting our 1.2 million sq.m. leasable target by 2020 is because the math is simple. With 1.2 million sq.m. of leasable space, yielding say an average of P750 per square meter per month by that time, this should give the Company total annual recurring revenues of P10.8 billion,” DoubleDragon Chairman Edgar “Injap” J. Sia II was quoted as saying in the same statement.
“This rental income practically translates to about 90% EBITDA margin because in addition to rent, developers collect maintenance fees from tenants which covers operating expenses of each property,” he added. — CRAG

Energy unit boosts Lopez Holdings’ second-quarter earnings

LOPEZ Holdings Corp. reported a net income of P1.03 billion in the second quarter, higher by 43% compared with year ago’s P721-million profit attributable to the equity holders of the parent firm, with the stable showing of its energy unit boosting the quarterly results.
“The stable performance of the energy group under associate First Philippine Holdings Corporation (FPH) accounted for the results,” the company said in the statement.
In the first half, Lopez Holdings said net income reached P2.17 billion, up 23.3% from P1.76 billion in the same semester last year.
Lopez Holdings serves as the holding firm of the Lopez family for its investments in major development sectors.
FPH recorded a net income attributable to the parent firm’s equity holders of P1.95 billion, more than three times higher than the P607 million posted a year ago.
In the first six months, FPH registered a net income of P4.05 billion, up 60.7% from P2.52 billion a year ago.
“Unfavorable forex movement during the period partially offset the effect of growth in the recurring earnings of the FPH Group. ABS-CBN [Corp.] revenues declined by 2% while expenses increased by 4%,” Lopez Holdings said.
ABS-CBN recorded a 41% decrease in net income during the period, the holding firm added. As of mid-2018, Lopez Holdings owned 47% of FPH and 56% economic interest in ABS-CBN.
Energy unit First Gen Corp. posted a net income of $45.19 million, nearly three times more than $16.70 million in the same quarter last year. The company reports its figures in dollars, its functional currency.
In a statement, the company said its first half reported recurring net income attributable to the equity holders of the parent reached $115 million, up 35% from a year ago.
“The gas portfolio thrived during this period, especially San Gabriel and Avion that have been able to achieve remarkable turnarounds this year as they delivered much needed power to the grid,” said First Gen. President and Chief Operating Officer Francis Giles B. Puno in a statement.
“For the second half of 2018, San Gabriel shifts to being a contracted provider of electricity to Meralco (Manila Electric Co.) allowing it to achieve stable earnings. This contract proves the price competitiveness of natural gas-fired power versus coal-fired power even at baseload and more so at mid-merit levels of dispatch,” he added.
First Gen said the natural gas platform’s performance offset the soft showing of the other platforms. It said the period’s “strong numbers” were also boosted by lower interest expenses as a result of its deleveraging initiatives.
During the first half, the natural gas platform delivered recurring earnings of $88 million, up from $51 million previously.
On Tuesday, shares in Lopez Holdings fell 2.06% to close at P4.27 each, while those of FPH declined by 0.32% to P63.20 apiece. First Gen shares slipped by 0.38% to P15.90 each. — Victor V. Saulon

FDC doubles profit in Q2

FILINVEST Development Corp. doubled its net income attributable to equity holders of the parent company to P3.4 billion in the second quarter, from P1.74 billion during the same period a year ago, on strong real estate sales.
In a regulatory filing, the Gotianun-led holding company said its attributable net income rose 66% to P5.42 billion during the first six months of 2018, from P3.26 billion a year ago.
Second-quarter revenues stood at P19.2 billion, up 21%, bringing the six-month figure to P36.45 billion, up 12%.
The real estate business under Filinvest Land, Inc. accounted for the bulk of revenues. For the April to June period, real estate operations generated P7.65 billion in revenues, 56% higher than the same period a year ago.
For the first half, real estate revenues climbed 31% to P14.84 billion, “backed by a 30.9% growth in real estate sales and 29.9% growth in rental and related services.”
This brought net income from real estate operations 60% higher to P4.69 billion for the first semester, from P2.9 billion a year ago.
FDC’s banking and financial services business recorded a first-half net income of P2.03 billion, 14% lower than last year’s figure due to lower-than-expected results from East West’s rural bank unit.
Power generation operations, under FDC Utilities, Inc., saw a 234% surge in six-month net income to P765.7 million, as revenues from coal power plant and retail electricity operations grew by 29%.
Net income from FDC’s sugar business jumped 62% to P327.4 million for the first six months, as sugar sales improved.
Hotel operations posted a 26% rise in profit to P93.3 million as of end-June 30. Filinvest Hospitality Corp. has 1,591 rooms in four properties under the Crimson and Quest brands.
“We believe that our investments in power and infrastructure can yield returns that balance out our more cyclical business segments. Steady and stable revenues from the rental, power, sugar and infrastructure sectors will help to smooth out the waxing and waning of the business cycle. In addition, investing in airport infrastructure will complement our projects in hospitality and BPO rental properties,” FDC President and CEO Josephine Gotianun Yap was quoted as saying in a separate statement.

ASEAN artists come together in a 3-part show


ON AUG. 8, 1967, the founding members of the Association of Southeast Asian Nations (ASEAN) — the Philippines, Malaysia, Indonesia, Singapore, and Thailand — signed a document (later known as the ASEAN Declaration) describing the region as “bound together by ties of history and culture.”
To conclude the commemoration of ASEAN’s 50th anniversary, the Philippines marks the occasion by hosting a contemporary art exhibit. Presented by the National Commission for Culture and the Arts (NCCA) through the Dalubhasaan Para sa Edukasyon ng Sining at Kultura (DESK) and with the support of the Office of Senator Loren Legarda, the exhibit, titled Ties of History: Art in Southeast Asia, features artworks by 10 artists — one from each ASEAN member state.
The exhibit is a “survey of contemporary art,” and “a diligent study of a particular practice” which allows the audience to look into the artists’ interests. The works are mounted in three major art institutions — the Metropolitan Museum of Manila, the University of the Philippines’ Vargas Museum, and the Yuchengco Museum in Makati.
The participating artists are: Amanda Heng (Singapore), Roberto Feleo (Philippines), Anusapati (Indonesia), Do Hoang Tuong (Vietnam), Chris Chong Chan Fui (Malaysia), Yasmin Jaidin (Brunei), Min Thein Sung (Myanmar), Vuth Lyno (Cambodia), Jedsada Tangtrakulwong (Thailand), and Savanhdary Vongpoothorn (Laos).
According to the exhibit curator Patrick D. Flores, the project began when NCCA Chairman and National Artist for Literature Virgilio Almario “found it important to commemorate” the 50th anniversary of ASEAN and wanted the exhibition to be spread throughout the metropolis.
“I thought of a curatorial process to involve three museums. I chose 10 artists to represent each ASEAN nation state, and each artist will showcase three types of work for each museum,” Mr. Flores told BusinessWorld shortly after the exhibit opening at the Yuchengco Museum on Aug. 9.
“As a curator, I wanted [to mount the exhibit] in different types of museums,” Mr. Flores said, noting that the Yuchengco museum is a corporate museum — most of the artists’ early works are on display there — while UP Vargas is a university museum and the experimental works and videos are on view there. The Metropolitan Museum, as a contemporary art museum, is where the installations are mounted. “Exhibitions are always site specific and [the] site also creates a dimension for the work,” he said.
THE ARTWORKS
The various early works of the participating artists at the Yuchengco Museum present their attitude on colonialism, nature, and personal experiences.
Representing the Philippines is sculptor and painter Roberto Feleo with his early works are from the sapin-sapin series of the 1970s and ’80s. “When I started painting, I had a problem of knowing what makes the work unique and what makes the work a signature piece,” he told BusinessWorld. Mr. Feleo’s research on Philippine representations in art made him use the layering of plywood. His other featured works in the exhibit include paintings inspired by the 1807 Basi Revolt in Ilocos Norte when Ilocanos fought against the Spaniards for prohibiting them from selling basi (sugarcane wine).
Thai artist Jedsada Tangtrakulwong’s Deserted Buildings (2008) features 23 manga comics with their contents cut out, leaving only the borders of the comic panels. “I remove all the character because when we look at the manga we always read for the story or content,” Mr. Tangtrakulwong said. Copies of the original manga are free for guests to go through and appreciate the material per se.
Myanmar’s Min Thein Sung worked in a large coffee shop after graduating from university. At the coffee shop, he found himself stressed and the schedule monotonous. He found respite in his visits to the restroom which inspired his 2008 work.
“One day, I realized when used the toilet that it just solving the problem of the physical. I was thinking, ‘Why did they give the restroom its name?’” Mr. Sung told BusinessWorld.
For his work titled Restroom, Mr. Sung made a toilet bowl from paper mache and travelled with it to various countries. Aside from the physical relief of the toilet, Mr. Sung thought of vacation as the relief for the mind. He then travelled with the paper mache toilet bowl and took pictures of it in isolated places, from beachfronts to meadows.
Amanda Heng of Singapore explores gender identity and her relationship with her mother in her work. Dear Mother (2009) shows a text installation and photograph of a woman’s chest with hands covering her breasts and another of a hand touching a woman’s back. “I wanted to express the relationship between my mother and myself but also mother and daughter relationship in general,” Ms. Heng told BusinessWorld.
CONTEMPORARY ART IN SEA
“Contemporary art in Southeast Asia is active and dynamic,” said Mr. Flores. “Before, the impression of art from Southeast Asia was traditional but its not the only kind of art that the Southeast Asia produces. Contemporary art is always in dialogue with tradition. It is also in dialogue with nature, the urban condition, and the changing phase of the countryside,” he noted.
“The Philippines is ready to host these kinds of exhibitions. In the past, the Philippines was only represented, but now we are able to host and invite [others] over here and give our own perspective,” he said.
The exhibition will be on view at the three museums until Oct. 6. — Michelle Anne P. Soliman

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