Factory output growth slows in March

May 4, 2018 | 11:26 am

Industrial production grew 13.6% in March, the Philippine Statistics Authority (PSA) reported this morning.
Preliminary results from the PSA’s Monthly Integrated Survey of Selected Industries (MISSI) showed that March factory output — as measured by the Volume of Production Index (VoPI) — was slower than the 23.7% reported in February but was faster than the 12.3% recorded last March 2017.
Growth in manufacturing was largely driven by surges in the production of printing (107.6%), textiles (32.9%), food manufacturing (28.0%), miscellaneous manufactures (15.5%),petroleum products (15.3%), wood and wood products (15.0%), non-metallic mineral products (12.7%), and electrical machinery (11.9%).
Average capacity utilization, which is the extent by which industry resources are being used in the production of goods, was estimated at 84.2% with twelve of the 20 sectors registering capacity utilization rates of 80% and above. — Lourdes O. Pillar

Consumer prices rise further in April, breaching full-year target

May 4, 2018 | 10:55 am

Consumer prices rose to its fastest pace in more than five years in April, the government reported this morning.
The Philippine Statistics Authority (PSA) said April inflation rose to 4.5% from the 4.3% logged in March and 3.2% in the same period last year. Last month’s print was the fastest in at least five years as computed under the 2012-based consumer price index, according to PSA data.
The preliminary result matches the median forecast in a BusinessWorld poll of 11 economists conducted last week. The April print was also within the 3.9-4.7% forecast range for the month given by the Bangko Sentral ng Pilipinas’ (BSP) Department of Economic Research.
The April preliminary result brought year-to-date average to 4.1% – overshooting the 2-4% target band set by the BSP for 2018.
The PSA attributed the acceleration to the faster annual gains recorded in alcoholic beverages and tobacco (20%); clothing and footwear (2.2%); housing, water, electricity, gas, and other fuels (3%); furnishing, household equipment and routine maintenance of the house (2.8%); health (2.8%); transport (4.9%); recreation and culture (1.5%); and restaurant and miscellaneous goods and services (3.4%).
Meanwhile, growth in prices of food and non-alcoholic beverages remained steady from March albeit elevated at a 5.9% rate. This was, however, still higher than 3.3% in April 2017.
The food alone index, meanwhile, eased to 5.5%, slower than the 5.7% recorded in the previous month, but faster than the 3.6% in April 2017. — Christine Joyce S. Castañeda
RECOMMENDED: BSP chief Nestor Espenilla on the central bank’s inflation response

PHL to remain growth leader in Asia

May 4, 2018 | 12:33 am

By Melissa Luz T. Lopez
Senior Reporter
THE PHILIPPINES is expected to remain a growth leader in Asia-Pacific, a regional think tank said, even as it flagged that the entire region could be threatened by a looming trade dispute with the United States.
The ASEAN+3 Macroeconomic Research Office (AMRO) sees Southeast Asian economies as well as Japan, China, Hong Kong and Korea growing by 5.4% this year, slightly slower than the 5.6% clocked in 2017.

Despite the slowdown, the think tank sees resilient domestic demand coupled with upbeat exports keeping the region as the center of world output growth.
The AMRO also expects the Philippines to remain one of the fastest-growing economies, with the local infrastructure push seen to unlock an even faster expansion. The think tank kept its growth forecast for the Philippines at 6.8% for 2018 and 6.9% for 2019 which was first pencilled in October. This is slightly higher than last year’s 6.7% growth although below the government’s 7-8% target.
However, there remains a huge scope to unlock a faster climb.
“It (growth) may go a bit higher but it very much depends on how fast they are able to disburse spending on infrastructure. Infrastructure spending is a good thing in the long run because it raises growth potential,” AMRO chief economist Hoe Ee Khor said on the sidelines of the agency’s report launch yesterday at the Marco Polo Hotel.

The current Philippine growth forecast is second to Myanmar’s seven percent and matches the pace expected for Cambodia and Lao PDR, according to the AMRO’s latest projections.
However, the AMRO pointed out that the Philippines may now be approaching a downturn and seeing a slowing credit cycle.
The Bangko Sentral ng Pilipinas (BSP), however, said this may not necessarily be the case as far as the domestic economy is concerned as investments actually build on potential growth.
“If you go into infrastructure you either avoid going into a contraction or a downturn because going into soft and hard infrastructure will tend either to prolong the late cycle or to bypass the late cycle and move to an early or even an early or mid-business cycle,” BSP Deputy Governor Diwa C. Guinigundo said during the AMRO’s joint seminar, a side event to the Asian Development Bank annual meeting.
‘US-ASIA WAR’
Threats of a trade war between the US and China stand as the biggest risk to regional growth, with the standoff seen to spill over to all Asian economies.
AMRO Director Junhong Chang said estimates showed that a “very limited” trade war among the world’s biggest economies could stunt growth in emerging markets by as much as 0.5%. The impact is stronger on advanced economies like Japan and Singapore, ranging from 0.2-0.8% of gross domestic product (GDP).
“The US trade war is in fact a US-Asia war with significant fallout on the rest of the world,” Ms. Chang said. “Let’s hope this scenario remains hypothetical.”
BSP Governor Nestor A. Espenilla, Jr. however, said that “deeper” intra-regional links will boost overall growth prospects.
“I believe that member states have positively leveraged on regional integration to retain their collective growth momentum. Integration has also provided the additional impetus for individual country growth,” the BSP chief said.
AMRO’s Mr. Khor also noted that diversification of exports has made the region “more resilient,” with growing demand within the region able to cushion the impact of external trade shocks. A surge in tourist arrivals would also support economic activity, but would require nations to invest in connectivity.
TIGHTENING NEEDED?
Mr. Khor also said that robust economic conditions signal the time to “start withdrawing” policy stimulus from central banks in the region at a time of rising global yields.
He noted, however, that a low inflation environment lends room to maintain an accommodative policy stance. Across the region, inflation is seen to average 2.1% this year, higher than 2017’s 1.8%.
The Philippines is expected to clock in the fastest pace of price increases at 4.3%, coming from 2017’s 3.2% under 2006 prices. Mr. Khor said the BSP needs to take steps to rein in inflation and keep the economy from overheating.
“We have seen that the central bank should take the signs of inflation and the external position in making a decision in interest rates… Already, the monetary conditions have tightened quite a bit,” the AMRO economist said.
“Certainly, I think the BSP is fully aware of the need to make sure that the economy moves back from overheating.”
“By doing a bit of tightening, it’s possible for inflation to come back down and for the current account to remain sustainable,” Mr. Khor added, even as he pointed out that the current account remains in a “good deficit” as it mirrors imports of capital goods.
The BSP will assess policy settings during their May 10 review, with some analysts noting that central bank officials have since taken a more hawkish tone than usual in the face of faster inflation.

BSP says to take ‘decisive’ action as inflation heats up

May 4, 2018 | 12:32 am

THE CENTRAL BANK will not hesitate to take “decisive” action should inflation maintain its ascent, with signs pointing that price increases now cover a wider range of goods, top officials said.
Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said latest observations bared that inflation is becoming broader than initially expected.
“What we react to is whether it’s spreading and it is affecting expectations. And our reading, based on the latest data, it seems to have spread somewhat,” Mr. Espenilla told reporters on the sidelines of the Asian Development Bank annual meeting yesterday.

“These are the elements that we are measuring. We would like to assess all of these come May 10 and make the appropriate decision.”
Inflation has maintained its ascent in the past few months, with March’s 4.3% reading under the 2012 base year proving to be fastest in at least three years. The pace of price increases likely quickened further this April, with the BSP forecasting a 3.9-4.7% range — a rate already beyond the 2-4% target band.
The Department of Finance, in an economic bulletin yesterday, said it expects inflation to have logged at 4.5% last month due to the uptick in prices of food and “sin” products.
On the sidelines of the ADB meeting, Socioeconomic Planning Secretary Ernesto M. Pernia also said the April inflation figure is “higher than March,” noting that “oil prices have been going up consistently for the past several months.”
Mr. Pernia added that the depreciation of the peso supported the overall rise in prices, as well as the higher excise taxes introduced in January.
The BSP’s Monetary Board will review their policy stance on Thursday, which will come a week after the release of April inflation data and on the same day as first-quarter gross domestic product data.
Policy makers have kept their stance unchanged since September 2014, with the view that manageable inflation and robust domestic economic activity render no need for a fresh monetary stimulus.
The BSP’s rate-setting meeting also comes a week after the United States Federal Reserve voted to keep borrowing costs steady, following a rate hike introduced in March.

Mr. Espenilla said the Fed’s move “creates more certainty and predictability” as far as the global financial markets are concerned.
BSP Deputy Governor Diwa C. Guinigundo said separately that the Fed’s decision to remain on hold demonstrates the “gradual” pace of policy tightening in the US, which he noted will be a “very important input” to the BSP’s own policy meeting next week.
Domestic inflation remains a bigger concern, the central bank official added, referring to the April print to be published by the Philippine Statistics Authority today.
“If it is higher than 4.3%, then it means something. If it is lower than 4.3%… then we have to reassess all the numbers,” Mr. Guinigundo told reporters.
“The other argument of course is what do you expect to happen in 2019? If indeed inflation is expected to revert to the target path, then why move at this point.”
The central bank expects full-year inflation to average 3.9% this 2018 before settling back down to three percent next year, factoring in the “transitory” impact of the tax reform law which pushed the costs of select goods higher.
“But let me just clarify: if the sum of all of these points of considerations point to the BSP to undertake some decisive action, we will not have second thoughts on this because maintaining price stability is our primary mandate and we are going to adhere to that mandate of the BSP,” Mr. Guinigundo added.
TERM DEPOSITS
In another development, the central bank will reduce its offering under the term deposit facility to P60 billion on Wednesday from P90 billion previously. Mr. Guinigundo said this factors in banks’ inclination to hold more cash ahead of the May 14 holiday for the nationwide barangay and youth council elections.
Auction volumes have been trimmed to P30 billion for seven-day term deposits, P20 billion for 14-day instruments, and P10 billion under the 28-day tenor. — Melissa Luz T. Lopez with a report from Elijah Joseph C. Tubayan

ADB needs to address shocks that could disrupt developing countries’ rise — NEDA chief

May 4, 2018 | 12:31 am

THE ASIAN DEVELOPMENT Bank (ADB) has been “responsive” to developing countries’ needs but needs to offer more support in the area of cushioning shocks that could disrupt these countries’ progress towards becoming higher-income economies.
Socioeconomic Planning Secretary Ernesto M. Pernia said at the annual ADB meetings that the Philippines has benefited greatly from ADB assistance, which has brought down the poverty rate to 21.6% in 2015 from 25.2%.
Speaking at the 2017 Development Effectiveness Review seminar on the sidelines of the first day of the 51^st ADB Annual Meetings, Mr. Pernia acknowledged ADB support for the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) subregional grouping, the conditional cash transfer program, and investment climate and productivity reforms to strengthen macroeconomic fundamentals “resulting in a higher growth trajectory since 2010.”

However, he said that the bank has done “relatively little” on family planning, “thereby materially delaying the country’s harvest of the demographic dividend,” as well as mitigating inter-regional disparities, improving higher education and health care, as well as promoting science and technology and innovation to prepare for “disruptive industries.”
The National Economic and Development Authority, which Mr. Pernia heads, was providing inputs for ADB’s long-term strategy.
“While ADB’s operational priorities are aimed at reducing inequalities and empowering the vulnerable sector, let me forward other development areas that seem not highlighted in the ADB Strategy 2030 but are of equal importance to the region: macroeconomic stability through surveillance to mitigate potential buildup of economic and financial stresses of household credit and real estate bubble — which can easily spread in the region,” Mr. Pernia said.
He also recommended the “recognition of risks and opportunities brought about by international migration,” while also highlighting the importance of addressing the needs of refugees and stateless individuals.
Stephen P. Groff, ADB’s Vice-President for Operations, meanwhile said that ADB’s approach to addressing the Philippines’ concerns will focus on the development of infrastructure.
“It underpins almost all SDGs (Sustainable Development Goals) in one way or another.What we find out in many of the countries is not just inequality of income, but inequality of access to services, health care, and jobs. Infrastructure plays a critical role in alleviating those,” he said.
ADB President Takehiko Nakao said that the ADB is setting its sights on expanding infrastructure support in Mindanao in addressing the long-standing security issues there.
“We also want to invest more in Mindanao, for sustaining peace in Mindanao. We need to develop Mindanao in a broader sense,” Mr. Nakao said in a separate press briefing yesterday.
He noted that the ADB signed a $380 million loan agreement with the Philippine government to help build 280 kilometers of roads on Mindanao, and may also participate in financing rail projects, to help the island better connect to regional markets.
“The reason Asia is successful is because of open trade and investment regimes, in addition to stable macroeconomic policies,” Mr. Nakao added.
Economists from the bank’s Regional Cooperation and Integration Thematic Group said in a separate forum that the creation of industrial parks and economic zones is seen as immediate measures for encouraging regional cooperation, while also creating “pockets” of growth by attracting business activity towards border areas and away from urban centers.
In particular, Indonesia and Timor Leste are expected to benefit from tourism cooperation, as well as by creating an island-wide livestock zone on the island of Timor, which the two countries share.
Cristelle Pratt, Deputy Secretary General of the Pacific Islands Forum Secretariat, said that effective cooperation requires a “collective effort, robust investment from banks. We need states to work together and it will require some political will.”
Moreover, Mr. Pernia noted that the ADB Strategy 2030 should also address factors contributing to the middle-income trap such as the “low level of economic diversification, inefficient financial market, low level of innovation weak institutions, and an inefficient labor market.”
“The ADB should provide support in enabling middle-income countries to transition to high-income status,” he said. — Elijah Joseph C. Tubayan

The Hulpon festival and value of pagtutulungan in Brgy. Malico

May 4, 2018 | 12:31 am

Text and photos by Michelle Anne P. Soliman

A six-hour drive away from Makati, through the sharp curves of Dalton pass in between Nueva Vizcaya and Pangasinan, and 1,300 feet above sea level is Brgy. Malico, a small community of about 500 people. There is no mobile signal there. The dirt roads are barely illuminated at night. According to locals, the temperature does not rise above 20°C even in the summer month of April.
Early in the morning after we arrived there, we heard chanting and singing from a short distance away — the celebration of the Kalanguya tribe’s third Hulpon festival had started.
THE KALANGUYA TRIBE
Once headhunters in the Caraballo Mountains, the Kalanguya tribe derives its name from the phrase “keley ngo iya,” which literally translates to “what in the world is this?,” according to an article written by Gaspar C. Cayat, the president of the Kalanguya Tribe Organization, Inc.
Governed by a council of elders, the tribe is scattered in mountain villages in Nueva Ecija, Nueva Vizcaya, and Pangasinan. Located in an area designated as their ancestral domain, Brgy. Malico in Nueva Vizcaya is considered the Kalanguya tribe’s biggest settlement. There the members of the tribe — distinguished by the red, black, and white vertical stripes of their traditional dress — plant sayote (chayote) and weave walis tambo (tiger grass brooms) as a source of livelihood.
ADOPTED SON OF THE TRIBE
“The first time I went to [Brgy.] Malico was in 1995,” said Edgardo C. Amistad, president of the United Coconut Planters Bank-Coconut Industry Investment Fund (UCPB-CIIF) Foundation Inc. “In my first visit, I met the chieftain, Taynan Omallio. From then on, I wanted to return and have a place of my own here,” he told BusinessWorld during the Hulpon festival weekend in April.
In 2001, a forester at a reforestation project UCPB-CIIF had in Antipolo gave Mr. Amistad the opportunity to return to Brgy. Malico. “My forester is from Malico and is a Kalanguya. I asked him to accompany me, so I could talk to the chieftain who happens to be his uncle. From then on, I’ve been visiting the place, and I became close to Taynan and his family. I even had a room in his house,” he said.
“So, since I became close to him, he invited me to become an adopted son of the tribe since I’ve been trying to help them out. One of the requirements is that I had to buy pigs to feed the community,” Mr. Amistad said of his responsibility as an adopted son of the tribe. “When you’re adopted, they are not only adopting you, they’re adopting your whole family.”
Specializing in business strategy and sustainability and program management, Mr. Amistad, along with the late chieftain and other local government officials, participated in an initiative to preserve the culture of the Kalanguya tribe and promote eco-tourism in Brgy. Malico.
The first idea in 2015 was celebrating a sayote festival which was aimed at promoting the plant as a source of livelihood and the community’s major vegetable crop. However, it veered away from the goal of cultural preservation. Mr. Amistad and the others then considered what where the important characteristics of the tribe and focused on hulpon, the tribe’s core value of sharing and helping. A vision-mission statement of the initiative was approved, which led to launch of the first Hulpon festival in 2016.
“Because of the festival, you attract visitors, because of that, people would see the place,” Mr. Amistad said.
THE HULPON FESTIVAL
The concept of hulpon is commonly practiced amongst the tribe during weddings, funerals, and when a tribe member is recovering from illness. The sharing may be in kind or services.
The first Hulpon Festival in April 2016 highlighted the Kalanguya wedding play. The main event in the second festival, in February 2017, was a pageant where knowledge of the tribe’s culture was the basis for winning the title of Mr. and Ms. Hulpon.
The third Hulpon Festival was held on April 21 to 22 this year, outside the late chieftain Omallio’s house, which is rented out as visitors’ lodging.
The festival began with the traditional pig slaughter at 6 a.m. The other festivities that morning included a traditional dance performed by the Malico elementary school students, followed by the hulpon play which centered on the tribe’s practice of pagtutulungan (helpfulness) when the young son of a Kalanguya family fell ill.
The morning’s festivities ended with visitors and members of the tribe dancing in a circle to traditional music — the women’s forearms raised and palms open, the men’s arms outstretched. Two chants from a chanter outside the circle signaled that a participant was allowed to exit from the dance. The dances and the play are aimed at the young tribe members, for their education and appreciation.
In the evening, the pageant participants — four teenage boys and four girls — performed their tribe’s native dance in the talent segment and took part in the question and answer portion on how to promote the Kalanguya culture in modern society. The representatives from Centro village won Mr. Hulpon and Ms. Hulpon.
OWNERSHIP AND TOURISM
The Indigenous Peoples’ Rights Act of 1997 currently protects Brgy. Malico as an ancestral domain despite disputes to ownership among two provinces.
“It’s an area that’s being contested by both Pangasinan and Nueva Vizcaya. Some of the officials in [Brgy.] Malico are from San Nicolas, Pangasinan. Some are from Santa Fe, Nueva Vizcaya,” Mr. Amistad said.
Mr. Amistad expressed warriness about overdevelopment: “We’re trying to balance the goal for the place to be known but not overexpose it.”
“If you study the area, the wealth of the place is found in the climate, history and culture. We want the tourism to be different from other areas. It should be low-impact so that the environment can be maintained. It will help the community, but, at the same time, preserve the beauty of the place,” Mr. Amistad added.
As an adopted son of the tribe, Mr. Amistad was given a piece of land which he developed into a 300-sq.m. lodging house called the Malico Country Inn. The inn includes a chapel, a main house, traditional houses as additional lodgings, and an museum where he keeps a collection of antiques. A short distance from the inn one finds the remains of an abandoned American tank — Brgy. Malico, it turns out, was the site of a Word War 2 battle.
“At present the local tourism office recommended the improvement in the tourist sites like a peace memorial shrine and the road in the barangay. Seminars on [tourist] homestay are being scheduled. They also plan to conduct seminars on how to be a good tourist guide and how to do massage for the visitors,” Mr. Amistad told BusinessWorld in a text message about development plans in the community.
The plans are needed since Brgy. Malico is now more accessible to the outside world — the road from Santa Fe, Nueva Vizcaya was recently paved, and another from Pangasinan is currently being developed.
For inquiries on Malico Country Inn, call 0908-863-2982 or visit www.facebook.com/malicocountryinn.

Singapore Airlines and SSI tie up for shopping promo

May 4, 2018 | 12:30 am

DON’T throw your boarding passes away — digital or paper — if you’re getting on a Singapore Airlines (SIA) flight as Singapore’s flag carrier has partnered with Stores Specialists Inc. (SSI) for an entire year’s worth of deals and discounts for shoppers with SIA boarding passes.
“We have done this more than 10 years ago in other countries and we’re bringing it to the Philippines this year,” Balagopal Kundavara, Singapore Airlines Philippines general manager, told the media during the promo’s launch on April 26 at Central Square in Bonifacio Global City.
“The Philippines is not a small market [for SIA] in terms of fliers and loyal customers,” he explained before adding that they’re just testing out the program in the country — but if the reception is good, they might make it a long-term promotion.
The promotion, which is ongoing until to April 17, 2019, allows shoppers on SIA flights to get “very, very good deals” on participating SSI brands.
Michelle Suarez, marketing communications head of SSI, said at the same launch that over 38 SSI brands will be offering exclusive discounts for the year, including Aeropostale, Boss, Brooks Brothers, Coach, Kate Spade, MakeRoom, Michael Kors, and Samsonite, among others.
All shoppers have to do is to present their Singapore Airlines or SilkAir boarding pass to get the deals. The boarding passes are valid within one month from the date of travel, while KrisFlyer PPS Club members can avail of the offers anytime by showing their membership cards upon purchase.
Until this June, brands like Samsonite are offering 10% off on regular items except new arrivals, best sellers, and travel accessories, while Coach is offering 10% off on regular items.
For a complete list of participating outlets, visit www.singaporeair.com/boardingpass or ssilife.com.ph. — ZBC

Federal Reserve adds to list of reasons why Asia stock investors are jittery

May 4, 2018 | 12:30 am

THERE ARE A PLETHORA of reasons out there to sell equities today.
Risks of a Federal Reserve’s interest rate hike in June moved front and center Thursday, jostling for position with a simmering China-US trade war, and weaker currencies on the growing list of headaches for stock investors in Asia.
And the “sell in May” theory might come into fruition this year: the MSCI Asia Pacific ex-Japan Index fell 0.5% to extend a three-day slide as most markets in the region followed US stocks lower. Hong Kong’s Hang Seng Index slumped as much as 2%, while benchmarks in Indonesia and the Philippines tumbled at least 2%. Japan remained closed for a holiday.
The Fed, which held rates steady for May, said inflation will run near its target over the medium term and it expects economic conditions to evolve in a manner that will warrant further gradual increases in the federal funds rate.
“The Fed’s outlook on rising inflation is bad for stocks as it confirms the prospects of three to four rate hikes this year, with the earliest in June,” said Lex Azurin, an analyst at AB Capital Securities in Manila. Returns for stocks will get smaller in a period of rising interest rates and inflation, he said.
FED PRESSURE
The Fed’s decision to stay the course will continue to boost the dollar and weigh on the Hong Kong dollar and stocks, according to Ken Chen, Shanghai-based analyst with KGI Securities.
“Share prices are adjusting to reflect valuations that the market thinks should compensate for rising interest rates and inflation,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. “The decline in share prices also reflects that many investors priced in two rate increases this year, but with the recent Fed statement it will be more of three adjustments.”
TRADE WORRIES
The ongoing trade spat between the US and China remains a factor for investors, with a senior China government official saying the nation won’t succumb to “threats” from the US, spurring speculation the conflict won’t be defused any time soon.
“Concerns about trade is still an overhang to the market, as investors do not see a possible way for an immediate solution,” said Linus Yip, chief strategist with First Shanghai Securities.
INDONESIAN ROUT
Along with Hong Kong, investors in Indonesia are also in a selling mood. The rupiah slumped for a fourth day to a 2016 low, while the stocks benchmark retreated as much as 2.5%.
“The depreciation of the rupiah continues to hurt sentiment among equities investors,” said John Teja, director at PT Ciptadana Sekuritas Asia, in a text message. “Weaker than expected April inflation data on Wednesday also signals that consumption was still weak.”
CURRENCY IMPLICATIONS
“Who wants to buy stocks in a country where the currency is weakening?” said Stephen Innes, head of trading for Asia Pacific at Oanda Corp., in a phone interview. “We seem to be moving from what appeared to be a synchronized global growth narrative only a few weeks ago to a synchronized global downturn.”
While global markets aren’t going entirely risk-off just yet, equity investors are starting to take on a “this is as good as it’s going to get” view by taking a more defensive posture against rising rates and the ongoing trade conflict, instead of chasing corporate earnings, Innes said.
AUSSIE OPTIMISM
Australia is outperforming the region, climbing for a fifth consecutive day in a longest winning streak since April 19, reversing the losses suffered since February. Raw-materials producers and financials paced gains.
It’s “quite unusual” for Australia not to follow leads from international markets, said Julia Lee, an equity analyst at Bell Direct. There’s some technical buying after the benchmark index broke through the 6,000 point barrier, she said. “It looks like there’s a little bit of optimism on the Aussie market.” — Bloomberg

Aboitiz Equity Ventures income rises 3% in Q1

May 4, 2018 | 12:10 am

ABOITIZ Equity Ventures, Inc. (AEV) reported a 3% increase in first quarter consolidated net income to P4.8 billion despite its power business, the biggest contributor to the holding firm, reporting lower profit during the period.
AEV told the stock exchange the modest income growth came after lower one-off losses representing net unrealized foreign exchange losses.
“Our diversified portfolio gives us the resilience to sail through varying business cycles. The underlying strength of our core operations and a vibrant economy keep us optimistic on our long-term fundamentals,” said Erramon I. Aboitiz, AEV president and chief executive officer, in a statement.
Of AEV’s businesses, power accounted for 64% of total income, with banking and financial services contributing the second biggest at 30%, followed by land at 1%. Infrastructure had a negative 2% impact on the first quarter results, the company said.
During the period, Aboitiz Power Corp. reported a 9% drop in consolidated net income to P4 billion because of one-off losses.
“Despite the one-off adjustments we have to incur in the quarter, we continue to see modest growth of the group in both our generation and distribution business. On the positive note, we continue to see improvements in plant reliability and availability which has resulted to significant financial contributions,” Antonio R. Moraza, AboitizPower president and chief operating officer, said in a statement.
He said AboitizPower, the holding firm of the Aboitizes’ power business, continues to post growth in its distribution utility (DU) business “thanks to growing regional economies.”
The company recognized non-recurring foreign exchange losses on the revaluation of its dollar-denominated liabilities amounting to P1.2 billion, bigger than the previous year’s P577 million.
Without the one-off adjustments, AboitizPower said its core net income rose by 4% to P5.2 billion. The company also recorded an 11% growth in consolidated earnings before interest, tax, depreciation and amortization (EBITDA) to P11.9 billion.
“We look forward to further improving the operation of our power plants, while investing in technology to improve the services in the DUs. We are also looking forward to completing several power plant projects this year which will give us opportunities to contract and contribute to the growing economy,” Mr. Moraza said.
AEV’s banking business Union Bank of the Philippines contributed P1.4 billion to the holding firm’s profit or higher by 32% compared with its share in the previous year.
Pilmico Foods Corp. and its subsidiaries recorded a net income of P264 million, 10% lower than the level in the previous year because of higher cost of raw materials and operating expenses.
Aboitiz Land, Inc. and other the subsidiaries posted a combined net income of P59 million, down 18% after an increase in borrowing expenses to fund development projects.
The share of Republic Cement and Building Materials, Inc. swung to a P82-million loss, reversing the previous year’s net income contribution of P202 million due to higher energy input costs.
On Thursday, shares in AEV fell by 6.94% to P63 each, while shares in AboitizPower slipped by 2.84% to P37.60 each. — Victor V. Saulon

MPIC posts ‘better-than-expected’ Q1 earnings

May 4, 2018 | 12:09 am

By Krista A.M. Montealegre, National Correspondent
METRO PACIFIC Investments Corp. (MPIC) grew first-quarter earnings by 16% on the back of better-than-expected volume growth in its business units, as the infrastructure conglomerate remains hopeful of reaching an acceptable agreement with the government on its long-pending tariff issues.
In a disclosure to the stock exchange on Thursday, MPIC chalked up a 16% growth in consolidated core net income to P3.6 billion in the January to March period from P3.1 billion in the prior year.
The strong growth was attributed to the increased investment in the power industry through Beacon Electric Asset Holdings, Inc. last year, robust traffic growth on all domestic roads, and steady volume growth coupled with the inflationary tariff increase implemented by Maynilad Water Services, Inc.
Consolidated reported net income attributable to owners of the parent company rose 27% to P3.8 billion during the period from P3 billion a year ago.
In terms of contribution to the net operating income, power accounted for P2.4 billion or 54% of the aggregate contribution; toll roads contributed P1.1 billion or 24%; water added P800 million or 17%; the hospital group provided P190 million or 4%; and the rail, logistics and systems group delivered P35 million or the remaining 1%.
MPIC managed to outperform initial expectations in the first quarter, putting the company on track to exceed last year’s income levels despite the regulatory overhang at Maynilad and Metro Pacific Tollways Corp.
“We remain hopeful that there will be eventually an agreement with government in terms of the tariff structure,” MPIC Chairman Manuel V. Pangilinan said in a briefing in Makati City.
“You’ve seen the first quarter numbers, it turned out to be better than expected partly because the volume of the businesses has grown, driven in large part by the continuing robust economic growth. At the same time, our numbers have been helped by operating efficiency and cost containment,” Mr. Pangilinan said.
Foregone revenues have reached P12 billion for Maynilad and P10 billion for MPTC pending the resolution of the tariff issues, MPIC Chief Financial Officer David Nicol said.
“In this regard, the best way forward is for us to accept that we take the accumulated revenue backlog and apply it to the tariff over the remaining concession life together with a gradual increase in the next two to three years to bring the tariff to contracted levels,” MPIC President Jose Ma. K. Lim said, referring to a proposed solution with the Toll Regulatory Board.
Mr. Pangilinan voiced his support for the government’s infrastructure program and expressed optimism that the economy will “continue to be strong” despite headwinds, including rising inflation, softer remittances, and higher interest rates.
“Despite those (challenges), the volumes we’ve seen for April are still on the high side,” he said.
MPIC is one of three key Philippine units of Hong-Kong based First Pacific Co. Ltd., the others being Philex Mining Corp. and PLDT, Inc. Hastings Holdings, Inc., a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc., has a majority stake in BusinessWorld through the Philippine Star Group, which it controls.
Shares in MPIC lost 22 centavos or 4.23% to close at P4.98 apiece.

Pilipinas Shell sees ‘huge potential’ in non-fuel business

May 4, 2018 | 12:08 am

PILIPINAS.SHELL.COM.PH

By Victor V. Saulon, Sub-Editor
PILIPINAS Shell Petroleum Corp. (PSPC) expects its non-fuel business to account for a bigger share of its gross income in the coming years, its president said, as he points to doubling the budget for the segment to about P2 billion.
“Non-fuels retailing is something that continues to be our focus because we believe that this will lead us to our next wave of change,” said Cesar G. Romero, PSPC president and chief executive officer, in a media briefing ahead of the company’s annual stockholders meeting in Makati City on Thursday.
Based on the company’s projection, he said non-fuels show a “huge potential” as its contribution last year was only about 10% of gross income.
“We hope to grow this to anything between 20% and 30% in the next three to five years,” Mr. Romero said.
For non-fuels, the company opened 37 Select stores and 35 lube bays, all located in Shell outlets, last year, he said.
“We normally said before, we invest about a billion [pesos] in the retail business. For 2018, we’d double that. We have allocated P2 billion for our retail business compared to P1 billion in the past,” he said.
“We plan to continue to spend this amount of money at least in the next two to three years,” he added.
Yearly, PSPC usually aspires to open 15 to 20 Select stores, and at least 30 to 50 lube bays. Last year, more stores were opened than usual, while lube bays were less than the usual number.
Anthony Lawrence D. Yam, PSPC vice-president for retail, said the company started “moving” the lube bays in the middle of 2017. This year, he said the opening of such bays would be “robust” and continuous towards December, possibly exceeding 50 units.
Mr. Romero said the company hopes to be able to open 200 to 300 Select stores. PSPC currently has 1,044 retail stations after opening 66 last year.
“We have to scale up because part of the game of convenience store is having the scale,” Mr. Yam said, adding that the strategy would make the supply chain more efficient and less costly.
He said the concentration of the stores would be in urban areas such as Metro Manila, Cebu, Davao, Cagayan de Oro, as well as toll roads.
PSPC previously disclosed a capital expenditure of P4.289 billion for 2018 for its retail as well as its manufacturing and supply businesses. Its target budget for 2019 and 2020 was set at P3.903 billion and P4.196 billion, respectively.
“Capital expenditures for retail principally relate to the planned establishment of new retail service stations,” the company said.
Of the 2018 outlay, up to P2.636 billion has been allocated for retail, and P1.653 billion for manufacturing and supply.
“Capital expenditures for manufacturing and supply principally relate to the refinery’s hydrogen optimization in 2018 and 2019. Additional capital expenditure for manufacturing and supply also relate to the improvement of existing supply and distribution sites,” PSPC said.

DNL Q1 profit driven by non-food business

May 4, 2018 | 12:07 am

D&L INDUSTRIES, Inc. (DNL) posted a double-digit growth in earnings in the first three months of the year on the strength of its non-food business units.
The listed food and chemicals manufacturer chalked up a 12.3% rise in net income to P744 million in the first quarter of 2018 from P663 million a year ago, according to a disclosure to the stock exchange on Thursday.
Revenue growth was muted at 2% to P6.4 billion for the three-month period from P6.3 billion in the prior year on the back of the 25% decline in coconut oil prices during the period.
However, the “lower cost and expenses as well as higher other income from foreign exchange gains” helped boost earnings, DNL President and Chief Executive Officer Alvin D. Lao said in a briefing in Makati City.
Two-thirds of earnings now come from the non-food business consisting of oleochemicals, specialty plastics and aerosols, allowing DNL to weather the flat growth in the food ingredients business as a result of lower commodity sales.
“We expect the domestic business to continue to be strong. The indication from customers is malakas pa rin. They plan to open more stores and add more items in their menu. The direction is may growth pa rin,” Mr. Lao said.
“Even if inflation has gone up, 20 years ago we were used to seeing inflation above 10%. Yes, inflation is higher now but at the same time you’re seeing good growth: the economy is growing 6%, our company is growing 12%, return on equity is almost 19%. When you look at things from that perspective, hindi nakakatakot,” Mr. Lao said.
Given the robust domestic sales, exports as percentage of total revenue fell to 22% in the first quarter of 2018 from 24% a year ago. Export revenues dropped 5% to P1.4 billion year on year, normalizing from above-average growth last year.
The high-margin specialty product (HMSP) segment grew volumes by 13% year on year, beating the historical average of 7%. As a result, its revenue contribution improved to 64% from 58% in the entire 2017, providing DNL a steady source of recurring revenues.
The commodity business accounted for the remaining 36% of revenues. Blended commodity margins stood at 6.5% during the period from 3% a year ago, pushing overall gross profit margin by 1.2 percentage points year on year to 17.9%.
Shares in DNL shed 20 centavos or 1.87% to settle at P10.50 per share. — Krista Angela M. Montealegre

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