TOYOTA MOTORS Philippines Corp. (TMP) and Mitsubishi Motors Philippines Corp. (MMPC) have ignored Filipino-owned parts makers “in favor of the Japanese companies” based here for the localization requirement under the government’s auto industry resurgence program, the Philippine Parts Makers Association, Inc. (PPMA) said on Monday.

“What happened to the objective of boosting the local production and supply of SMEs (small and medium-sized enterprises)? It seems that the local car assemblers have totally ignored the local SME supply chain and have just focused on their own Japanese-affiliated suppliers,” the PPMA statement read, which was signed by PPMA President Ferdinand I. Raquelsantos.

The Comprehensive Automobile Resurgence Strategy (CARS) program is an initiative established under the Aquino administration that would incentivize three car makers to locally produce three car models with a production volume of at least 200,000 units for up to six years, or an average of 33,333 vehicles per year. MMPC and TMP are the two companies registered under the program.

Since being awarded as participants of the CARS program, the companies have announced late last year a handful of initial partnerships with local suppliers in preparation for the start of their volume production.

Mitsubishi would begin volume production in April this year while Toyota would do so in August 2018.

“Noteworthy is the fact that, none of these local suppliers are registered under the SME category. Mostly are Japanese locally established companies, with the rest having TLA (technical licensing agreement) with local Filipino large companies,” the statement read.

PPMA said they asked the car makers for a timeline for the phase-in of local parts makers in the supply chain.

In the case of Mitsubishi, PPMA said that they were told of a scheduled “Wave 1 to 3 phase-in” next year. However, “no plan for local development of SME suppliers is apparent or forthcoming.”

PPMA said that they asked Japanese suppliers visiting Mitsubishi in March last year to enter into joint venture agreements or TLAs with local parts makers, especially those considered SMEs.

Instead, PPMA said that the suppliers only worked with either “Japanese comrades” in the local industry or large Filipino companies.

On the other hand, PPMA noted that Toyota said it would take four years for the development, and depending on whether or not it would be approved, SME firms would enter the supply chain “in the middle of production life which will be sometime by the end of 2021.”

While the local parts makers group recognized the employment gains under the CARS program due to in-house production among others, they noted that there is a “noticeable downsizing” in SME operations which the group fears is “tantamount, if not near, to closure.”

“Our large companies-members are preparing and looking forward in making true forecast of increase in production of about 55%. They will definitely be benefitted from this CARS Program while the SMEs will continuously strive for their existence,” PPMA said.

Trade Undersecretary Ceferino S. Rodolfo has previously said that the government cannot require the car makers to pick SMEs for the CARS program, noting that the companies should have the space to choose which local parts makers they would like to partner with.

Toyota and Mitsubishi officials were not available for comment as of press time.

However, in separate interview in November, they said that the matter is still under discussion.

Froilan G. Dytianquin, MMPC first vice-president for marketing, said late last year that Mitsubishi is still studying whether or not SME firms could be picked as Tier 1 suppliers, but noted that SMEs could later come in as Tier 2 and 3 suppliers.

Tiers point to the level of commercial distance between the supplier and the manufacturer. Tier 1 firms are direct suppliers to a company, while succeeding tiers indicate an indirect relationship that could stretch further along the supply chain.

On the other hand, TMP First Vice-President Rommel R. Gutierrez said in a chance interview in November that this is still subject to an ongoing discussion that is in the process of filtering the list for those that are qualified under the CARS program. — Roy Stephen C. Canivel

CEBU PACIFIC is set to launch two new routes from its Cagayan de Oro hub in March, as it further expands its domestic network.

In a statement, the Gokongwei-led budget carrier said it will start four weekly flights (Monday, Wednesday, Friday and Sunday) between Cagayan de Oro and Tagbilaran on March 15.

Three weekly flights (Tuesday, Thursday and Saturday) will also be launched between Cagayan de Oro and Bacolod on March 16.

The new routes will utilize Cebu Pacific’s new ATR 72-600 aircraft which will be delivered in early March.

“Cebu Pacific stays committed in providing the best connectivity options for our valued passengers at the lowest fare available in the market… At the same time, passengers from Tagbilaran and Bacolod will now be able to explore Mindanao without the hassle, through the gateway that is Cagayan de Oro,” Alexander Lao, Cebgo president and chief executive officer, was quoted as saying in a statement.

Cebu Pacific is offering a P799 all-in fare for the two routes for travel from March 15 to May 31, 2017. The regular, one-way fare from Cagayan de Oro to Tagbilaran is P1,235, while Cagayan de Oro to Bacolod is at P1,806.

STI COLLEGE scored a double “A” from Philippine Rating Services Corp. (PhilRatings) for the issuance of bonds worth P3 billion.

In a statement released on Monday, the local debt watcher said it assigned a “PRS Aa” rating on the bonds proposed by the subsidiary of listed STI Education Systems Holdings, Inc. under a shelf registration for P5 billion worth of debt securities.

STI College, incorporated as STI Education Services Group, Inc. (STI ESG) in 1983, plans to issue the first tranche of the shelf offering in tenors of seven and 10 years, according to a disclosure to the Philippine Stock Exchange on Jan. 12.”

The company has earmarked the proceeds of the bond offering for the expansion of its campuses and other general corporate purposes.

To date, STI College has 32 schools under its ownership and 32 more under franchise agreements across the country. It also operates 12 educational centers, of which five are company-owned and seven are franchised.

STI College offers senior high school across its schools, taking advantage of the implementation of the K to 12 program that expanded the country’s basic education curriculum to include two years of vocational studies.

PhilRatings found the proposed bonds to have a high quality and very low credit risk. It assigned the second highest score on the debt papers to indicate also the extremely strong capacity of STI College to meet its financial commitment.

The debt watcher assigned a “stable” outlook on the rating given to the proposed bonds. This suggests the debt issue will likely maintain its PRS Aa score within the next 12 months.

“The rating reflects the following factors: STI ESG’s ample cash flows with minimal reliance on debt; the stable demand for its business; its position as an established educational institution with the ability to adapt to shifts in the industry; and its consistently improving revenues,” PhilRatings noted.

STI College has shown a consistent upward trend historically, according to PhilRatings, with its total revenues growing to P2.4 billion last year from P1.6 billion back in 2012. Tuition and other school fees comprised as much as 87% of the revenues.

The company’s net income, meanwhile, registered a compounded annual growth rate of 23.4% despite a more volatile trend. Last year, for instance, the bottom line dropped on the 134% increase in interest expense following the drawdown of a loan from China Banking Corp. in 2015 and the absence of a one-time gain.

In the six months to September 2016, the consolidated revenues of STI College improved 17% year on year to P1.2 billion. Tuition and other school fees continued to account for 83% of the total, while cost and expenses rose at 5%. Accordingly, the company netted 59% higher or P542.7 million.

“Over the coming years, consolidated revenues will continue to expand on the back of a continued increase in the number of student enrollees,” PhilRatings said.

“The Group is focused on organic growth in its schools located nationwide and will continue to pursue this track during the projected period. Bottom line will likewise show an upward trend while net profit margins will be maintained within historical levels.” — Keith Richard D. Mariano

A MALAYSIAN mall owner is trying to attract Philippine retailers offering American-style fastfood and lifestyle clothing to set up shop in the Southeast Asian country.

Officials of the Kuching-based Plaza Merdeka visited Manila anew last week to meet executives from Suyen Corp. and Golden ABC, Inc., owners of Bench and Penshoppe, respectively, and fastfood giant Jollibee Foods Corp.

Plaza Merdeka General Manager Cheah Kheng Mun is making a new pitch to seal the deal for these Philippine retailers to expand in Sarawak by second or third quarter of this year.

“You sell a pair of jeans here for P1,500. In Malaysia, you can sell the same pair at RM150, or about P1,800-P1,900 when converted,” he told BusinessWorld. “You gain.”

Marketing these Philippine brands in Malaysia, a new market for these companies, shouldn’t be back-breaking, he added, largely because of their Asian roots.

Mr. Cheah believes Jollibee’s Yum Burger and Chickenjoy would not be too alien to Malaysian consumers. He noted Jollibee serving rice, considered a staple food for Filipinos and Malaysians, would make the fastfood chain more attractive to locals.

He also cited Penshoppe’s use of supermodels Kendall Jenner, Gigi Hadid, Cara Delevigne and Sean O’Pry — all “familiar faces” for the 20- to 26-year-old Malaysians, which comprise Plaza Merdeka’s highest spenders.

Mr. Cheah said Philippine brands also have an edge over Western retailers in Malaysia — its shared Asian background. Many Southeast Asian consumers are fans of Korean stars like Lee Min-ho, who models for Bench, and Sandara Park, who appears in Penshoppe ads.

Bench, he added, can also benefit from the popularity of Asian TV dramas, particularly Philippine teleseryes which air in Malaysia. For instance, ABS-CBN’s Pangako Sa’yo is a particular favorite among Malaysian audiences.

In the process, they will “create a lot of opportunity for other people,” Mr. Cheah said. “When you build a new store in an uncharted territory, for the logistics, fashion, marketing, advertising, sales, etc., you are creating jobs.”

At a time when US President Donald J. Trump’s protectionist policies are looming over Southeast Asian economies traditionally dependent on the US, Mr. Cheah said with these efforts in the region, “at least we could help the economy grow.”

The Kuching-based Plaza Merdeka is looking to woo Philippine retailers to open stores in its malls. — PLAZA MERDEKA

STATE AGENCY National Power Corp. (Napocor) is seeking regulatory approval to charge electricity consumers more than P1.11 billion or a monthly equivalent of 1.34 centavos per kilowatt-hour (kWh) for one year.

The amount, if approved, will find its way in the monthly power bill of consumers and will cover the difference between what the agency was allowed to charge as against what it was able to collect for 2015.

“The recovery of shortfall within one year or 12 months would be reasonable and timely in order for [Napocor] to augment its financial requirements to provide up to date recovery and adjustment of the ensuring years’ subsidy requirements,” Napocor said in its filing with the Energy Regulatory Commission (ERC).

The filing, which was published in newspapers on Monday, “are merely reimbursement of actual expenses for CY [calendar year] 2015,” Napocor said, adding that “there are no carrying charges calculated and being proposed herein.”

Napocor, the government-owned corporation mandated to bring electricity to remote areas that are not connection to the transmission system, is authorized by law to charge a return on its rate base composed of the sum of its assets in operation plus two months operating capital.

As determined by the ERC, its collection — in the form of a so-called “universal charge” — is imposed on all electricity end-users.

In its application with ERC, Napocor said it required P12.975 billion in revenue during the period, which is higher than its sales of P5.731 billion. This leaves P7.24 billion for collection via the universal charge. For 2015, it said the actual revenue from universal charge was P6.211 billion.

It calculated the shortfall at P1.033 billion, which excludes the cash incentives for renewable energy developers of around P78.76 million. The combined figure results in the final amount the agency seeks to recover.

Napocor said the calculation of its revenue requirement included the following expenses: fuel costs; other operating expenses plus personal services and maintenance; depreciation, foreign exchange fluctuation on data servicing; rate base as of December 2015 and revenue from sales.

Napocor President Gladys C. Sta. Rita has asked the ERC to approve the application, which was dated Jan. 12, 2017, and for the regulator to direct the Power Sector Assets and Liabilities Management Corp. to remit monthly the actual universal charge collected from electricity consumers.

For 2015, Napocor has implemented a provisionally approved universal charge for missionary electrification of P927 million per month or equivalent to 15.44 centavos/kWh for a total of P11.135 bilion for the year. Including the cash incentive for renewable energy developers, the rate amounted to 15.61 centavos/kWh. The approval was extended for 2016. — Victor V. Saulon

VICTORIAS CITY, NEGROS OCCIDENTAL — Victorias Milling Company (VMC) Inc. expects profit falling by an annual 12% this year, as sugar prices continue to remain low.

VMC Chief Finance Officer Teresita V. Ilagan said the sugar miller’s net income may go down to P700 million from the P798 million it posted in 2016. The listed company’s fiscal year ends in August.

“The original outlook was about P1 billion but we will go somewhere (around) P700 million this year,” she said in a press briefing here on Monday. VMC posted a net income of P1 billion in 2015.

For its first quarter ending November, VMC earned P119.08 million, 59% lower than the P292.19 million in the comparable period in 2015 due to late start-up this crop year.

Ms. Ilagan attributed the low sugar prices mainly to the massive importation of high fructose corn syrup (HFCS), an alternative sweetener used by some industrial manufacturers for beverages, cookies and juices.

The Sugar Regulatory Administration (SRA) earlier said that from January to November last year, local industry players imported around 285,000 metric tons (MT) of HFCS, 44.67% higher than the 197,000 MT of HFCS shipped to the country in the same period in the prior year.

As of Jan. 8, mill site sugar prices have gone down to P1,538.03 per 50-kilo bag from P1,784.92 at the start of the September milling season, according to the SRA price watch.

VMC President and Chief Operating Officer Eduardo V. Concepcion said sugar production for this year may be flat as it continues to feel the effects of the severe El Niño last year.

“Overall picture now is total production will be more or less the same last year. Tonnage is high but sweetness is not as high in the previous year,” he told reporters at the same briefing.

Mr. Concepcion added that the company’s initial target was to achieve milling 3.2 million tons of cane for the current year. This was revised downward to a “more realistic” 3 to 3.1 million level.

“Malaki talaga impact ng El Niño kasi na-stunt yung growth ng mga canes eh (El Niño’s impact was really big because it stunted the growth of the sugarcanes),” Linley A. Retirado, VMC chief manufacturing officer, said in an interview.

However, Mr. Retirado noted the firm’s milling target for the current year is still considerably on the high side. VMC recorded its highest tonnage of 3.3 million tons of cane in only two financial years from 2003, he added.