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Macay on the lookout for M&A opportunities

BEVERAGE manufacturer Macay Holdings, Inc. is scouting for merger and acquisition (M&A) opportunities abroad in the next 12 months in a bid to expand its portfolio outside carbonated drinks.

“Geographically, we’d like to diversify. If there’s an opportunity we can actually invest by way of mergers and acquisitions outside the Philippines, we’d like to be open to that,” Macay President Antonio I. Panajon told reporters after the company’s annual shareholders’ meeting in Makati on Wednesday.

The top executive said they are also looking at partnerships or buyouts of companies in overseas markets, particularly developing countries in Asia and Africa.

“We’d like to look at not only beverage but consider other opportunities that will fit our competence like food. And then product diversification, not being confined to carbonated drinks,” Mr. Panajon said.

Mr. Panajon declined to give details on how much investment they are looking at, but noted this will be “very significant that will really impact our business.”

The interest in diversification comes on the heels of the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law, which significantly pulled down the firm’s earnings in 2018. Its net income attributable to the parent fell 71% to P479.37 million last year.

The company’s products are mostly sugar-sweetened beverages, which were slapped with a P6-12 excise tax under the TRAIN law. Macay brands include RC Cola, Fruit Soda Orange, Juicy Lemon, Arcy’s Rootbeer, and Seetrus.

Macay decided to subsidize the price increase instead of passing it on to consumers, since the lower price is its main advantage against competitors.

“We would like to mitigate like what happened with the TRAIN law, all our businesses are in one basket so that means we’ll have to pursue different strategic directions,” Mr. Panajon said.

Macay expects to record better earnings this year, banking on the recovery in volumes and weather conditions.

“The indications are we’re gaining again our growth in terms of volume…It has something to do as well with the weather. Mainit eh (It is hot)….Profit should be higher than last year,” Mr. Panajon said.

Asked if the company will eventually pass on price increases to consumers, Mr. Panajon said this will be unlikely.

Macay’s net income attributable to the parent plunged 71% to P35 million in the first quarter of 2019, as gross revenues also went down six percent to P2.48 billion.

Shares in Macay shed 1.08% or 10 centavos to close at P9.20 each at the stock exchange on Wednesday. — Arra B. Francia

SSS looking to hire more fund managers for IRF

LOCAL managers for the remaining P2 billion of the Social Security System’s (SSS) investment reserve fund (IRF) may be tapped as early as end-June, the pension fund’s chief said on Wednesday.

In a press briefing at the Palace, SSS President and CEO Aurora C. Ignacio said on Wednesday that the pension fund hopes to put the remaining P2 billion of its investment portfolio up for rebidding by this month or July.

“We are looking at other investment channels at the same time looking at the funds. So we are scheduling some who would volunteer to bid for the next funds and there are a lot of bidders,” Ms. Ignacio said.

“So we hope to bid out the amount before the end of the semester or maybe next month,” she added.

The P2 billion is part of the P9-billion investment portfolio that the SSS opened for bidding last year. The agency earlier announced that it has already hired local fund managers to manage P7 billion of its IRF — which was allocated equally to three Balanced Fund mandates, three Pure Equity Fund mandates, and one Pure Fixed Income Fund mandate — for over two years in order to boost its financial standing.

The agency is allowed to appoint local or foreign fund managers to manage its IRF.

Under the Balanced Fund mandates, the agency deployed P1 billion each to Rizal Commercial Banking Corp., BPI Asset Management and Trust Corp. (BPI AMTC) and ATRAM Trust Corp.

The fund managers for the three Pure Equity Fund mandates were BPI AMTC, Metropolitan Bank and Trust Co. and Philequity Management, Inc., also with P1 billion apiece. The SSS said further that the BPI AMTC would also manage P1 billion under the Pure Fixed Income Fund mandate. — A.L. Balinbin

Business Expectations Survey

BUSINESSES were on the whole more confident of prospects this quarter compared to the preceding three months as they expected improved demand — marking the second straight quarter of improvement — but households turned slightly more pessimistic in the same comparative periods in the face of rising prices, according to results of the central bank’s latest surveys on these two segments that were released to media on Tuesday. Read the full story.

Business Expectations Survey

How PSEi member stocks performed — June 26, 2019

Here’s a quick glance at how PSEi stocks fared on Wednesday, June 26, 2019.

 

Philippines loses six places in economic freedom rankings

THE Philippines’ economic freedom ranking slipped six places to 49th out of 162 countries, Canadian think-tank Fraser Institute said in its 2018 Economic Freedom of the World report.

The report, which used data from 2016, showed the Philippines with a score of 7.34 out of ten, from 7.43 in 2015. The country shared its 2016 ranking with Gambia and the Bahamas.

Fraser Institute scored five areas, such as size of government, legal system and property rights, soundness of money, freedom to trade internationally and regulation.

The Philippines scored the highest in sound money and size of government with 9.42 and 8.50, respectively.

The think tank noted the significance of sound money, because high levels of inflation and volatility make it “difficult for individuals to plan for the future and thus use economic freedom effectively,” while size of government tends to signal the direction of spending and taxation, among others.

The Philippines scored the lowest in legal systems and property rights with 4.28 in 2016, down from 4.43 in 2015.

The country scored 7.13 in freedom to trade, in terms of buying, selling, entering into contracts and the like; and 7.37 in regulation, which may serve as constraints on the right to exchange. This is slightly lower than the 7.31 and 7.44 scores in 2015, respectively.

Socio-economic planning secretary Ernesto M. Pernia said in a phone interview Wednesday that economic freedom has improved since he assumed office in 2016. “I would think so, I would think so,” he said when asked.

He said based on the performance of the country, economic freedom has improved in terms of the “extent of economic decisions that can be made and the flexibility of policies.”

The rankings were topped by Hong Kong and Singapore with overall scores of 8.97 and 8.84.

Also in the top 10 were New Zealand (8.49), Switzerland (8.39), Ireland (8.07), the US (8.03), Georgia (8.02), Mauritius (8.01), the UK (8.00), Australia (7.98), and Canada (7.98). — Charmaine A. Tadalan

Angat expected to breach all-time low by Saturday, water regulator says

WITHOUT significant rainfall flowing to its watershed, Angat Dam is expected to breach the lowest recorded level of 157.57 meters by Saturday according to the National Water Resources Board (NWRB).

NWRB Executive Director Sevillo D. David, Jr. said at a briefing: “If the situation continues we are expecting the level of the Angat Dam to breach the lowest recorded level of 157.57 (meters) by end of this week,” Mr. David said.

At 6 a.m. on Wednesday, Angat Dam was at 158.4 meters, 21.6 meters below its rated minimum operating level of 180 meters. The latest level is 0.8 meters away from the lowest recorded level of 157.57 meters on July 13, 2010.

The NWRB also decided to maintain the current allocation of 36 cubic meters per second to concessionaires for the rest of June up to the first week of July.

Mr. David, Jr. said holding the current water allocation to concessionaires is due to the projected monsoon rains around Angat watershed, but any divergence from the weather forecast could still push the agency to adjust the allocations.

Chief of Climate Monitoring and Prediction Annaliza Solis from the government weather service, known as PAGASA, said the weather service is expecting monsoon rains in the coming days.

Inaasahan po natin (We are expecting) starting this week up to at least week one po ng (of) July, inaasahan natin may mga tinatawag na mga (we are expecting what we call) monsoon rains na dahil papalabas po ’yung bagyo ngayon, hahatak po ’yan ng Habagat. (because the tropical depression is going out, it will pull in the monsoon). We hope may mga ulan po na makaka-contribute sa pagdagdag ng tubig ulan sa Angat Dam. (there will be rains that can contribute to the rainfall in Angat Dam)” she added.

Ms. Solis said that the weather service is expecting rainfall in Angat Dam in July and August to be near normal. The El Niño phenomenon is also expected to end by August, although there is a possibility for it to continue until first quarter of 2020.

According to Ms. Solis, Angat Dam only received 118 mm of rain from June 1 to 25, or 36% of the normal amount of rain it should get during the period. The dam typically gets 332.4 mm of rain for the month.

Maynilad Water Services, Inc. spokesperson Jennifer C. Rufo said in a text message, “As long as the raw water allocation for Metro Manila remains at the reduced level of 36 CMS, we are constrained to continue implementation of the current rotational service interruption scheme.”

“As distributors of water supply, we can only distribute what is given to us, and just maximize that limited supply so that all affected customers will have some water supply daily,” she added.

Meanwhile, Manila Water Co., Inc., group head for corporate strategic affairs Nestor Jeric T. Sevilla, Jr. said, “We will continue to implement our rotational service interruptions until the NWRB decides on a new water allocation.”

Currently, rotational water interruptions for areas covered by the Manila Water range from 12-17 hours while areas served by Maynilad are experiencing 14 hours of interruption on average.

The current water allocation of 36 cubic meters per second amounts to 3.1 billion liters per day, 10 cubic meters short of the normal 46 cubic meters per second, which is equivalent to 4 billion liters per day, Mr. David said. — Katrina T. Mina

Fisheries sector hoping to match or top Q1 growth rate in 2019

THE fisheries regulator said he hopes to match or top the sector’s first quarter growth rate of 0.97% over the course of 2019.

“We would rather (keep pace) or improve… Positive at the end of 2018, and then another positive in the second quarter sana (I hope),” Bureau of Fisheries and Aquatic Resources (BFAR) National Director Eduardo B. Gongona told reporters on the sidelines of an event in Quezon City.

The first-quarter growth reversed a 4.58% year-earlier contraction. The sector also accounted for 13.45% of total agricultural output value in the period.

In the third quarter, he expects a boost from the aquaculture harvest with the sector currently seeding ponds with fingerlings.

He also said that the bureau has submitted a proposal to the Department of Agriculture (DA) to establish more fish cages. Starting this year and running to 2020, 300 fish cages will be allocated to each region, but Mr. Gongona said that 25,000 fish cages are currently available.

Early this month, Agriculture Secretary Emmanuel F. Piñol said that the Department of Finance has approved the use of at least P3 billion of the P4-billion Agricultural Enhancement Fund (ACEF) to expand fish farming. Land Bank of the Philippines (LANDBANK) will disburse the funds in the form of loans.

Under the proposal to be submitted by the BFAR, individual operators will be allowed to borrow up to P1 million, while cooperatives and associations can tap up to P5 million.

The BFAR and the Agricultural Credit Policy Council (ACPC) will also form loan facilitation teams to help potential loan applicants. — Vincent Mariel P. Galang

Majority of Filipinos plan to pay for medical expenses with savings, debt, study finds

A MAJORITY of Filipinos said they intend to finance their medical expenses from savings or debt, according to the findings of a health and wellness study by PhilCare, a health maintenance organization (HMO).

PhilCare also found that the Philippines is considered “far behind” in terms of health care and wellness compared to other countries it tracked.

On Wednesday, PhilCare said the Philippine Wellness Index 2019 returned a score of 2.84, classifying the industry’s performance as “somewhat good.” The 2019 report represents the second study since 2014, and factored in interview results from 1,350 participants.

The study’s lead researcher, Fernando D. Paragas, said during a briefing Wednesday that the Philippines is behind health care practices in other countries tracked like New Zealand, Canada, and the United States.

“We’re still far and as you can see, most indices are from the more well-off countries. They have measures to promote health and wellness while we are just starting,” Mr. Paragas said.

The 2019 Wellness Index included the finances of its respondents, and one of the findings was that many Filipinos are unable to easily afford healthcare.

The survey showed that 40% declared themselves uncertain about being able to afford medical expenses. Some 35% said they are uncertain if they can pay for regular checkups.

Some 37% said they will pay for medical expenses out of savings, while 25% said they plan to borrow money from friends and relatives when the need arises. Only 15% said they have an HMO.

The study also tried to evaluate physical, lifestyle, nutritional, and psychological wellness of respondents, with participants rating their psychological wellness as “good” while the rest of the categories were “somewhat good.”

PhilCare President and CEO Jaeger L. Tanco said that the HMO is looking to submit its findings to the government. He added that former Health Secretary Enrique T. Ona serves on the PhilCare Board.

“This is something we will discuss with Dr. Ona. We do plan to submit it and inform the public of the findings,” he told BusinessWorld.

Mr. Tanco added that the company is also planning to add more services and packages.

Mr. Ona said that PhilCare’s study will be available as a reference for government agencies implementing the Universal Health Care (UHC) Law. He added, “PhilCare will also forge partnerships with the government sector so they can use this proprietary study to draft relevant policies. We have findings in this study that may be very useful in the goal of the government to attain truly universal health care.” — Gillian M. Cortez

GSIS still plans to dispose of harbor site amid ICTSI dispute

THE Government Service Insurance System (GSIS) is going ahead with the sale of a portion of Manila North Harbor, which is operated by the International Container Terminal Services, Inc. (ICTSI), despite earlier reports that the port operator claims the state-run pension fund has no authority to do so.

In a statement yesterday, GSIS said it is “bent on selling” the 672,645-square meter property at the harbor, which threatens to disrupt ICTSI’s container port operations at the site.

“As a government entity that exists to ensure the integrity of the funds of its members, GSIS is determined to sell it through public bidding upon the approval of the Board,” GSIS President and General Manager Jesus Clint O. Arañas said in the statement.

The land is estimated to be worth about P33.632 billion, based on the zonal valuation as of May 9.

In a disclosure to the stock exchange earlier this month, ICTSI said the dispute dates back almost two decades ago, when GSIS lost an ejectment suit at the Metropolitan Trial Court, Regional Trial Court and Court of Appeals even though GSIS “only has bare title to the port land.”

Referring to this statement, Mr. Arañas said Wednesday the claims of ICTSI “does not preclude GSIS from disposing of the property.”

Aside from the property at the Manila North Harbor, GSIS is also trying to assert its ownership over a 1.2-hectare site that was included in the five-hectare resettlement site the Philippine Ports Authority (PPA) is donating to the National Housing Authority (NHA), the City of Manila, ICTSI, and Manila North Harbor Port, Inc.

“[T]he ocular inspection report of NHA reveals that the proposed relocation site infringes on another GSIS property occupied by informal settlers and allocated for socialized housing… with an area of 1.2 hectares which belongs to GSIS,” it said.

It said it wants the memorandum of understanding (MoU) on the PPA’s donation to be “rescinded, modified, or revised to exclude the overlapping portion of GSIS-owned property,” noting it “was never consulted and neither did it approve or consent to such donation….”

GSIS said it tried to communicate with the PPA and ICTSI over the land dispute, but instead found the legality of its title questioned.

“…GSIS has invited ICTSI to discuss the use and rental of the disputed property. But ICTSI referred GSIS’s letter to PPA and deemed that ‘it may not be useful to sit down with GSIS without the participation of PPA,’” it said.

ICTSI said in an e-mail Wednesday it “(doesn’t) have a comment at this time.”

PPA was also asked for comment but had not replied at deadline time. — Denise A. Valdez

BFP underspent on National 911 system, failed to complete fire stations — CoA

THE Commission on Audit (CoA) said the Bureau of Fire Protection (BFP) failed to use P53.3 million worth of funds from the Department of Interior and Local Government (DILG) and Department of Energy (DoE).

According to its annual audit report in 2018, BFP only utilized P58,659.88 from the P2 million funds from DoE. On the other hand, the BFP only used P6 million out of the P44 million provided by the DILG.

“It may be recalled that DoE has been requesting for the liquidation or refund of the funds in its letter dated Dec. 6, 2016 but to date the same has not yet been acted upon,” according to the report.

CoA added, “…The funds from DILG intended for National 911 for the conduct of training of BFP-EMS (Emergency Medical Services) remained unexpended.”

It also reported that BFP said the funds received from DoE and DILG will be used for the continuation of delayed projects they were intended for.

“Management commented that funds received from DoE will be used for the continuation of the project. On the other hand, projects for the fund transfer from DILG for the National 911 Program are on-going,” the state auditors said.

The auditing agency recommended that BFP “immediately refund to DoE the amount of P1.94 million which remained unutilized since May 2017.”

The state auditors also called out BFP for failing to achieve its goal of establishing at least one fire station in every province, city, and municipality.

“Records of Infrastructure Section- Logistics and Engineering Division of BFP-NHQ show that as of Dec. 31, 2018 there were 133 uncompleted construction of fire stations nationwide,” CoA said. — Vince Angelo C. Ferreras

Hong Kong, Thai, Malaysian trade delegations expected in Davao

DAVAO CITY — Trade delegations are expected to visit Davao City in the next few months with investor interest buoyed by last week’s Davao Investment Conference (ICon) 2019, according to officials of the Davao City Chamber of Commerce and Industry Inc. (DCCCII).

At yesterday’s Habi at Kape forum, DCCCII president Arturo M. Milan said a group from Hong Kong, is visiting this week and requested business-matching meetings.

Trade missions from Thailand, Taiwan, and Malaysia are also coming for discussions and to present their products, he added.

The investor interest, Mr. Milan said, is viewed as an opportunity to promote tourism not just in Davao City but the Davao Region as a whole.

“There are so many requests and many still want to come in. Part of this, we are planning to hold the Davao Tourism Summit in July because the challenge now is for connectivity to be established, how to make it sustainable and how we an encourage more tourists to come,” he said.

DCCCII Executive Vice-President John Carlo B. Tria, meanwhile, said the chamber is also working on responding to follow-on requests for business matching after the Davao ICon.

“We are receiving a lot of inquiries and a lot of discussions for partnerships,” Mr. Tria said.

Around 600 domestic and international delegates attended the fifth staging of the Davao ICON on June 20-21.

“There were 18 countries (that) participated and seven were directly represented by their ambassadors. This is the first time that we have that number of countries participating,” Mr. Milan said.

Malou G. Monteverde, chairperson of Davao ICON 2019, said the conference opened up Davao as an investment destination in Southeast Asia.

“It was a huge success and placed Davao in the global map as a SE (Southeast Asian) destination,” Ms. Monteverde said.

She added that participants are considered “game changers” heralding further business in infrastructure development and economic zones. — Maya M. Padillo

DTI to release incentive scheme for EV firms, parts makers

THE Department of Trade and Industry said it is working on a “special program” that will attract investors to various segments of the electronic vehicle (EV) industry all across the value chain.

“We are studying what other support we can provide to the e-vehicle industry. A special program that will quickly attract foreign and local investors in this industry of the future… to compete with other countries with respect to becoming a preferred location for e-vehicle production,” Trade Secretary Ramon M. Lopez said in a statement Wednesday.

Mr. Lopez made the disclosure at a ceremony to open a center to facilitate trade with South Korea, in the presence of officials from South Korea’s Ministry of Trade, Industry, and Energy (MOTIE), the Korea Trade and Investment Promotion Agency (KOTRA), and South Korean companies.

The Korea-ASEAN Free Trade Agreement Support Center opened this week.

The DTI met earlier this month with International Electric Vehicle Association and other EV firms from South Korea.

The association encouraged the Philippines to provide additional support to attract more investors in the EV and parts industry, and proposed that that aside from the usual tax holidays, the government provide a performance-based, time-bound incentive regime.

It also lobbied for incentives for EV owners, like free parking and discounted tolls, in line with the practices in South Korea and the Association of Southeast Asian Nations.

Undersecretary for DTI’s Competitiveness and Innovation Group Rafaelita M. Aldaba earlier said the DTI, in coordination with other regulators, hopes to release this year an incentive package that will encourage EV firms to put up assembly plants.

The program will be modeled on the Comprehensive Automotive Resurgence Strategy which rewards domestic production and the manufacturing of high-volume car models.

The Philippines is hoping to host South Korean EV firms amid ongoing negotiations for a bilateral free trade agreement.

“We see so much potential and opportunities in our e-vehicle industry that can be further strengthened with our deepening bilateral relationship with a manufacturing powerhouse like South Korea,” Mr. Lopez added.

The Philippines and South Korea launched this month the first round of negotiations for an FTA, which they hope to wrap up by September this year, in time for signing by November.

The Philippines and South Korea have conducted their first round of FTA negotiations in early June. — Janina C. Lim