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Tax appellate court upholds its ruling on Dole’s P167-M refund

THE Court of Tax Appeals (CTA) upheld its decision granting P166.7-million tax refund to Dole Food Co., Inc. (DFCI) over its erroneously paid capital gains tax.

In a 13-page decision, the court en banc denied for lack of merit the petition for review of the Bureau of Internal Revenue (BIR), affirming its third division’s decision and resolution in granting refund to DFCI.

The case stemmed the shared transfer agreement of DFCI and Dole Asia Holdings Pte. Ltd. (DAHL) where the company sold and transferred all its rights and interest in Dole Philippines, Inc. (DPI) for P1.9 billion.

The company owns 11.87% of the shares in Dole Philippines.

The CTA junked the bureau’s claim that the court’s third division erred in considering the financial statements of DPI in 2012 despite DFCI’s failure to submit those during its administrative claim in the bureau.

It said the court is not limited from receiving pieces of evidence that were not submitted in the administrative filing.

“Thus, petitioner is totally mistaken in his assertion that only those evidence which respondent submitted in its administrative claim for refund may be presented before this Court. A claimant may also present new or additional evidence that will solidify and further corroborate its claim for refund,” the court said.

The BIR also alleged that the property values in the financial statement of DPI was stated at cost and not based on fair market value which it said should be used at the time of the sale of the stocks.

The court, however, said that the bureau did not provide evidence to support its claim that DFCI opted to use a revaluation model wherein it was supposed to carry its property, plant and equipment in its financial statement at fair market value.

“Thus, this Court cannot disturb the factual findings of the Court in Division which initially tried the case,” the court said.

“There being no allegation nor iota of evidence from petitioner of abuse, arbitrariness, or capriciousness being committed by the Court in Division, this Court has no reason to reverse the latter’s findings,” it added.

The court noted that the case is about whether the tax refund has legal basis and the admission of the financial statement “was material to the determination of the total assets profile of DPI.”

The shares of stocks of the company is covered by Article 14(2) in relation to Article 1 of the Reservation Clause of the RP-US Tax Treaty.

Article 14(2) states that gains from the alienation of property shall be taxable only in the contracting state “of which the alienator is a resident” while Article 1 states that both the Philippines and US may tax gains from the disposition of an interest of a corporation if the assets “consists principally of a real property interest located in that country.”

It also said that based on records, real property assets constituted only 17.8% of DPI’s total assets. “Thus, the gains from the sale of DPI shares by respondent to DAHL were taxable only in the United States where the alienator, i.e., respondent, is a resident.”

“The capital gains tax therefore paid by respondent to petitioner on the sale of share transaction was erroneous. Hence, the argument of the petitioner that the value of the Property Plant and Equipment must be based on the fair market value at the time of sale and not on cost is irrelevant and immaterial to the case at hand,” the court said.

The court noted that the Tax Treaty was the basis of the refund grant and not the Certification No. 16-016 dated Dec. 8, 2016, which the BIR claimed must not be given weight or credit as the DFCI failed to present the custodian of the document.

The decision was penned by Associate Justice Catherine T. Manahan. — Vann Marlo Villegas

Negative investor sentiment pulls down ISM’s share price

INVESTORS sold off ISM Communications Corp. shares last week with analysts attributing the movement to overall negative market sentiment as well as news on Dito Telecommunity Corp.’s possible delay in its commercial operations.

A total of 525.40 million ISM shares worth P1.09 billion were traded from Feb. 10 to 14, data from the Philippine Stock Exchange showed, making it the fifth-most actively traded stock last week.

ISM shares closed at P1.90 apiece on Friday, down 21.8% from P2.43 a week ago. Year to date, the stock’s share price slipped by 51%.

“ISM’s share price movements were influenced by the developments in Dito Telecommunity. The company is poised to be the telecommunications, media, and entertainment arm of the Udenna group, so it was negatively affected with the reports [last] week about the possible delay of Dito Telecommunity’s roll-out due to problems in permit application,” Philstocks Financial, Inc. Senior Research Analyst Japhet Louis O. Tantiangco said in a text message.

Mr. Tantiangco noted the report “drew skepticism” on the part of investors, which led them to sell positions on ISM.

A news article published on Feb. 9 reported that Dito’s commercial operations will be delayed “over the complicated cell tower permitting process,” adding that there were concerns from some lawmakers and Department of Information and Communications Technology (DICT) Secretary Gregorio B. Honasan II regarding Dito’s capability to complete its rollout program by July this year.

To recall, Dito is scheduled to launch its services in the second quarter of 2020, with a government commitment to deliver a minimum broadband speed of 27 megabits per second (mbps) to 37.03% of the national population by July.

ISM has gained approval from its board of directors in December to buy 100% of Udenna Communications, which it will use as the parent firm for Dennis A. Uy’s telecommunications, media, and entertainment businesses.

Dito is owned and controlled by Mr. Uy’s Udenna Corp. and Chelsea Logistics and Infrastructure Holdings Corp., and China Telecommunications Corp.

In a separate disclosure on Wednesday, Chelsea said that “there is no truth” to the said delay, assuring the public that it will be able to meet its commitments to the government.

For Regina Capital Development Corp. Equity Analyst Anna Corenne M. Agravio, the decline in ISM was more due to the overall negative investor sentiment in the market.

“While the downturn may indicate some stock-specific negative investor sentiment, ISM’s movement last week is more of a reflection of the local market as a whole. ISM was but one of the many companies that bore the brunt of the bearish volumes and selling pressure we saw from the index the past days,” Ms. Agravio said in an e-mail.

“If anything, investors sold down ISM due to the increased uncertainties brought about by the global virus outbreak. Again, this is as much a reflection of the company as it is on the Philippine stock market,” she added.

ISM posted a net income of P50.42 million in the nine months to September 2019, up 235.8% from P15.01 million in the same period in 2018.

“ISM has an initial support range from P1.55 to P1.60. If this fails to hold, its next support will be at P1.30. Initial resistance lies at P2.00, while the next resistance is at P2.60,” said Philstock’s Mr. Tantiangco.

Meanwhile, Regina Capital’s Ms. Agravio placed the stock’s support and resistance levels at P1.7 and P2.37, respectively.

“ISM is already at its almost two-year low. Given that indicators are already deep into the oversold region, it is likely that the stock will soon settle at a new bottom before consolidating sideways. Note that at this rate, it is more plausible that ISM will trade closer to its support than the resistance for the rest of the month,” Ms. Agravio said. — Jobo E. Hernandez

Davao mixed-use project to start with housing, UP graduate school

CONSTRUCTION will start this year for the initial residential units and the University of the Philippines Los Baños (UPLB) graduate school at the Agriya mixed-use complex of Damosa Land, Inc. (DLI) in Panabo City, Davao Del Norte.

DLI First Vice President Ricardo F. Lagdameo said the company has so far sold about 40% of the initial 177 lots for the residential component, which is expected to generate 70% of the project’s total revenue.

Mr. Lagdameo, in an interview during the project’s formal launch on Feb. 13, said the initial phase of the project is estimated to cost about P4 billion, but the total investment has yet to be determined for what the firm sees as a long-term development for the 88-hectare complex.

“It is really a long-gestation project,” he said.

Agriya, conceptualized by architect Felino A. Palafox, Jr., is designed as an “agricultural metropolis” or agropolis, and the name is a play on “Agricultural City of Anflocor,” the Floirendo family’s holding firm that includes DLI and the flagship Tagum Agricultural Development Co., Inc.

Macy P. Bibat, project head, said the company will showcase the first model house by next month and start building before the end of the year.

“We are not really advocating that they (lot buyers) put up a big house on the lot,” said Ms. Bibat, noting that the project promoters want to encourage backyard farming in keeping with the agropolis concept.

The lots range between 202 to 450 square meters priced at P6 million to P15 million.

Mr. Lagdameo said that when the company turns over the properties, it will be giving out seedlings to the owners to get them started on their own small farm.

For the university campus, Ms. Bibat said UPLB is scheduled to start with the first building by the second quarter this year.

The 1,500-square meter building will house classrooms and an auditorium, among other office components.

DLI donated three hectares for the UPLB extension unit, which will be focusing on graduate studies in agriculture.

Ms. Bibat said the state-run school will later set up greenhouses and laboratories.

Mr. Lagdameo said the firm is planning to invite other educational institutions to set up a campus for primary and secondary education.

“We also want to have here a K to 12 (kindergarten to grade 12) school.”

Meanwhile, the company is also finalizing Agriya’s Naturetainment area, which will be open to visitors.

The agri-tourism area features a living crop and aquaculture farm where guests can learn how food is grown and have a better “appreciation of agriculture,” Ms. Bibat said.

It will have a “pick-and-pay” section where children can harvest vegetables to bring home.

Tourism Secretary Bernadette Romulo-Puyat, speaking at the project launch, said Naturetainement will be part of the campaign on agri-tourism, which is being promoted as a key segment for the tourism industry.

“It is a noble thing what you are doing here at Agriya, highlighting the merits and importance of agriculture,” said Puyat. — Carmelito Q. Francisco

MPIC, Marinduque team up to protect marine biodiversity

METRO PACIFIC Investments Corp. (MPIC) has teamed up with the local government of Marinduque to boost awareness of the environment and protect the province’s marine biodiversity.

In a statement during the weekend, MPIC said its corporate social responsibility arm Metro Pacific Investments Foundation had signed an agreement with Marinduque for a program created for coastal communities.

“I am pleased that we have institutionalized collaboration among our member companies with different stakeholders from government, academe and civil society to rapidly respond to socio-economic issues of our country, as well as to proactively support activities towards community development,” said MPIC Chairman Manuel V. Pangilinan.

“We, as a business, strive to fulfill our share of the responsibility to mitigate the effects of climate change — a goal that we are slowly attaining through this cause,” he added.

The signing of a memorandum of understanding between MPIC and Marinduque through Lord Allan Jay Q. Velasco, who represents a legislative district of the province at the House of Representatives, will activate the adoption of MPIC’s flagship environmental program called Shore It Up!

The program aims to raise environmental awareness, provide livelihood assistance, protect and propagate mangroves, and conserve the country’s marine resources.

For its 12th year, the award-winning environmental sustainability movement, chose Marinduque as its community partner because of the province’s geographic location as a center of marine biodiversity.

The partnership includes the formation of the marine protection, inspection and conservation guardians and the implementation of underwater and coastal clean-ups.

Shore It Up! will also develop a program that protects more than 2,000 hectares of mangroves, raising awareness on conservation efforts within the province.

Mr. Velasco said: “The province of Marinduque is very much pleased that Shore It Up! and the MVP group decided to implement their MPIC Guardians Program here in our island, so that our bantay dagats can serve with authority as better stewards of our seas to heighten the protection and conservation efforts in our province.”

Marinduque is the eighth Shore It Up! site in the country. The island province, a popular destination among diving aficionados, attracts tourists for its “rustic, calm and blissful atmosphere,” MPIC said.

Under the memorandum of understanding, the program will earmark specific efforts and sustainable programs that will benefit not only the environment, but also the local community of Marinduque.

Of lukewarm coffee and new roads

ANOTHER alarm goes off at the crack of dawn. Another early morning drive in total darkness. I drag myself out of the house — still a little disoriented from the lack of sleep — and set my destination via a link that was sent over Viber to an unmapped location. I arrive at a very non-descript corrugated iron gate that is pulled open just wide enough for my car to squeeze in then is immediately shut behind me. I park, get handed a hard hat, a reflectorized vest, and a lukewarm cup of coffee. I wait.

I’ve been getting more and more of these calls recently and, as much as I am not a morning person, I have come to look forward to them; because when Department of Public Works and Highways (DPWH) Secretary Mark Villar calls and asks to meet at a construction site at an ungodly hour, in my experience, it’s always good news.

Today is another one of those days. It’s Thursday, February 13, a day before Valentine’s. We are standing on a tiny blue digital dot in the middle of the Pasig River and Sec. Mark is talking excitedly about his big date. “By second quarter of next year, this will cut travel time from BGC to Ortigas down from one hour to just 11 minutes.” He says quite proudly. That digital blue dot we are standing on is, of course, the new BGC-Ortigas Link. It’s only a blue dot now because there’s no map for it yet — mainly because there’s no bridge here yet, but that is exactly why Sec. Mark invited me here. He is excited to show me.

“See how close it is now?” Sec. Mark points at the roughly 100-meter gap between the Ortigas side and the BGC side as we stand on the edge listening to him speak about his project like an ob-gyn describing an ultrasound to expecting parents. “We are using what they call ‘traveling form’ technology to connect it. Every three days, you will see this gap move about eight meters,” which is roughly the same speed of the cars along EDSA, I cut in. Sec. Mark laughs out loud, but this time with a lot more confidence and less weight than I have seen before.

I say that because three years ago, that joke probably would have been taken more personally. Simply because, with frustration at an all-time high and not a solution in sight, Sec. Mark knew that a lot of that responsibility and hate would land on his desk.

Sure, he could argue that he inherited those problems, but hate is still hate and traffic is still traffic — inherited or otherwise. Which is why the DPWH secretary and his team spent the last three years quietly developing 23 different decongestion plans for EDSA — the biggest of which will be the NLEX/SLEX/Skyway connector. There are also nine bridges being built across the Pasig River — all of which will provide a vital link between the north and south of Metro Manila — expected to be completed under his term.

These are all micro solutions that are designed to form a macro one by creating opportunities outside Metro Manila by providing a road network that can serve as the economic backbone of our nation’s capital. The full effect will only be felt once completed, of course, but Sec. Mark and his team are confident that we will be feeling it more and more over the next couple of years because we will have just crossed the “it will get worse before it will get better” hump. So while it will still take time — and the improvements incremental — every new road opening, bridge opening, or additional piece of infra will slowly untie this knot that we have come to know as Metro Manila.

I’m sure there are those who feel that it can’t come quick enough, and I feel you. We all do. But this is not something that can be done overnight; this is something that is usually done in the middle of it, while everyone is sleeping and only a quiet few are working around the clock so they can set up super early morning meetings with lukewarm coffee with people like me, so they can announce another new section of road that should bring us one step closer to the dream of a city that never sleeps but one that can finally start moving again.

And that will always be something worth getting up for.

Cocoa traders expect adverse weather to hit Ivorian sales

ABIDJAN/LONDON — Adverse weather and hoarding in Ivory Coast could see sales of the top cocoa producer’s largest export fall some way short of consensus, which could push global prices higher, traders said.

Cocoa futures on ICE are near their highest in three years as overly dry, hot winds have damaged the crop outlook in Ivory Coast, which grows around 40% of the world’s cocoa.

“Everyone knows the mid-crop this year is going to be a nightmare,” a Swiss-based trader told Reuters. “The weather has been dry (and) people are not selling what they promised to sell because they’re hoping for higher prices.”

Nine Ivory Coast exporters and buyers said they expect port arrivals for the April to September mid-crop to reach just 350,000-400,000 tonnes. This compares with official data of 527,000 tonnes last mid-crop and is well short of forecasts.

“Mid-crop arrivals should be between 450,000-500,000, that is what people are expecting,” Marex Spectron deputy head of agriculture Jonathan Parkman, who has been involved in cocoa for almost four decades, said.

Ivory Coast, along with its neighbour Ghana, has introduced a $400 a tonne living income differential or premium for its 2020/21 cocoa sales in a bid to guarantee higher prices for farmers and combat pervasive poverty. This has prompted local dealers waiting for next season’s price hike to hoard stock and even default.

“We’re not going to get any (supplies) in August and September, they’re all going to hold onto their cocoa because they want to sell it next season,” a France-based trader said.

Adverse weather is having an impact on the tail end of the October to March main crop, with Ivory Coast exporters and buyers now expecting port arrivals at 1.58 million tonnes from a previously forecast 1.69 million.

Last season’s main crop was 1.652 mln tonnes, official data shows.

“Our counting teams have noted since January that production will be down compared to last season following the lack of rain,” said an Ivory Coast-based director of a European export company.

If the main and mid-crop forecasts of Ivorian buyers and exporters prove true, total arrivals this season would come to 2 million tonnes maximum. Last season’s arrivals totalled 2.18 million, according to official figures.

A Reuters poll last month forecast 2019/20 Ivorian output of 2.2 million tonnes, but locals are sceptical.

“I’m looking for 5,000 tonnes of (cocoa) before March but I don’t think I’ll (get) it. There is not much left,” an Ivory Coast based exporter said. — Reuters

Treasury bills, bonds to fetch lower rates as BSP eyes cuts

GOVERNMENT SECURITIES on offer this week will likely fetch slightly lower yields amid a lower rate environment globally and with the country’s central bank chief hinting on another cut in key rates as early as next quarter.

The Bureau of the Treasury (BTr) will auction off P20 billion worth of Treasury bills (T-bills) on Monday, broken down into P6 billion each for 91- and 182-day papers and P8 billion for the 364-day securities.

On Tuesday, the BTr will also look to raise P30 billion via reissued 10-year Treasury bonds (T-bonds) with a remaining life of eight years and 10 months.

For Dino C. Aquino, vice-president and Fixed Income Trading head at Security Bank Corp.’s Asset Management Group, yields on the 10-year papers could move with a downward bias and range between 4.325-4.375% or 4.4%, at most, while rates for the T-bills could also decline by around five to 15 basis points (bps).

Last week, the government fully awarded the T-bills it offered, raising P20 billion as planned from the sale of the short-term bonds.

It accepted P6 billion each as planned for the three- and six-month papers at average rates of 3.115% and 3.461%, respectively. For the one-year securities, P8 billion was awarded as programmed at an average yield of 3.908%.

Meanwhile, the Treasury accepted P20 billion as planned when the 10-year papers were last offered on Nov. 12, awarding the bonds at an average rate of 4.617%.

At the secondary market on Friday, the 91-, 182- and 364-day T-bills fetched yields of 3.199%, 3.449% and 3.904%, respectively, while the rate of the 10-year T-bond ended at 4.387%.

“Given the comments by the BSP (Bangko Sentral ng Pilipinas) Governor, we expect interest rates to have a downward bias next week. I suspect that there’s going to be more appetite this time given by the latest comment by the BSP Governor. So we might see banks might reposition after taking profit this year,” Mr. Aquino said over the phone on Friday.

BSP Governor Benjamin E. Diokno said on Friday that the central bank may cut rates by another 25 bps as early as the second quarter to shield the economy from the effects of the deadly coronavirus disease 2019 (COVID-19) outbreak.

The BSP Monetary Board will meet to discuss policy anew on March 19.

Mr. Aquino said they expect strong demand for the T-bills on offer today as investors flock to safer assets, with the outbreak threatening global growth prospects and also affecting financial markets.

“Stock market is pretty weak so I think most investors are looking at fixed-income assets as a venue for their investments to at least have a steady streamline of coupon instruments given the volatility that’s going on in the equity market. So I think for the time being, given that the COVID-19 is continuing to persist globally…rates could continue to be low globally. So that would bode well for our local bonds,” Mr. Aquino said.

Meanwhile, Rizal Commercial Banking Corporation Chief Economist Michael L. Ricafort said the yield on the 10-year papers could drop below the 4.3% level as “prospects of slower global economic growth and global inflation due to lingering concerns over the coronavirus disease could have led to slight easing in global and local interest rate benchmarks.”

The two analysts said the market’s continued reaction to the outlook upgrade by debt watcher Fitch Ratings to “positive” from “stable” will also drive yields lower.

“This could be positive for bonds because they also signal that we can have ratings upgrade in the next three to six months, most likely,” Security Bank’s Mr. Aquino said.

Fitch last week upgraded its outlook on the country’s credit rating to “positive” from “stable” while maintaining its grade at “BBB,” citing the country’s sound macroeconomic policy framework, strong growth and stable inflation environment.

The Treasury has set a P420-billion local borrowing program this quarter, broken down into P240 billion in T-bills and P180 billion via Treasury bonds. — Beatrice M. Laforga

Still packing the heaviest punches

Text and photos by Aries B. Espinosa

NO ONE was probably holding their breath when the joint sales figures of the Truck Manufacturers Association (TMA) and the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) for 2019 came out.

As expected, Isuzu Philippines Corp. (IPC) packed the heaviest punches in overall truck sales, cornering 45% of the market in the combined Category 3 (light duty), 4 (medium) and 5 (heavy) truck sales for the period from January to December 2019. That meant, of the 14,049 brand-new trucks sold during the year in the country, 6,279 came from IPC, for a 44.7% share of the overall market.

IPC’s 2019 sales performance officially extends the Japanese truck maker’s winning streak in overall truck sales to 20 years, dating back to 2000. This also marks the 21st consecutive year that IPC tops Category 3 sales, and the 23rd consecutive year that IPC leads in any one of the three truck categories (IPC led Category 5 sales in 1997 and 1998, while it began its dominance in Category 3 sales in 1999).

Just like in 2018, IPC’s strongest suit in 2019 was its sales performance in Category 3, where it retained its 55% market share, accounting for 4,241 units of the total 7,660 light-duty trucks sold. IPC likewise emerged the leader in Category 4 sales, accounting for 1,566 of the 4,426 medium-duty trucks sold for a 35.38% market share.

In Category 5 (heavy duty), IPC landed a strong second with 472 units sold for a market share of 33%.

Hino Motors Philippines, IPC’s closest competitor in Category 3 sales, managed to sell 1,593 units for a 20.8% share of the market. In Category 4 sales, the competition between Isuzu and runner-up Hino was tighter, with the latter selling 1,217 units for a 27.5% share. Hino dominated Category 5 by selling 563 heavy-duty trucks out of the total 1,431 sold for a 39.3% market share. In overall sales, Hino came in second with 3,665 total sales, for a 26.1% share. Mitsubishi Motors Philippines Corp. came in third with 1,583 total sales, or an 11.3% share.

IPC’s feat comes amid the influx of new truck brands, particularly from China.

The Isuzu brand’s biggest advantages, however, happen to be two of the most daunting obstacles for these newcomers to overcome: reputation and after-sales service.

Mario Ojales, IPC department head for dealer sales (commercial vehicles), explained to Velocity: “Truck buyers still trust our products because of their known durability, fuel efficiency, and higher resale value. We also have the most number of dealerships nationwide (45 and counting) that can service and repair their trucks, and these dealerships maintain an extensive parts inventory. Then we have the mobile clinic trucks that can do site servicing.

“To top it all, we have well-trained Truck Elite Sales Executives who can find solutions to our customers’ needs. This specialized sales force is trained technically on how to assist our customers in purchasing their trucks.”

IPC President Hajime Koso attributed the brand’s continued success to Isuzu’s global reputation as a leading truck maker, the durability and reliability of its trucks, and the full after-sales service of an extensive nationwide dealership network.

“By being responsible partners, IPC does not just supply world-class vehicles, but also provides solutions to meet customers’ business needs. Their growth is essential to IPC’s growth, the development of the Philippine transport sector, and of the economy in general. Hence, we provide total support to our partners’ businesses with great products and after-sales support,” he said.

Poe wants written temporary permit for ABS-CBN

CLAIMS that existing rules allow the operations of ABS-CBN Corp. beyond the end of its franchise next month or until 2022 must be made official, a senator said on Sunday, amid concerns that its termination will displace over 11,000 workers.

Senator Grace S. Poe-Llamanzares, who chairs the Committee on Public Services, said a temporary permit should be issued to this effect, asserting Congress’ power over matters relating to a franchise.

“Kahit sabihin pa nila na pwede naman ’yan i-extend hanggang 2022, maganda siguro kung in writing o kaya at least verbally sabihin sa Kongreso,” Ms. Llamanzares said in a statement on Sunday.

(Even if they say that the franchise may be extended until 2022, it is best if this is put in writing or at least verbally stated in Congress.)

She suggested the statement may read “We commit to give ABS-CBN, through the National Telecommunications Commission, a temporary permit to operate.”

Her statement comes after no less than Senate President Vicente C. Sotto III said that while the franchise expires in March 2020, the network may still operate while its franchise renewal remains pending in the 18th Congress.

Even Speaker Alan Peter S. Cayetano said the network may still operate until 2022, when the 18th Congress closes.

Ms. Llamanzares last week filed a resolution in exercise of the committee’s oversight function, seeking to hold an inquiry on the allegations against ABS-CBN and its unit, ABS-CBN Convergence, Inc.

The move comes as the proposed franchise renewal awaits committee deliberation in the House Committee on Legislative Franchises, chaired by Palawan first district Rep. Franz E. Alvarez.

Mr. Cayetano said the franchise would take a backseat to other measures, but assured it would be taken up before March 2022. ABS-CBN’s bid to have its franchise extended for another 25 years has been pending since the first year of President Rodrigo R. Duterte’s term.

The issue arose after Solicitor General Jose C. Calida’s move to have the network’s existing franchise forfeited via a quo warranto petition before the Supreme Court, citing among others the violation of ownership requirement. — Charmaine A. Tadalan

Bunge profit tops estimates on strong South American results

CHICAGO — Agricultural commodities trader Bunge Ltd. reported a stronger-than-expected quarterly profit on Wednesday as rising crop prices boosted farmer sales in South America and swelled margins in its large agribusiness segment, sending shares up more than 3% in pre-market trading.

But uncertainty about global trade and demand for Bunge’s food and feed products clouded the outlook for this year, with 2020 earnings per share seen about flat.

The company cautioned that agribusiness results could slip this year as margins shift depending on crop sizes, farmer sales and the implementation of an interim US-China trade deal.

Bunge and its agribusiness peers Archer Daniels Midland Co (ADM.N), Cargill Inc. and Louis Dreyfus Co. have been hit hard by a years-long crop supply glut followed by a tit-fot-tat tariff war between the United States and China that disrupted global trade flows.

The companies, known as the ABCDs of global grain trading, have also seen livestock feed demand dented by a deadly hog disease in China known as African swine fever, or ASF. The full impact of China’s coronavirus outbreak on Bunge’s business also remains unknown.

“We’re still faced with uncertainty in 2020. We expect markets to remain volatile as long as US and China trade tensions and ASF continue to create uncertainty,” Chief Executive Officer Gregory Heckman said on a call with analysts.

“It’s too early to tell what, if any, impact the coronavirus situation will have on our markets or how developments in Argentina may affect the industry this year,” he said, referring to changes in Argentine agricultural export tax policy.

Bunge’s agribusiness segment, its largest in terms of revenues and volumes, gained in the fourth quarter on strong vegetable oil demand and good South American oilseed crushing margins.

Accelerated farmer crop sales in Argentina ahead of anticipated increases to export taxes boosted the grains unit, which reported positive adjusted earnings before interest and tax (EBIT) margins compared with a negative margin last year.

Adjusted EBIT for the agribusiness rose over three-fold to $177 million in the fourth quarter.

Bunge said net sales fell to $10.78 billion in the quarter ended Dec.31, from $11.54 billion a year earlier year.

Adjusted net income attributable to the company was $191 million, compared with $18 million a year earlier.

Excluding items, the company earned $1.27 per share, above analysts’ average estimate of 32 cents per share, according to IBES data from Refinitiv. — Reuters

Government bonds rally as Fitch upgrades outlook on credit rating

YIELDS ON government securities (GS) declined last week after Fitch Ratings upgraded its outlook for the Philippines’ credit rating, fuelling hopes for a possible hike in its assessment.

GS yields, which move opposite to prices, fell by an average of 3.1 basis points (bps) week on week, according to Philippine Dealing System’s PHP Bloomberg Valuation Service Reference Rates published on Feb. 14.

Last week’s bond yields’ movement was “driven by the Fitch upgrade for the Philippine economy with positive outlook also resulting to the appreciation of peso,” BDO Unibank, Inc. Chief Market Strategist Jonathan L. Ravelas said in a phone interview.

He added that yields went down following the Bangko Sentral ng Pilipinas’ (BSP) decision to cut key policy rates by a quarter of a percentage point the week prior.

“The outlook upgrade received by the Philippines from Fitch also weighed down on rates, despite easing US-China trade tensions,” a bond trader said in an e-mail interview.

The bond trader added that the downward movement “was largely felt on the shorter end of the yield curve as the latest BSP policy rate cut was expected to affect heavily on near-term rates.”

Last Tuesday, Fitch upgraded its outlook on the Philippines’ credit rating to “positive” from “stable” while maintaining the grade at “BBB” — a notch above minimum investment grade — which it received in December 2017.

A positive outlook indicates the credit rating could stay at its current level or be upgraded within the next two years.

A higher credit rating would mean lower borrowing costs for the country, as it makes the Philippines more attractive and reliable for investors to pour funds into.

In its report, Fitch said the Philippines is likely to be among the fastest growing economies in the Asia-Pacific region this year and 2021, with its pace well above the current “BBB” median.

The Philippines also received a credit rating upgrade to “BBB+” from “BBB” earlier this month from Japan-based Rating and Investment Information, Inc.

S&P Global Ratings upgraded the country to “BBB” last year, while Moody’s has maintained a “Baa2” rating — a notch above investment grade — for the Philippines since 2014.

Meanwhile, on Feb. 6, the BSP’s policy-setting body Monetary Board slashed key rates by 25 bps, bringing the overnight reverse repurchase rate to 3.75% and the overnight deposit and lending rates to 3.25% and 4.25%, respectively.

It also revised upwards its inflation forecast for the year to three percent from 2.9%, but kept its view for 2021 at 2.9%. Both forecasts still fall within the central bank’s 2-4% target.

At the end of the trading last Friday, yields on benchmark tenors went down across-the-board with the three-month, six-month, and one-year Treasury bills declining by 5 bps, 2 bps, and 2.5 bps, respectively, to yield 3.199%, 3.449%, and 3.904%.

Yields on the two-, three-, four-, five-, and seven-year Treasury bonds decreased by 4.5 bps, 4.7 bps, 4.4 bps, 3.8 bps, and 1.5 bps, respectively, fetching 4.017%, 4.140%, 4.219%, 4.271%, and 4.333%.

Rates of the 10-, 20-, and 25-year notes also dropped 0.7 bp, 2.1, bps, and 2.9 bps, respectively, to 4.387%, 4.969%, and 5.005%.

For this week, Mr. Ravelas said GS yields “will continue to go sideways to down.”

Meanwhile, the bond trader said yields might move “with an upwards bias” ahead of the release of the “potentially less-dovish guidance” from the Federal Reserve minutes this week.

“The increase in yields, however, might be capped by lingering concerns over the spread of COVID-19 (coronavirus disease 2019) and likely weaker economic data on Japanese economic growth as well as US manufacturing and services data for the month,” the bond trader said. — ECAJ

BMW to unveil new X1 and 1 Series in ‘Joyfest’

By Angel Rivero

SMC Asia Car Distributors Corp. (SMCACDC), the official importer, distributor, and service provider of BMW automobiles and motorbikes in the country, announced last Wednesday that it will reveal the all-new 1 Series and face-lifted X1 during its “BMW Joyfest” sales event from Feb. 21 to 23 at the Activity Center of Bonifacio Global City. The 1 Series is set to showcase its most modern look, together with a completely new platform designed for ever more performance and versatility. Meanwhile, the latest X1 will flaunt a number of updated features to reinforce why it is a truly captivating Sports Activity Vehicle (SAV, BMW’s term for SUV).

The German marque’s Joyfest is one of its two major sales events (the other being the “BMW Expo”) held every year in the Philippines. It is an event not to be missed, as the luxury brand will be offering heavily discounted cars, test drive opportunities for select models, and limited-time deals for BMW Lifestyle merchandise.

The BMW Joyfest will also be presenting a rare opportunity to owners of qualified BMW vehicles — vehicles purchased from 2018, whose odometers read less than 200,000 kilometers, and whose original two-year warranties are about to expire within a month — a chance to purchase an extra three years of BMW factory-authorized warranty for their older units, extending their existing vehicle warranty to a total of five years (with a 200,000-km travel cap).

To clarify, all brand-new BMW units that have been purchased since 2019 have already enjoyed a full, five-year (or 200,000 km, whichever comes first) warranty. However, vehicles purchased before 2019 came with standard two-year warranties. It is for these vehicles that came with the previous warranty period that this special BMW Extended Warranty Program is for.

SMCACDC President Spencer Yu explained that based on the data they gathered from a customer feedback mechanism that they have employed, the most common concern of BMW owners in the Philippines is that “the maintenance of BMW vehicles is very expensive.”

He added, “They may be referring to the replacement of parts that break after the warranty period, which can get expensive, and thus, we thought of bringing down the cost of customer ownership by providing them this option to purchase additional warranty for another three years. Consider it our brand-building activity for customer retention.”

BMW’s five-year warranty is a substantial proposition as it includes the replacement of major and minor components necessary to keep the car running safely. Additionally, it includes five years of the BMW Assistance Program — executed in partnership with Ibero Asistencia — a roadside assistance provider which is on-call 24 hours a day, 365 days a year (and available in all major cities nationwide).

Visitors to the event will also have the opportunity to behold and inspect all the other BMW automobile models on offer, such as the 5 Series, 6 Series, 7 Series, and X2.

Finally, Mr. Yu also disclosed that the company is currently encouraging dealers to make arrangements with different banks in order to secure zero-percent interest on installment for their customers who wish to purchase additional warranty using their credit cards.

For more information on the upcoming BMW Joyfest, visit its official Facebook page, BMWPhilippines.

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