LT Group allocates P19 billion for capex

By Arra B. Francia, Senior Reporter

LT Group, Inc. (LTG) will be spending about P19 billion in capital expenditures (capex) this year, a big chunk of which will be used to support the planned stock rights offering of its banking unit.

The holding firm of tycoon Lucio C. Tan said about P7-8 billion of the budget will go to Philippine National Bank (PNB), which announced last month plans to raise P12 billion in fresh capital.

“As you know we have about 60% interest in PNB…if we subscribe to our requirement then we will have to add P6-7 billion for that,” LTG Chief Financial Officer Jose Gabriel D. Olivares said in a media briefing after the company’s annual shareholders’ meeting in Manila yesterday.

PNB earlier said that the stock rights offering will enable the bank to sustain its asset growth, and would give it more leeway for future expansion.

About P2 billion will go to Eton Properties Philippines, Inc., which focuses on developing office buildings catered toward business process outsourcing (BPO) firms.

“We continue building BPO buildings and horizontal developments, and we’re planning to develop new facilities,” LTG President and Chief Operating Officer Michael G. Tan said during the briefing.

Mr. Tan added that Eton Properties has just finished turning over its fifth BPO tower in Centris, Quezon City to tenants. It is also working on its joint venture with Ayala Land, Inc. for Parklinks, a 35-hectare mixed use estate covering areas in Pasig and Quezon City.

The LTG chief said the rest of the subsidiaries will get about P1 billion from the capex, which will mostly be used for working capital requirements.

LTG’s other units include tobacco arm PMFTC, Inc., liquor maker Tanduay Distillers, Inc. (TDI), beverage manufacturer Asia Brewery, Inc. (ABI), and Victorias Milling Company, Inc.

This year’s capex is 73% higher than the P11 billion it spent in 2018.

Mr. Tan said the company is aiming to show an improved performance this year compared to 2018, despite higher excise taxes weighing on the demand for tobacco and alcoholic products.

“The government wants to increase further the excise tax for both tobacco products and alcoholic beverages. If passed into law, higher taxes would adversely affect volumes as these would translate to higher selling prices,” Mr. Tan said in a speech during the stockholders’ meeting.

Mr. Tan said that while the company is not against tax increases, “the hikes should be moderate.”

“The tobacco business will remain as the main source of LTG’s earnings. PMFTC, Inc. will continue to be vigilant in the fight against illicit trade and continue to work with government,” he said.

For ABI, the company sees the stabilization of volumes for Cobra energy drinks as there are no further tax increases for sugary drinks. It is also expanding its bottled water facilities to support the segment’s growth, and offset the weakness of other units.

Shares in LTG jumped 2.29% or 38 centavos to close at P17 each at the stock exchange on Tuesday.