In a press briefing following the company’s annual stockholders meeting Thursday, Ayala chief financial officer and treasurer Delfin Lazaro said the conglomerate does not intend to tap new borrowings this year, having enough cash. "We have a lot of cash. We’re carefully evaluating what we could prepay," he said.
"From time to time, we do prepay loans, especially if the negative carry is quite large. But we do so on a case to case basis. We don’t have a specific prepayment plan at the moment, but we do have a lot of cash. We will look at the liability situation, and we will look at those that we will prepay for the benefit of the company," Lazaro said.
Ayala has $239 million in maturing debt this year. Another $157 million will mature next year and $125 million in 2007.
Lazaro said debt reduction remains a top priority of the group as part of efforts to further strengthen its balance sheet.
As of end-December 2004, Ayala had consolidated cash balance of P24.4 billion, more than double the year ago level of P10.52 billion, mainly due to asset sales including the divestment of its five percent stake in Globe Telecom.
Net debt at the end of 2004 was $646 million, lower than last year’s $734 million. Of this amount, 58 percent comprised of US dollars and the balance of 42 percent are in pesos.
Ayala president Jaime Augusto Zobel de Ayala said while the company’s current debt profile and key gearing ratios are at very comfortable levels, "we continue to pursue our efforts to further bring down debt to allow us greater flexibility moving forward to take advantage of growth-oriented investment opportunities."
Zobel said the company, through AC Capital, is looking at new businesses with strong growth prospects.
He said that while the conglomerate is serious in further reducing debt, it also recognizes the value of rewarding shareholders using some cash flow to pay cash dividends. Ayala’s board recently approved a 33 percent increase in its regular cash dividend to shareholders from P0.06 per share to P0.08 per share.
The Ayala board has also approved the proposed one for 50 reverse stock split aimed at aligning the company’s stock price to levels more comparable with other large cap listed conglomerates. The stock split shall also reduce the total number of shares outstanding, which has grown to over 17 billion shares to 380 million shares.
Since the beginning of 2004, Ayala’s stock price has appreciated by 52 percent by yearend, outperforming the Philippine composite index’s 26 percent gain and is up 76 percent by March this year. Ayala’s market cap has likewise grown by 53 percent to P113 billion by end-2004, making it the third largest market cap in the Philippine Stock Exchange.
Zobel said the company is hopeful it could sustain its growth this year, which saw its net profit more than double to P7.11 billion from only P3.09 billion.
"All the signals are good. We’re hoping the results will be better this year. We’re always cautiously optimistic, as long as the economy continues to grow," said Zobel.
While last year’s earnings were influenced by one-time gains, Ayala’s recurring earnings from key subsidiaries in property, banking and telecom contributed significantly as they continue to lead these sectors and increase their profitability.