RP firms likely to meet target earnings this year, says First Pacific

Hong Kong-based industrial conglomerate First Pacific Co. Ltd. (FPC) has expressed confidence that despite slowdown in the global economy, its businesses in the Philippines can meet earnings targets this year.

FPC managing director and chief executive officer Manuel V. Pangilinan noted that the slowing global economy and weak capital markets have added challenges to the operating environment of their businesses.

Around 70 percent of FPC’s operating profits comes from Philippine Long Distance Telephone Co. (PLDT), where it is the single biggest shareholder. Specifically, out of the $158.6 million in FPC’s group profits for the first half of 2008, PLDT contributed $106.9 million while infrastructure company Metro Pacific Investments Corp. (MPIC) accounted for $1.1 million. Indonesia-based Indofood posted first half profits of $50.6 million.

“However, their robust fundamentals provide the assurance that earnings prospects for the full year remain strong. We are firmly committed and focused on achieving our operational and profit targets for 2008,” Pangilinan, who chairs both PLDT and MPIC, pointed out.

He earlier said they remain cautious and vigilant, yet confident, that they will achieve their targets for 2008. PLDT is sticking to its net income target of P37 billion for the whole year, or a five-percent growth from last year.

Pangilinan said PLDT will continue to invest in the business even as it continues to look at new opportunities. “The time to buy is now,” he said, adding that they are, in fact, increasing this year’s capital expenditure budget “because we are optimistic that subscriber growth will continue inspite of the external challenges facing the business.”

He also revealed that they are eyeing two telecommunications companies in the region for possible acquisition. When asked whether the purchase will be made by PLDT or by FPC, he said it can be done by either one or both.

FPC earlier announced that its recurring profit increased 64.3 percent to $126.5 million, driven by the strong performance of PLDT and Indofood, and the turnaround in MPIC. The recurring profit excludes the effects of revaluation of plantations and derivatives, foreign exchange differences and non-recurring gains.

Profit contribution from operations rose 53.5 percent to $158.6 million from $103.3 million.

FPC recorded net non-recurring gains of $22.4 million principally reflecting gains in relation to the settlement of its exchangeable notes with PLDT shares. These exceptional gains are significantly lower than last year’s $216.1 million.

Consequently, the group’s net profit decreased 47.3 percent to $156.8 million from $297.5 million during the same period in 2007.  

“We are very pleased that PLDT, Indofood and MPIC reported solid performances in the first half of this year. Whilst the combined effects of accelerating fuel and food prices could have adversely affected our profit results in the first half, the competitive strength of our businesses and their diversity enabled us to raise our performance level for the period,” Pangilinan noted.

He pointed out that it has been an active first half for First Pacific. In the Philippines, MPIC completed the conversion of its outstanding convertible notes into a 33-percent equity interest in Medical Doctors Inc. MPIC also acquired a 34 percent interest in Davao Doctors Hospital, the leading medical institution in Southern Mindanao.

MPIC likewise increased its effective interest in Maynilad to 51 percent on a fully diluted basis from 42 percent, and agreed to acquire 67.1 percent interest in Manila North Tollways Corp. (MNTC).

PLDT’s profit momentum last year was carried through in its 2008 first half performance. The increase in cellular, broadband and data service revenues, helped by gains in certain derivative transactions, were the main profit drivers. Profit contribution to First Pacific improved 26 percent to $106.9 million for the period.

Meanwhile, MPIC is expanding its core business portfolio aimed at becoming the leading infrastructure group in the Philippines. MPIC’s contribution to FPC amounted to $1.1 million for the period versus a $1.5 million loss the previous year.