Ayala income down to P8.1 billion

MANILA, Philippines - Ayala Corp., the country’s largest conglomerate, said lower equity earnings and capital gains on its investments slashed its 2008 consolidated net income by half of the previous year’s level.

In a financial report submitted to the Philippine Stock Exchange (PSE), Ayala said net earnings fell to P8.1 billion as equity earnings from its operating units dipped to P7.8 billion and gains from share sales fell by 63 percent.

Ayala president and chief operating officer Fernando Zobel De Ayala said the global economic slowdown has dampened consumer domestic consumer spending and affected the performance of some of the company’s key businesses.

However, Ayala remains optimistic it can weather the tough challenges on the business front “given the solid business models of each of our operating units, their strong fundamentals and balance sheets, and dominant market positions,” Zobel De Ayala said.

“While the operating environment is and will continue to be challenging, these distressed conditions also present opportunities. We continue to explore these and have ensured sufficient liquidity across the group to pursue any compelling opportunity on top of our committed growth targets in the short to medium term,” Zobel De Ayala stressed.

Ayala owns the country’s top property firm Ayala Land, telecommunications firm Globe Telecoms, and utility firm Manila Water. It also has interests in banking (Bank of the Philippine Islands and BPI Family Savings Bank), car distribution, electronics and business services like outsourcing.

The group booked capital gains of 2.7 billion from the sale of shares in Globe Telecoms, way below the P7.3 billion in gains reported in 2007. Helped by several successful fund-raising initiatives, Ayala’s cash position increased to P25 billion a year earlier, positioning the company for potential acquisition opportunities amid deflating asset prices.

Earnings from companies under AC Capital declined owing to non-recurring losses from its electronics unit Integrated Microelectronics Inc. (IMI), AG Holdings and BPO companies under LiveIt. This offset the positive earnings contribution of its water and automotive dealership businesses.

On the bright side, Ayala’s property and water businesses registered double-digit growth. Ayala Land posted a net profit of P4.8 billion or 10 percent higher than the year ago figure as demand for its middle and affordable residential brands, Alveo and Avida, remained robust.   Manila Water, on the other hand, recorded a net income of P2.79 billion, up 15.3 percent from P2.42 billion a year earlier on higher sales volume. Total revenues amounted to P9.15 billion while operating costs and expenses reached P2.52 billion. Ayala’s banking arm, BPI reported a 36 percent drop in net income to P6.4 billion, weighed down by a P1.3 billion decrease in non-recurring investment income of its insurance units and lower securities trading income.

Earnings of Globe Telecom likewise slid 15 percent to P11.3 billion, squeezed by higher operating expenses. Consolidated revenues amounted to P62.9 billion, slightly down from P63.2 billion a year earlier. 

Integrated Microelectronics Inc. remained in the red with a loss of $16 million due to a non-recurring loss from currency hedging contracts as well as a one-time provision for manpower expenses. Excluding non-recurring items, IMI would have reported a net income of $32 million on the back of a five percent gain in revenues driven by the strong performance of its operations in China and Singapore.