JG Summit reports P694-million loss for 2008

MANILA, Philippines - Crippled by huge mark-to-market and foreign exchange losses, JG Summit Holdings Inc., the investment holding firm of the family of tycoon John Gokongwei, incurred a net loss of P694 million last year, a reversal of the P8.61-billion net profit reported in 2007.

 In a financial report filed with securities regulators, JG Summit president and chief operating officer Lance Gokongwei said the net foreign exchange translation loss amounted to P2.93 billion, compared to a gain of P7.2 billion a year earlier, while the mark-to-market losses reached P7.05 billion as against a gain of P1.96 billion.

“This is a direct result of translating the value of the company’s dollar-denominated assets and liabilities using a much devalued Philippine peso at the close of the year 2008,” Gokongwei said.

He said the mark-to-market losses were brought about by the combined effects of the lower market value of its financial assets and fuel hedges coming out of the decline and volatility of global financial and commodity markets, as well as the lower value of the peso.

“We accept the intrinsic value of the new standards of mark-to-market accounting for enterprise risk management. Nevertheless, we focus more on maintaining the resilient strength of the operating fundamentals of the businesses of the group, which is more important in the longer term,” Gokongwei said.

JG Summit’s core earnings before taxes jumped 59 percent last year to P9.07 billion as revenues rose 29 percent. 

Core EBITDA (earnings before interest, taxes, depreciation and amortization) amounted to P25.11 billion, 19 percent higher than the P21.11 billion recorded a year ago, driven by the strong performance of the company’s food, property and telecoms businesses.

Consolidated revenues grew 29.1 percent to P99.87 billion from last year’s P77.37 billion as most of its subsidiaries posted double-digit revenue growth. Gross income increased by a smaller 18 percent to P34.84 billion due to substantial increases in input costs in the food, property, airline and petrochemical businesses.

“We are pleased with the strong operating results of our various subsidiaries especially against the backdrop of a very challenging business environment,” Gokongwei said.

Effective management of general and administrative expenses led to a higher growth in operating income of 76 percent to P11.21 billion.

Financing costs and other charges, on the other hand, dropped 7.8 percent due to lower average interest rates offsetting the effects of a devalued currency.

Cebu Air Inc., the group’s airline unit, incurred a net loss of P3.26 billion during the period under review due to foreign exchange and mark-to-market losses from its dollar-denominated obligations and fuel hedges as well as higher expenses, particularly fuel cost. Consolidated revenues, however, went up 31.1 percent to P19.68 billion on increased passenger traffic and capacity and new routes and additional frequncies.

Meanwhilke, JG Summit Petrochemicals Corp. (JGSPC) registered revenues of P9.28 billion for its fiscal year ending September 2008 owing to higher sales volumes. Gross margin improved from a negative six percent to a positive 2.6 percent.