JG Summit bleeds in Q3 as lockdowns, inflation bite

MANILA, Philippines — A perfect storm of hard lockdowns and elevated inflation tarnished JG Summit Holdings Inc.’s balance sheet in the third quarter, derailing the company’s delicate recovery from the coronavirus onslaught

The Gokongwei-led conglomerate posted a net loss of P3.4 billion in the July-September period, a reversal from P844.1 million net income posted in the same period last year, according to a disclosure to the stock exchange on Friday.

In the first nine months, JG Summit incurred a net loss of P2.4 billion, a turnaround from P123.8 million net profits a year ago. But core net income, which excludes extraordinary financial events, stayed in the positive territory at P948 million, albeit down 21.5% year-on-year.

Lance Gokongwei, company president and CEO, said the last quarter “presented challenges to some of our subsidiaries”. The government had to impose fresh restrictions last August and September to curb a sudden COVID-19 flare-up fueled by the Delta variant, crippling economic activity anew. At the same time, inflation has been soaring above the government’s 2-4% target amid supply problems that hurt both businesses and consumers.

That devastating combo of slow growth and rising prices hit JG Summit hard. Consolidated revenues in the third quarter grew 9% year-on-year to P50.4 billion, slower compared to 24% rate in the second quarter. Topline in the first nine months, meanwhile, inched up 9% on an annual basis to P167.9 billion.

At this rate, Gokongwei said JG Summit’s financial health is forecast to return to pre-pandemic level only in 2023, with a more sustained recovery seen next year amid a pick-up in vaccination, which is key to preventing disruptive lockdowns in case of future flare-ups.

Still, Gokongwei is cautiously optimistic. “While the sentiment is getting better, our margins will be affected by inflationary pressures driven by higher oil and input prices as well as the devaluation of the peso,” he said.

Among JG Summit’s businesses, the struggle is most intense for Cebu Pacific. Financial results showed the loss-making budget carrier bled P22 billion in the past three quarters, as air travel demand has yet to make a comeback from its historic collapse at the onset of the pandemic. 

Universal Robina Corp, the conglomerate’s food unit, generated P85.8 billion in revenues in the first nine-months, up by measly 1% compared with a year ago due to “weaker consumer demand given the economic environment”.

Revenues from JG Summit’s property business, Robinsons Land Corp, soared 39% year-on-year to P30.1 billion in the first three quarters. This was carried by bigger contributions from its Chengdu real estate project, as well as higher revenues from its offices, logistics and warehousing facilities. However, topline figures from Robinsons Land’s mall and residential segment sagged. 

Lastly, JG Summit’s banking segment, Robinsons Bank Corp, reported a net income of P942 million in the January-September period, up 20% year-on-year on the back of 15% annual growth in loans. 

Moving forward, Gokongwei said “our plan is to manage these headwinds through better pricing and cost management measures.” He did not elaborate.

On Friday, shares in JG Summit gained 1.27% as of 12:12 p.m., outperforming the main index.