Aboitiz Power [AP 31.80 unch] [link] Q2/22 profit of P7.1 billion, up 78% from Q2/21 profit of P4.0 billion, and up 145% from Q1/22 profit of P2.9 billion, while H1 net income was 2% lower y/y despite AP’s recognition of a one-off gain of P792 million from a US dollar hedge executed by one of AP’s subsidiaries.
Sticking with just Q2 performance data, AP reported that its core net income was P6.2 billion, up 59% y/y, driven by “fresh” contributions to the financials by new power plants, and by suffering less downtime during the period at existing power plants.
AP noted that it saw an increase in peak demand in Luzon and Visayas this year that has exceeded the demand of even the pre-COVID 2019 peak. AP also notes that it will need to focus on maintaining “plant availability” to support “increasing economic activity across the country”.
MB BOTTOM-LINE
I like to see AP’s focus on the bottom-line here (doing more with the same assets), as there’s nothing I hate more than “downtime” as a shareholder of a commodity company like this. Downtime is waste. Every hour not spent generating electricity, mining gold, or pumping oil, is an hour that shareholders will never get back. It’s true that there’s always going to be a need to perform “preventative maintenance”, but even then, the challenge for extractive companies is to reduce this downtime as close as possible to the asymptote of zero.
It’s easy, when commodity prices are high, for teams to get lazy. The suppressive impact of downtime can be hidden by elevated prices for the product, but when those prices drop, the habits learned can be quite sticky. That’s why Ilike to see AP talking the talk about focusing on efficiency now, even while electricity prices are on an up-trend. To me, that’s good management.
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