AEV to focus on core businesses

Although other subsidiaries of the Aboitiz Equity Ventures (AEV) have generated encouraging growth in 2007, the company has no immediate plans of putting up major investments, aside from its promising power business.

During the company’s annual stockholders’ meeting held Monday, AEV president and chief executive officer (CEO) Jon Ramon Aboitiz reported a 54 percent increase in the company’s profit in 2007 to P5.8 billion, from P3.8 billion in the previous year.

Strong operating results of the power and banking groups drove AEV’s robust performance, accounting for 61 percent and 23 percent of total income contribution from its business groups, respectively.

In an interview with Aboitiz, he said that although the company is constantly looking at opportunities for major investment movements for its subsidiaries like banking, transport, and food groups, he said what is clear right now is the company’s active stance to grow its power generation, and distribution businesses.

As other conglomerates are trying to diversify and expand their business coverage in other industries, Aboitiz said AEV will continue to grow organically, and concentrate in growing its core businesses.

Although there are movements of repositioning in some of its subsidiary companies, like banking, transport, he reiterated that no major investments are being eyed by these groups in short term.

Instead, in the next four years, the company will concentrate on the P70 billion worth of projects in the power business with an earmarked budget of P11 billion to be infused by AEV in these new projects, the rest will be financed by its different partners.

“The power group continued to account for the lion’s share of AEVs earnings despite the company’s ownership dilution following the listing of Aboitiz Power Corporation [AP] in July 2007,” said AEVs chief operating officer (COO) and executive vice president Erramon Aboitiz.

Favorable economic conditions led to strong electricity sales for APs distribution group, while the increase in generating capacity of the generation group led to a higher contribution from power revenues. The power group contributed a total of P3.3 billion, up by 47 percent from the previous year.

AEV’s banking arm, Union Bank and City Savings Bank ended the year 2007 with solid financial results. It contributed P1.24 billion, 11 percent higher than in 2006, and this accounted for 23 percent of AEV’s total income.

UnionBank contributed P1.18 billion last year, a 10 percent higher than last year’s contribution, notwithstanding lower interest rates prevailing in the market squeezing interest spreads.

City Savings Bank (CSB), on the other hand, contributed P63 million to the conglomerate’s total revenue, this is an improvement of 32 percent over 2006’s performance.

The Aboitiz Transport System Corporation (ATS) ended the year 2007 with P318 million contributions to the company, a 124 percent increase over its 2006 contribution.

Despite the increase in inputs costs, AEV’s food arm, Pilmico Foods Corporation (Pilmico) grew its income by four percent over 2006 to P530 million.

Higher selling price for flour and its efficient million operations afforded the company a 15 percent year-on-year expansion operating income.

The company’s feeds business and swine operations recorded a 19 percent year-on-year growth in combined revenues from P2.8 billion to P3.3 billion.

In June 2007, Pilmico began the construction of a new feedmill at its Iligan Milling Complex which will be operated by subsidiary Fil-Am Foods, Inc.

Also, Fil-Am Foods is undergoing expansion of its swine finishing and breeding capacities which will become commercially operational by 2009 and 2010, respectively.