AEV Q1 income up 27% to P5.9 billion

CEBU, Philippines - Aboitiz Equity Ventures, Inc. (AEV) ended the first quarter of 2012 with a consolidated net income of P5.9 billion, recording a 27% increase year-on-year (YoY). This translates to an earnings per share of P1.06 for the period in review.

For the first quarter, AEV booked one-off gains of P386 million due to the revaluation of consolidated dollar-denominated loans and placements. In addition, AEV’s power subsidiary unit booked gains of P11 million that resulted from its associates’ share redemption during the quarter. Adjusting for these one-offs, AEV’s core net income amounted to P5.5 billion, up by 28% from the same period last year.

Out of the total earnings contributions from the company’s strategic business units (SBU), power accounted for 73%. Banking and food contributed 23% and 4%, respectively.

Aboitiz Power Corporation (AboitizPower) ended the quarter with a higher income contribution of P4.3 billion, vis-à-vis the previous year’s P3.9 billion. When adjusted for non-recurring items, AboitizPower recorded a 10% YoY improvement in its earnings share, from P3.6 billion to P3.9 billion. 

The power generation business contributed P3.9 billion for the quarter, up by 4% YoY. Increased average selling prices and higher net generation accounted for the enhanced bottomline performance of the group.

AboitizPower’s average selling price for its power recorded a 5% YoY improvement. This was mainly attributable to the higher prices at the Wholesale Electricity Spot Market (WESM). Curtailed supply due to higher average plant outages and a surge in demand during the quarter led to the 34% YoY hike in the average price of electricity in the Luzon grid’s spot market.

Attributable net generation for the quarter rose by 13% YoY, from 2,168 gigawatt hours (GWh) to 2,452 GWh. This was driven by a 22% expansion in power sales through bilateral contracts. In terms of capacity, AboitizPower sold, on an attributable basis, 1,483 megawatts (MW), up by 14% YoY. This was on the back of rising capacity sales through bilateral contracts and improved levels of ancillary services.

As of quarter end, AboitizPower’s attributable capacity was at 2,350 MW, posting a 15% YoY increase. The growth was due to the following: assumption of full ownership of and control over the 70-MW Bakun hydro run-of-river plant in May 2011, acquisition of the 242-MW Navotas power barges in May 2011, the full completion of the rehabilitation of the Ambuklao hydropower facility in September 2011, the completion of the 4-MW Irisan hydropower Greenfield project in September 2011, and the partial completion of the rehabilitation works at the Binga hydropower facility.

“Our strategy for sustaining our growth trajectory is to build additional capacity through greenfield projects to supply future growth of the economy. We will also continue the rehabilitation of our existing facilities to maximize capacity and improve reliability,” said AboitizPower president & CEO Erramon Aboitiz.

The company’s distribution business recorded expansions in volumes and margins resulting to a 62% YoY increase in the   sector’s income contribution to AboitzPower for the first quarter, from P347 mn to P563 mn. The company’s attributable electricity sales grew by 7% YoY, from 889 GWh to 950 GWh. Growth was spurred mainly by an 8% YoY increase in attributable power consumption of the industrial customer segment, while the residential and commercial sectors posted healthy growth rates of 6% and 4%, respectively. Gross margin for the group improved on a YoY basis mainly due to the implementation of the rate structures approved under the Performance Based Regulation scheme. 

Income contribution from banking recorded a 215% YoY expansion, from P422 million to P1.3 billion.

Union Bank of the Philippines (UnionBank) ended the quarter with an earnings contribution of P1.2 billion, a 285% jump YoY. The bank’s net interest income for the first quarter of 2012 was slightly up by 1% YoY to P1.8 billion. Total interest income amounted to P2.9 billion on generally lower average yields of earning assets and drop in average levels of due from other banks.

Gross interest income on loans and receivables, however, increased to P1.7 billion as the expansion in the average levels of these investments more than offset the decline in its average yields. Total interest expense, on the other hand, went down by 16% YoY to P1.1 billion due to the drop in average levels of high- cost deposits and lower borrowings as the bank exercised the call option on the P1.3 billion unsecured subordinated loans in September 2011.

As a result of the foregoing and higher impairment losses booked for the quarter in review, net interest income after impairment losses declined by 4% YoY to P1.6 billion.

Non-interest income for the quarter soared to P3.9 billion from P1.2 billion a year ago, driven primarily by hefty trading gains. Higher premium revenues also contributed to the significant increase in non-interest income due to the higher sales of its subsidiary’s pre-need plans. The corresponding trust fund contributions of said plans, salaries and employee benefits in support of the bank’s expansion initiatives, taxes and licenses drove operating expenses to increase by 31% YoY.

UnionBank's asset base stood at P260.1 billion as of end of March 2011, with a deposit level of P190.3 billion and a loan book of P115.2 bn. The bank's capital adequacy ratio and Tier 1 ratios further strengthened to 19.7% and 16.9%, respectively.

“Anticipating continued market volatility this year, UnionBank will continue to exploit trading opportunities to augment the earnings from our lending business as we did in the first quarter,” Aboitiz said.

AEV’s non-listed thrift bank, City Savings Bank (CitySavings), contributed earnings of P99 million during the quarter, down by 4% YoY. Net interest income grew by 18% YoY to P320 million, mainly attributable to the robust growth in the bank’s interest income on loans and services, which expanded by 28%, from P387 million to P493 million.

The implementation of CitySavings’ expansion program and various initiatives pushed up operating expenses by 27% YoY, which weighed down the bank’s overall profitability. The bank ended the quarter with a loan book of P10.9 billion and total resources of P15.8 billion, up by 10% and 21% from year-end 2011 levels, respectively. NPL ratio for the quarter ending March 31, 2012 was roughly at 1% while the NPL coverage ratio was at 129%. Total capital funds amounted to P1.9 bn with a capital adequacy ratio of close to approximately 15%.

AEV food subsidiary Pilmico Foods Corporation, recorded a 22% YoY decline in its first quarter income contribution, from P282 million to P219 million. The flour business logged a 12% YoY increase in its income contribution given the 4% YoY expansion in both volume sales and gross margin. Higher input costs resulted to a 9% YoY drop in the feed unit’s bottomline. Poor market condition, i.e. lower average selling price and higher input costs, coupled with lower volume sales saw the swine unit ending the quarter with a negative income contribution. (FREEMAN)