Philippines Microeconomic Weekly Update #43

MACROECONOMICS WEEKLY UPDATE

In June, the country’s external trade value dropped by 9.6% year-on-year to $17.32 billion, a sharper decline than the 4.4% decrease seen the previous month. This is largely due to the exceptional performance in June 2022, which saw a remarkable 16.3% trade increase. Concurrently, the Value of Production Index (VaPI) showed a slower annual growth of 3.9%, compared to May’s 9.9% and June 2022’s 7.8%, primarily driven by a 0.4% dip in food product manufacturing, responsible for a 36.8% contribution to the overall VaPI reduction. Likewise, the Value of Net Sales Index (VoNSI) for manufacturing rose by 3.4% in June 2023, in contrast to May’s 7.7% surge. This deceleration in VoNSI growth aligned with three sectors affecting VaPI: food product manufacturing (-3.2%), fabricated metal products (-36.4%), and beverages (-7.7%).

INDUSTRY UPDATE

HOLDINGS

In 2Q23, SM Prime Holdings, Inc. (SMPH) achieved a net income of Php 10 billion (+49% YoY), propelled by a 39% YoY revenue growth to P31.2 billion. For the first half of 2023, SMPH reported total revenues and net income of P59.5 billion (+29% YoY) and P19.4 billion (+38% YoY) respectively. Aboitiz Equity Ventures Inc. (AEV) and Coca-Cola Europacific Partners PLC (CCEP) have submitted a nonbinding Letter of Intent to acquire full ownership of Coca-Cola Beverages Philippines, Inc. (CCBP) from The Coca-Cola Company (TCCC), proposing a 60:40 ownership structure between CCEP and AEV, with a total enterprise value of USD 1.8 billion. Meanwhile, Metro Pacific Investments Corp. gained approval from over 2/3 of current shareholders in a Special Stockholder’s Meeting to delist their stock after a tender offer period starting August 9, 2023, and ending September 7, 2023, with less than 1% of shareholders opposing the delisting.

FAST MOVING CONSUMER GOODS 

Universal Robina Corporation (URC) reported 2Q2023 net sales of Php 38.82 billion (+9.9% YoY, -2.46% QoQ), bringing 1H2023 net sales to Php 78.63 billion (+10.57% YoY). Sales of URC’s branded consumer foods business (BCF) grew to Php 54.83 billion (+6% YoY) while its Agro-industrial and Commodities (AIC) division had net sales of Php 23.802 billion (+22.8% YoY) driven by its Sugar and Renewables business

ENERGY 

Meralco’s SVP and Chief Revenue Officer, Ferdinand Geluz, projected a 5% growth in energy sales volume for the latter half of 2023, surpassing the 3.8% growth in the first half. This growth hinges on the recovery of energy demand from the semiconductor sector (SEIPI), which anticipates a rebound later in the year. ACEN Corporation (ACEN) reported robust 1H2023 revenues of Php 20.5 billion (+28% YoY), driven by increased net generation and higher operating capacity, enabling a net selling merchant position amid strong WESM prices. EBITDA, including associates and JV contributions, reached Php 9.4 billion (+20% YoY), with Philippine operations contributing Php 4.1 billion and international operations contributing Php 5.5 billion.

MINING AND OIL 

In 2Q23, SCC posted a net income of Php 10.2 billion, up by 13% from 1Q23 but down by 5.4% from 2Q22, withstood a 17% drop in coal prices through increased exports to China and improved power plant availability. Meanwhile, PCOR’s 1H23 net income fell by 20% to Php 6.14 billion due to reduced revenues and higher interest expenses. In 2Q alone, Petron’s Php 178 billion revenues dropped by 21% YoY and 6% QoQ, resulting in a steeper net income decline to Php 2.74 billion (-33% YoY | -19% QoQ).

TELECOMMUNICATION

PLDT Inc. (TEL) generated P94.5-Bn of service revenues (+1% YoY) in 1H23, primarily driven by the growth in its Home and Enterprise segments which grew by 3% YoY and 2% YoY, respectively. As a result, the company earned P18.5-Bn of net income (+10% YoY) while its telco core income reached P17.6-Bn (+3% YoY) boosted by higher EBITDA (+3% YoY) and lower depreciation (-1% YoY) – which partly offset the 18% YoY increase in finance costs.

BANKING AND FINANCE 

Metropolitan Bank & Trust Co. (MBT) marked a 34.1% YoY rise in net income to P20.9 billion, elevating return on equity (ROE) to 12.9% from last year’s 10.0%. In Q2 alone, MBT achieved a 37.1% YoY growth to P10.4 billion, driven by a 27.0% YoY increase in net interest income to P50.6 billion. BDO’s second-quarter earnings reached Php 18.72 billion (+52.56% YoY), resulting in 1H2023 earnings of Php 35.2 billion (+46.62% YoY), with net interest income at Php 89.5 billion (+28.86% YoY), supported by expanding gross customer loans (Php 2.7 trillion, +8% YoY) and customer deposits (Php 3.3 trillion, +12%). UBP reported P6.4 billion net income (+6% YoY) in 1H2023 alongside strong P34.4 billion revenue (+60% YoY) largely due to the Citi acquisition, leading to a 0.60% net interest margin expansion (5.2%) through consumer banking growth, and P10.5 billion improved fee income, bolstered by Citi’s digital business synergy and organic expansion.

PROPERTIES

Ayala Land Inc. (ALI) experienced a 24% growth in consolidated revenues for 1H23, reaching Php 66 billion, maintaining positive momentum from the previous quarter. In 2Q, ALI’s revenues amounted to Php 34.4 billion, showing a 22.5% YoY and 14% QoQ growth. AyalaLand Logistics Holdings Corp. (ALLHC) generated P1.5 billion in revenues (-12% YoY), resulting in P339 million net income (-15% YoY) for 1H23. Revenue breakdown includes 3% YoY growth in sales from industrial lots to P657 million, a 9% YoY decrease in warehouse leasing (P331 million) due to facility upgrades, a 50% YoY increase in cold storage revenues (P85 million) from an additional facility, and a 3% rise in commercial leasing to P443 million driven by improved rental and occupancy rates.

GAMING

Bloomberry Resorts Corporation (BLOOM) disclosed this morning its business performance for the 2nd quarter of 2023 which showed a net income growth of 90% YoY to Php 3.4 billion. BLOOM’s 2Q2023 net income also grew 13% compared to the first quarter which can be attributed to management’s cost efficiency efforts. Cash operating expenses of Php 7.2 billion grew 17% YoY but was flat compared to the 1st quarter of 2023.

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