JG Summit bulks up 2017 capex to P48 B

MANILA, Philippines -  JG Summit Holdings Inc. is setting off on a more aggressive capital spending program this year as it seeks better positioning for its various businesses to counter emerging challenges on the external front.

The investment holding company of the Gokongwei family has set aside P48 billion for capital expenditures this year, 13 percent higher than the P41.9 billion earmarked in 2016, its president and chief operating officer Lance Gokongwei said.

Aside from its budget, the group also spent over P33 billion additional investments in 2016 to fund various acquisitions.

Gokongwei said the group has already used up P9.3 billion of this year’s budget during the first quarter.

Bulk of the group’s 2017 capex would still go to its airline and property units, similar to last year, he said.

The airline business would get 18 to 20 percent of this year’s allocation, while property would have about 15 percent, he added.

“With the ASEAN Economic Community in place, we can expect more multinationals getting more aggressive to build their presence regionally. Amid this backdrop, other relevant variables surround the industry and markets we are in as well,” Gokongwei said.

“From tougher competition, inflationary pressures, commodity prices to rapid changes in technology, government reforms and demand dynamics. These new external realities are both opportunities and threats to our overall business,” he added.

JG has five core subsidiaries: Cebu Pacific, JG Petrochemicals, Robinsons Land Corp. (RLC), Universal Robina Corp. (URC) and Robinsons Bank.

For Cebu Pacific, Gokongwei said the group is continuously reviewing its fleet expansion plan in light of various issues the company is facing.

He said Cebu Pacific has a current fleet of 60 aircraft and has a remaining order book of 44 aircraft for the balance of 2017 up to 2022.

“As such we prefer to keep a conservative but flexible fleet expansion plan that would allow us to adopt to our current development,” he said.

“For RLC, we will focus on growth prospects for our investment portfolio. We will complete four new malls and expand two existing malls as well as three office developments that will boost net leasable area by 20 percent and three hotels that will increase the number of rooms operated by 20 percent,” Gokongwei said.

For URC, JG’s overall plan for the year is to take the company on a path of recovery by maintaining its robust innovation pipeline and rebuilding its Vietnam business.

“We expect aggressive ASEAN-based players to continue to be a threat to URCs topline growth and profitability. Overall at URC, we are expecting a better second half but we continue to remain cautious on our guidance and to intense competition, forex impact and the lower prices of sugar,” Gokongwei said.

JG Summit, meanwhile, will continue expanding its petrochemical business with five projects being lined up. These projects include the expansion of its naphtha cracker and polypropylene plants, as well as construction of new polyethylene, aromatics and butadiene factories.

Gokongwei said its banking unit Robinsons Bank will be one of the areas of focus for the conglomerate.

The company is undertaking a 2020 plan to increase its market share and be more important and relevant player in the Philippine banking industry.

“We’ve increased the capitalization of the banks, over P12 billion and right now, we’ve been focusing on building our management team, our technology, our branch network and you can see we’re beginning to move up the rankings in terms of asset size. I think we’re number 19 now with less than one percent market share of the total banking industry, but I think in terms of capitalization we’re probably the best capitalized bank relative to assets in the industry and we have sufficient capital to support growth. The intention is, we think in the next two to three years, to be in the top 15 and we will see from there,” Gokongwei said.