Ayala Corp. sees higher earnings this year

Holding firm Ayala Corp. expects net earnings this year to be substantially higher compared to the past year as it embarks on a focused strategy of debt reduction, asset rationalization and prudent spending, its president Jaime Augusto Zobel de Ayala II said.

In a press briefing, Zobel de Ayala said while the first quarter was somewhat flat in terms of the company’s financial performance, they remain confident of an improvement later in the year as the operations of the conglomerate’s core businesses move into higher gear.

Even with the sale last year of food processor Pure Foods Corp. to San Miguel, Ayala Corp. still boasts of a formidable stable of businesses considered as leaders in their respective fields: Ayala Land Inc. (ALI), Globe Telecom and Bank of the Philippine Islands.

Its real estate flagship, ALI, for instance, reported slightly lower income during the traditionally weak first quarter but expects a recovery for the remainder of the year with the string of new and expansion projects scheduled to be launched.

In 2001, Ayala Corp. earned P2.1 billion, down from P2.4 billion in the prior year as increased financing and forex swap costs weighed down the surge in revenues posted by the business units, including the P2.5-billion one-time gain from the sale of Pure Foods.

"While we have experienced some volatility in our recent financial results, we are prepared to accept the trade-off between short-term earnings performance and the ability to use our financial resources for medium to long-term value creation," Zobel de Ayala said.

At end-2001, the conglomerate has consolidated borrowings of P52 billion, 77 percent of which are dollar-denominated. These dollar exposures are hedged or covered either by cross-currency swaps or forward purchases of US dollars, which Ayala Corp. resorted to protect its forex position during the time the peso was at a volatile stage.

The Ayala official said as part of their debt reduction plan, another $97 million in loans has been repaid ahead of maturities last quarter, adding to the $190 million in debt repayment last year. For the next five years, he said they expect the debt level to be pared down from $500 to $300 million as their debt repayment program continues.

For its value-creation program, Ayala Corp. will spend the bulk of its P40-billion capital expenditure allocation for the expansion of Globe Telecom’s network infrastructure, on top of the strategic repositioning of its new business unit, AC Capital — considered as the "the most important single change" in the structure of Ayala Corp.

AC Capital will take over the responsibility and management of Ayala’s other businesses (except BPI, Globe, ALI and its foreign arm Ayala International) as a portfolio and be in charge of finding new and creative ways for Ayala to create more value from each of these businesses.

The new unit will take over Manila Water, Integrated Microelectronics, iAyala, the automotive manufacturers Honda and Isuzu, and other non-core assets whose combined book value amount to roughly $200 million.