JG Summit [JGS 53.20 1.3%] [link] previewed its FY22 earnings by revealing that its net income fell by 86% to just P0.7 billion, despite “record high” revenues and a doubling of its core net income to P6.2 billion.
JGS said that the dramatic fall in consolidated net income was due to the 9% drop in the value of the Philippine Peso relative to the US Dollar, which had a negative impact on the value of JGS’s US Dollar-denominated debt. Of the five main business segments in the Gokongwei Family’s holdco, three were profitable and two were wildly unprofitable.
Universal Robina [URC] reported a 28% increase in revenue and a 12% increase in net income, thanks to strong “sales momentum”. Robinsons Land [RLC] reported a 22% increase in revenue and a 21% increase in net income thanks to the recovery of malls and hotels, backed by strong residential sales. Robinsons Bank reported a 15% increase in revenue and a 12% increase in net income.
On the negative side of things, Cebu Pacific [CEB] reported a 261% increase in revenue, but still reported a P14 billion net loss for FY22, due mostly to a 75% increase in operational expenses tied to the increase in the cost of fuel. JG Summit Olefins Corporation, the petrochemicals division, saw its revenues fall by 11% and it recorded a P14.9 billion net loss due to low demand from China and higher inputs.
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Depending on where you think global currencies are headed relative to the US Dollar, this either gives JGS an easy low bar that it will be able to dunk over this time next year when it reports on FY23, or it sounds an alarm about how exposed the JGS juggernaut is to moderate swings in the peso’s value.
Of course, JGS didn’t talk about the phenomenon that evaporated 86% of its profitability until the third paragraph of this press release.
It preferred to talk about the record revenues and the jump in core net income, which are definitely nicer stories to tell.
Yet I couldn’t help but notice the repeated mention of rising input costs (for URC, CEB, and JGSOC) as factors that tempered profitability.
That’s something to watch for as JGS navigates 2023.
I don’t want to get distracted by JGS net income figures comparing to this year of forex losses, and perhaps miss some important inflation signals coming from its constituent businesses.
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