While power gets P44 billion AEV subsidiaries to get smaller chunk of capital expenditure

CEBU, Philippines – Apart from its huge capital expenditure for the power business, Aboitiz Equity Ventures (AEV) would allocate lesser investments for the rest of its subsidiaries this year.

Of the total P46 billion capex for 2009, P44 billion will go to power business expansions, and P1.2 billion for its transport business—the Aboitiz Transport System (ATS), the rest will be distributed to other business arms, like banking and food.

Publicly-listed AEV ended the year 2008 with a net income of P4.1 billion, 29 percent lower than 2007, reported AEV president and chief executive officer (CEO) Erramon I. Aboitiz during the AEV 2009 Stockholders Meeting held Monday at the Cebu City Marriott Hotel.

“Higher fuel prices for our transport business, and the rise of raw material costs and freight for our food subsidiaries resulted in the decrease of our margins,” Aboitiz said.

Out of the total earnings contributions from the four business segments, the power group continued to account for the lion’s share, contributing 70 percent of total earnings contributions, increasing from 61 percent in 2007.

This was followed by the banking group (Union Bank, City Savings Bank) with earnings contribution amounting to 18 percent of the total, down from 23 percent in 2007.

The group’s food business arm, Pilmico Foods on the other hand, continued to be a stable source of earnings for the conglomerate contributing 10 percent, the same percentage as the previous year.

The transport group (ATS) accounted for two percent total income contribution to AEV in 2008, dropped by six percent in 2007.

“While we do not expect the global economy to recover quickly, we remain confident about the prospects of AEV and its investments,” Aboitiz said.

He said the company has a strong balance sheet and excellent reputation, “as we have seen in the recent various fund-raising activities of the Group that will allow us to continue to tap the credit markets to fund our growth requirements.”

Aboitiz emphasized that the uncertain and volatile economic environment is making the future difficult to forecast. However, he expressed strong belief that this (difficult) environment offers big opportunities.

“We must therefore be on the look out for these opportunities and have the courage to grasp them when they come. Our challenge is to turn this crisis into an opportunity [for the company,” Aboitiz assured stockholders.

As the attempted sale of ATS failed, Aboitiz said the company is going to continue its planned expansion, to strengthen and further grow the freight business.

The P1.2 billion capex allocated for ATS this year will go to dry-docking investments, acquisition of new vessel for Cebu Ferries, among others.

In banking, Aboitiz said the company will continue to look for good assets, although he said that the bank has no immediate or concrete plans for acquisition.

While the 2008 performance brought about a dropped of earnings for the Group, the first quarter figures showed a recovering trend.

The company reported a 20 percent increase of net income for the first three months of 2009.

“Our businesses are profitable and have strong balance sheets, enabling them to support their own expansion needs. We would like to assure our stakeholders that AEV is on solid ground,” he concluded.