The financial health of Aboitiz companies

Yesterday was the Annual Stockholders meeting of the Aboitiz Power Corp. (AP) and later in the afternoon the Aboitiz Equity Ventures (AEV) held its Annual Stockholders meeting at the Marriott Hotel. These were two separate Annual Stockholders meeting and Mr. Erramon I. “Montxu” Aboitiz played the role of President and Chief Executive Officer (CEO) of both Aboitiz Power (AP) and AEV. As the presscon was strategically placed in-between meetings, we’ll give you the highlights of both meetings from the perspective of Montxu Aboitiz.

As Aboitiz Power (AP) was the first to go, allow me to give you what transpired during the presscon. AP ended the Year 2008 with a recurring net income of P4.7 billion, which was up by 38% from the previous year’s P3.4 billion, increases that came from its 2007 asset acquisitions. Despite the non-recurring net loss of P331 billion due to foreign exchange losses of P534 million due to the revaluation of the dollar-denominated loans and placements, plus the reversal of a P260 million provision made by an associate company and a P57 million project write-off, it bought AP’s total earnings to P4.3 billion translating to an earning of P0.59 per share. This should be music to AP stockholders given the reality of today’s global financial crisis, where many companies, especially in Europe, Japan or the US are all in the red.

AP’s major highlight for 2008 was their winning the competitive bid for the 747-MW Tiwi-Makban Geothermal Power Plants, which was acquired for US 447 million and gives the Aboitiz Company its first foray on a the so-called “Green Energy” power plants. A year earlier, they also acquitted the 100-MW Binga Hydro Power Plant. Montxu Aboitiz pointed out, “With its base load nature, it will bring us closer to our dream of making Cleanergy, our brand for clean and renewable electricity, available to all Filipinos.” We learned during the presscon that getting into a Clean Energy or Renewable Energy sources has become a passion of the Aboitiz Company.

Montxu also gave a report on AP’s 1st quarter results for the year 2009. They had a recurring net income of P490 million, recording a 54% year-on-year decline. He said, “All in all, the generation business’ earnings contribution for the quarter recorded an 83% decline. We are, however, very pleased to report that with the advent of early rains, the water levels in our dams are full to the brim that should allow us to step up our generation for the remaining months of the year.” This is due to the current problems we are experiencing with global warming, where we had a drought late last year and early this year that dropped the water levels precariously low. But the unexpected summer rains and typhoons have since corrected this problem.

Now as to the other report by Mr. Aboitiz, this time from the Aboitiz Equity Ventures (AEV) he started by stating, “The credit crunch that began in 2007 manifested itself in asset price deflation, financial turbulence, illiquidity in global financial markets and an economic downturn that resulted in several major companies sliding into recession in 2008… In the midst of this turbulence, AEV managed to hold on and end the year relatively unscathed. GDP growth for 2008 was 4.6% while AE closed the year with its stock price down by 19% at 5.60 per share, this decline was not as pronounced as that of the market with the Phisix slipping down by 48%.” All told, AEV for the year 2008 ended with consolidated revenue close to P36 billion, recording a 15% growth from the year 2007, mainly due to full contributions of acquisitions made in 2007.

The Transport Group ended with an income contribution of P81 million, compared to 2007’s net income contribution of P318 million. The decline is mainly attributed to the gains from the sale of vessels and other assets ATS realized in 2007. The President’s report made no mention of the ill-fated sale of Aboitiz Transport System (ATS) by the Kuwaiti consortium, perhaps the collapse of this deal happened just a few weeks ago. But when we asked him whether it was providential that the deal with the Kuwaiti consortium didn’t push through, Mr. Montxu merely gave the media a sheepish smile, which we took as a huge yes! With ATS making a P103 million for the 1st quarter for the year 2009 due to reduced fuel cost, Montxu had a big reason to smile.

As AEV is a huge company that has a lot of interests ranging from Banking to Foods, we cannot put everything in print. But allow me to mention that as far as Aboitiz Power is concerned, the Institute of Corporate Directors for its 2008 Corporate Governance Scorecard for Publicly Listed companies in the Philippines gave AP a very high score of 89% against the average score of 72%. This is why they now have Sebastian R. Lacson as Chief Reputation Officer (CRO) a title that only few companies that follow Good Governance use. Finally as for the threat of a strike by VECO employees, Mr. Lacson pointed out that VECO is always ready to serve its clients.