Big firms post mixed results; banks lift earnings

PHILIPPINE conglomerates reported mixed earnings results for the first half of the year amid market headwinds, but those with banking units came out stronger, analysts said.
“Corporate earnings for the top Philippine conglomerates in the first half of 2023 were mixed. Some companies reported strong earnings growth, while others, saw their earnings decline,” Globalinks Securities and Stocks, Inc. Head of Sales Trading Toby Allan C. Arce said in a Viber message.
Mr. Arce added that among the top listed firms, SM Investments Corp. and Ayala Corp. reported stronger earnings during the six-month period.
Carlos Angelo O. Temporal, senior equity research analyst for Unicapital Securities, Inc., likewise said noteworthy gains were observed from SM Investments and Ayala Corp., but GT Capital Holdings, Inc. stood out as it doubled its earnings.
“All three conglomerates benefitted from the robust performances of their banking units, which have continued to capitalize on elevated interest rates and sustained loan growth,” Mr. Temporal said in a Viber message.
He added that the companies also have property arms that “saw superb growths as residential revenues gain traction while cancellation rates significantly ease from last year’s lumpy figures.”
For the semester, GT Capital more than doubled its consolidated net income to P16.61 billion from P8.1 billion as its core businesses delivered better results.
GT Capital’s first-half earnings were primarily driven by an impressive increase in auto sales, which surged by about 50% year on year, accompanied by a substantial improvement in margins due to the relative stability of the peso.
Ayala Corp. booked an attributable net income of P18.41 billion for the first half, 13.2% higher than the P16.27 billion in the same period last year.
Mr. Temporal said the results were mainly due to ACEN Corp.’s profits, which were facilitated by the easing of fuel prices and the company’s shift to a net-selling merchant position in the spot market.
SM Investments saw a consolidated net income of P36.5 billion for the first half, reflecting a 32% increase from P27.7 billion, driven by solid consumer sentiment on the back of a positive economic environment.
Meanwhile, Mr. Temporal said these companies might face a couple of developing major headwinds: higher inflation due to rising oil prices and peso volatility.
“Resurgence in inflation from higher oil prices and other factors may lead to lower consumer demand across different sectors and higher input costs for companies,” he said.
He added that the peso’s volatility could result in “elevated interest expenses for entities with substantial dollar-denominated debt, reduced margins for net importers, and increased [capital expenditure] for companies relying on foreign-sourced materials and equipment.”
However, Mr. Arce said that these conglomerates with diversified portfolios that span multiple sectors might be better equipped to weather the challenges. — Adrian H. Halili