A trillion surplus in 2013

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Emeterio Sd. Perez

Emeterio Sd. Perez

IF the Philippine economy is greatly improving under the Aquino administration and you feel you do not benefit from it, then who does?

If it is not you and it is not the rest of us, then it must be big business. Whether this conclusion is logical or illogical, there is one easy way to find it out: Search the website of the Philippine Stock Exchange (PSE).

True enough, www.pse.com.ph provided me with the numbers to justify the conclusion. Based on the numbers culled from the PSE website, it is not the common man who benefits from the economic growth; it is big business.

The conclusion, though, is debatable.


But one thing that should be told is that the ordinary Filipinos are responsible for the profitability of private companies. Their patronage, as consumers, enables these companies to accumulate retained earnings, which, in turn, are returned to stockholders in the form of dividends. Happy days for the owners!

Selected companies. Of those on the list, only two are not controlled by families. San Miguel Corp. has three significant stockholders in Eduardo Cojuangco Jr., chairman and chief executive officer; Ramon Ang, vice chairman, president and chief operating officer; and Roberto Ongpin, a member of the board.

PLDT Group, on the other hand, is headed by Manuel Pangilinan, chairman. It has a number of units, the biggest of which and the most profitable is Smart Communications Inc. which is not listed.

The rest—there are five of them—are all controlled by businessmen who are among the wealthiest Filipino families.

The Aboitizes of Cebu are the majority stockholders of Aboitiz Equity Inc., which, in turn, counts Union Bank of the Philippines among its subsidiaries.

Ayala Corp. is a subsidiary of Mermac Inc., the unlisted corporate vehicle of the Zobels. Among its subsidiaries are Globe Telecoms Inc., Ayala Land Inc. and Bank of Philippine Islands Inc.

Alliance Global Group Inc. is the listed flagship of businessman Andrew Tan, who also controls Megaworld Inc.

The Gokongweis own JG Summit Holdings Inc., which is the majority stockholder of Universal Robina Corp. The family has formed an alliance with the PLDT Group by swapping JGS’s holdings in Digital Telecommunications (Phils.) Inc. with PLDT common shares.

The surpluses. As of September 30, 2013, seven listed holding companies reported P692.41 billion in combined retained earnings, thus needing only P307.59 billion in the fourth quarter to hit a trillion. Simply put, the seven companies in the list and their subsidiaries would have probably ended 2013 with that much money in their books.

The seven companies here are all listed but are not necessarily public. It is common knowledge that most of the listed companies are not fully compliant with the 10-percent minimum public ownership rule. What is PCD Nominee Corp. for if not for hiding the identity of the beneficial owners? Fortunately for them, the Securities and Exchange Commission (SEC) and its team of market examiners have not been looking into the operation of PCD Nominee. Good for the violators.

Financial performance. Let me go back to retained earnings. If you were to gauge the financial performance of a company whether listed or not, you check its retained earnings, which is an entry under stockholders’ equity representing accumulated net profits.

In turn, when a company may allocate a portion of its retained earnings for some projects, the amount is called appropriated. The rest, which is defined as unappropriated, may be made available for distribution as dividend either in cash or in stock.

(In the case of holding companies, their consolidated retained earnings include amounts that have yet to be declared and remitted to them by their subsidiaries and associates. The clarification is contained in the footnote to the financial statements.)

The SEC rule has a rule against keeping too much amount of retained earnings but has rarely been implementing it. It is up to the agency’s examiners to determine which among the listed companies in the list—and those not covered by this article—should declare dividends to reduce their surplus within the allowable limit.

When the SEC does it work and require the declaration of excess retained earnings as dividends, then the rich stockholders are getting even wealthier.

Now who benefit most from economic growth: the ordinary folks or big business?

esdperez@gmail.com

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