As of June 30, 2014, Ayala Corp. (AC) reported consolidated retained earnings of P100.998 billion and P92.640 billion as of December 31, 2014. This means in the first six months of 2014, various units of the Zobel-owned holding company contributed P8.358 billion (P100.998 billion minus P92.640 billion) to AC’s consolidated retained earnings.
AC’s filing showed its “equity in net earnings of subsidiaries, associated and joint ventures” amounted to P69.751 billion as of June 30, 2014 and P64.307 billion as of December 31, 2013. AC placed the two amounts inside brackets to indicate that these had yet to be declared as dividends.
By subtracting P74.751 billion from P100.998 billion, AC said only P26.247 billion of its close to P101 billion retained earnings was available for distribution as dividends, either in cash or in stock.
As of June 30, AC said it had declared P1.441 billion in cash dividend, which translated to P2.40 per share. In 2013, the holding company reported having distributed P2.887 billion in dividend, or P4.80 per share.
A quarterly financial filing by Ayala Corp. shows its various segments, or businesses, posted the following net incomes for the first six months of 2014: real estate and hotels, P8.534 billion; financial services and insurance, P3.796 billion; telecommunications, P2.099 billion; distribution and waste water services, P2.862 billion; electronics, P500 million; information technology and BPO services, P1.607 billion; international, P133 million; automotive and others, (P56 million); intersegment eliminations, (P131 million).
As the reports show, the Zobels’ seven businesses generated net profits of P19.531 billion but the financial filing listed only P16.488 billion?
Here is the series of computations that could show how AC arrived at its final amount. First, it deducted the P56-million loss in the first half of 2014 from P19.531 billion, which cut the amount to P19.475 billion. Then it subtracted a further P131 representing “intersegment eliminations” from P19.475 billion, and came down to the profit amount of P19.344 billion.
Yes, the computations are incomplete because the result shows a still higher amount of P19.344 billion in net profit when the actual consolidated net income as reported was P16.488 billion.
Of course, Due Diligencer did not forget how AC performed in the first semester of the year. The financial filing, which, by the way was unaudited, had the company’s net income figure in brackets, which meant it lost P2.856 billion during the six-month period.
By the process of elimination, P19.344 billion minus P2.856 billion equals P16.488 billion, which was the amount reported as AC’s consolidated net income in the first six months of 2014.
How did AC lose P2.856 billion in the first six months of 2014? As in the past, its expenses exceeded its earnings. It lost P4.958 billion in 2013; P3.482 billion in 2012; and P3.107 billion in 2011 for a total loss of P11.547 billion in three years.
As parent company, Ayala Corp. spent P1.311 billion from January to June this year, resulting in an operating loss of P587 million. It earned an interest income of P156 million but paid P2.248 billion in “interest expense and other financing charges in the same period.
Despite these financials, AC remained profitable because of its subsidiaries and associates that public investors should not worry about its own losses. As a matter of fact, proof of the holding company’s financial strength is the consistent profitability of its units (see “segment report”) that resulted in AC’s accumulated retained earnings that topped P100 billion.