Ayala to expand Generika after H1 profit growth


Ayala Corp. (AC), the oldest conglomerate in the Philippines, will expand Generika’s drugstore network to 1,000 outlets over the next three years in a bid to expand its healthcare and education businesses amid a rapidly growing population.

“Generika has 550 stores now, and we want to get it to more than 1,000 [branches]in five years,” Paolo Borromeo, head of AC corporate strategy and development, said in a press briefing on Thursday.

Ayala acquired 50 percent of Generika drugstore in mid-July from co-founder Julien Bello and his group.

Borromeo said the existing 550 Generika outlets are 90 percent franchised and 10 percent
company owned at present. He said Generika outlets are usually 20 to 30 square meters and cost P1 million to P1.2 million to franchise.

Jose Teodoro Limcaoco, AC chief financial officer, said in the same briefing that the conglomerate has allotted $20 million to strengthen its healthcare and education businesses—$10 million for each division. Part of the $10 million for healthcare will be for Generika’s expansion.

“Generika is 50-50 venture with [Teodoro Ferrer, co-founder of Generika]. He was with us before, and he shares the same values… For this one, we see ROI [return on investment]in less than three years,” Limcaoco said.

Borromeo said AC is looking for ways to expand its healthcare business by looking for partners, both local and foreign, so that it can provide affordable healthcare assistance to more Filipinos.

BEsides healthcare and education, Limcaoco and Borromeo said the conglomerate is also studying venturing into the agribusiness and consumer segment, looking and waiting for “opportunities” in these areas to add value to the firm in the long run.

“There are a lot of opportunities where we can enter, and we’re looking at all of them. But we’re not saying we’ll invest in all of them,” the Limcaoco said.

“The reason we raised a lot of cash last year is the anticipation of heavy spending this year in infra and power, and some are meant for opportunistic spending [for potential acquisitions]. But I don’t think the opportunistic spending is big this year. We still have a lot of cash,” he added.

The two officials said power and infrastructure are expected to do well this year as most of the power projects “came online in the first half of 2015” and the company is also planning to bid for transport infrastructure projects under the public-private partnership program such as the Ninoy Aquino International Airport (NAIA) development project, the Philippine National Railways (PNR) North-South Railway Project, and the Light Rail Transit (LRT) Line 2 extension project.

“There are three projects already awarded to us—the AFCS [Automated Fare Collection System], [the Daang Hari-South Luzon Expressway Link Road], and LRT 1 . . . But we are interested in the maintenance contract for LRT 2, PNR and NAIA though nothing yet has been concrete on PNR and NAIA. But we’re seriously looking at LRT 2,” Limcaoco said.

H1 net income up 6%
The company announced its net income for the first half of the year increased by 6 percent to P10.4 billion on the back of double-digit growth in its telecom, real estate, banking, and electronics businesses, also boosted by the modest performance of its power generation unit.

Equity earnings contributions of its business units rose by 2 percent to P13.2 billion during the period.

Excluding the impact of last year’s one-time gain from the sale of Stream Global Services, Ayala’s business process outsourcing unit, the conglomerate’s first-half net income increased 31 percent and its equity earnings rose 20 percent.

“Our earnings continue to grow at a strong pace in step with the overall performance of our business units. As demand drivers remain upbeat, and as our investments in power come onstream, we believe this strong growth will continue throughout the year,” Ayala president and chief operating officer Fernando Zobel de Ayala said in a statement.

“In addition, as our core businesses grow, we continue to seek new areas to invest in. We are developing new platforms in the healthcare and education spaces. We believe these two sectors present excellent opportunities for growth and scale,” he added.

Its property vehicle, Ayala Land Inc., saw its first-half net income increase by 19 percent to P8.4 billion, while other sectors likewise posted solid earnings growth.

Banking arm Bank of the Philippine Islands (BPI) posted net income of P9.3 billion, up 16 percent; telecommunications unit Globe Telecom Inc. said net profit went up by 27 percent to P8.7 billion; electronics and semiconductor unit Integrated Micro-Electronics Inc. net income climbed 35 percent to $15.2 million; AC Energy Holdings Inc. registered net income of P198 million.

On the other hand, Manila Water Services Inc.’s net income dipped by 4 percent to P3 billion on higher operating expenses.

P185-B capex
For the whole group, AC programmed capital expenditure (capex) of P185 billion this year to boost each segment as well as expand projects in the power and transportation sector. This year’s programmed capex is 23 percent higher than the actual P150 billion spent in 2014.

Bulk of P185 billion will go to ALI (P100 billion), while P37 billion will be for Globe Telecom Inc., P21 billion for parent firm AC for its investments in power generation and transport infrastructure, and the rest (P27 billion) for its other subsidiaries Manila Water Company Inc., Bank of the Philippine Islands, and Integrated Micro-Electronics Inc.

The conglomerate is targeting 25 percent to 30 percent growth yearly in profits and sales, in line with its above 20-percent growth over the past three years.

Founded in 1834 and incorporated in 1968, AC is the holding company of the Ayala family’s businesses which include water (Manila Water), telecoms (Globe), property (ALI), semiconductors (IMI), banking (BPI), power (AC Energy), infrastructure (AC Infrastructure Holdings Corp.) and BPO and education (LiveIt Investments) among others.

Ayala Corp. is 50.56-percent owned by Mermac Inc., 10.52-percent by Mitsubishi Corp. and 38.92-percent by the investing public.


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