Price hikes are non-disclosable numbers

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DO listed companies generate more revenues because of more sales or because of price increases? They should be more profitable because of the latter.

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Public investors may not care at all about the numbers as long as they receive regular dividends, either in cash or in stock. But unlike public investors, consumers may be more interested in how much more they are paying for the same consumer items of the same volume that they buy within the family budget.

Certainly the budget keepers, who are usually the housewives, know full well how prices of basic commodities have been rising. Their own price monitoring shows that they are paying more today for rice than a few months ago. Imagine, the price of one class of rice that used to be pegged at P40 per kilo at the start of the year has now gone up to P59! This means that a family whose income may not have increased at all has to add P19 to their budget to continue feeding the family. A price surge of 47.5 percent? Pity the poorest of the poor who may be looking at spending Christmas sans rice.

Going back to listed companies, Due Diligencer is citing a few examples to illustrate how their revenues have been increasing. Vista Land and Lifescapes Inc., for instance, reported revenue of P11 billion from real estate sales in the first six months of 2014, up from P9.7 billion in the same period of 2013.

The results of Vista Land’s financial performance translate to P1.3 billion more sales from January to June this year which, in turn, is equivalent to an increase of 13.7 percent—too small for a big industry player. But that is not the main point in this piece because it does not answer the question of whether the P1.3 billion additional revenue came from sales of more property units or from price increases per unit.

As properly disclosed somewhere in Vista Land’s postings on the Philippine Stock Exchange (PSE) website, the company made more money from the completion of housing units that were eventually turned over to home and lot buyers. The company’s filings did not provide the details of its pricing policy and formula, which should remain secret.

Like Vista Land, Ayala Land Inc. also disclosed in a quarterly filing that its net profit soared 25 percent to P10.8 billion in the first nine months of 2014. ALI’s “property development business” contributed P47 billion to consolidated revenues in the first nine months, 26 percent more than its sales of P37.4 billion in the same period in 2013.

Again, no one knows if these revenue increases came from price increases or only from more units sold. Thus, the financial disclosures of Vista Land and ALI were limited to revenues and the resulting net income for a given period.
 
More on Ayala Land
ALI is the property unit of Ayala Corp., which is the listed holding company of the Zobel family. It is optimistic on its continued profitability given its financial performance in the last three years.

In its financial statement audited by SGV and Co., ALI reported that its consolidated net income climbed 29 percent to P14.3 billion in 2013 from P11 billion in 2012 which, in turn, was up 28.9 percent from P8.6 billion in 2011. These profits resulted from revenues that increased by 36 percent to P81.5 billion in 2013 from P59.9 billion in 2012. In 2011, ALI’s revenues totaled P47.7 billion.

What is missing in these financial reports are the details that would let the public determine whether price increases in the houses and lots it sold was the main contributor to ALI’s consistent profitability. The footnote to ALI’s financial statement shows “land and residential unit sales” of P50.6 billion in 2013; P33.8 billion in 2012; and P25 billion in 2011.

ALI, like Vista Land, reported nothing on price increases, which should remain confidential because the required posting of quarterly and annual financial reports is limited to the disclosure of revenues, expenses and net income plus footnotes whenever needed.

Here are a few words of caution or warning: When you are buying a condominium unit, be sure to see not only the floor plan or layout that suggests where to place refrigerators, TV sets, etc. Be sure to see the actual units when available. If you don’t inspect the unit that you intend to buy, and it happens to be one of the end units, you may be paying for two big posts measuring two feet by two feet each that support the weight of the entire building. These posts extend from so many feet under the ground up to the top floor of the condominium.

Worse, aside from enriching the property developer by paying for a wasted space, you will be charged higher association dues which are computed based on the floor area, meaning including the space occupied by the two huge posts. The computations, of course, work in favor of the developer.

Try asking the people managing SM Development Corp. They should know better than what Due Diligencer had learned from its research. But why should SMDC managers care? What’s important is for them to show the numbers that would please businessman Henry Sy, his wife and his children.

esdperez@gmail.com

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1 Comment

  1. We should be aware that corporate disclosures are standard templates with limited information. Therefore financial decisions should be based on purpose driven investors rather than commission-driven stockbrokers.