Business | Economy
Ayala sees weak outlook after income falls 38%
Ayala Corp, the Philippines' most valuable conglomerate, said second-quarter net income slid 38 per cent, as bank and telecoms earnings weakened, and warned that inflationary pressure would hit its second half.
- Reuters
- Published: 23:22 August 11, 2008
Manila: Ayala Corp, the Philippines' most valuable conglomerate, said second-quarter net income slid 38 per cent, as bank and telecoms earnings weakened, and warned that inflationary pressure would hit its second half.
"We expect operating conditions to remain challenging for the balance of this year and perhaps into early next year as we continue to feel the pressure from higher inflation and interest rates," CEO Jaime Augusto Zobel de Ayala said in a statement.
Ayala, valued at $3.5 billion, owns the Philippines' top property firm, Ayala Land, and water utility Manila Water. It also has interests in telecoms, banking, car distribution, electronics and business services like outsourcing.
April-June unaudited net income was 3.7 billion pesos ($83 million). For January-June, net income dropped 45 per cent to 6.3 billion pesos, as capital gains fell and key businesses earned less.
Inflationary pressure
Annual inflation hit a near 17-year high of 12.2 per cent in July and the central bank has raised rates by 75 basis points since June to prevent it accelerating further.
Borrowing costs are predicted to rise again, by 25 bps, later this month, raising consumers' debt repayments and further crimping spending power.
"The pressures of rising oil and commodity prices and tightening credit globally have created a much more challenging operating environment," Chief Operating Officer Fernando Zobel de Ayala said in the statement.
The group booked first-half capital gains of 2.7 billion pesos from the sale of shares in Globe Telecoms but they were way below the seven billion pesos reported a year ago.
January-June earnings from key businesses fell 23 per cent, with net profit at Globe Telecoms and Bank of the Philippine Islands slipping from a year ago as the economy slowed.
Shares of Ayala Corp fell 45 per cent in January-June, underperforming the main stock index, which lost 32 per cent.
Ahead of the earnings on Monday, Ayala Corp closed up 2.4 per cent, while the main index was up 2.8 per cent.
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