MANILA, Philippines – Conglomerate JG Summit Holdings Inc. of tycoon John Gokongwei has allotted P40 billion for its capital expenditures this year.
The hefty capital spending will ensure the continuous growth in profits and support the expansion of local and regional operations of JG Summit’s units ahead of the Southeast Asian economic integration, executives said.
JG Summit senior vice-president Bach Johann Sebastian said the company pegged its capital expenditures at roughly P40 billion this year.
“Last year was bigger, around P50 billion because the bulk of it was the petrochemical facility but that is nearly complete,” Sebastian said.
The bulk of the spending will fund the expansion of property arm Robinsons Land Corp. (RLC), aviation unit Cebu Air Inc. and the remaining requirements of the $800-million naphtha cracker plant in Batangas that will start operations in the second half.
For this year, JG Summit is banking on new income contribution from power distribution giant Manila Electric Co. (Meralco) to boost its profits while core businesses are expected to post further growth.
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“In a nutshell, things are fairly good. The economy is robust and most of our businesses are doing well,” Gokongwei said.
“Clearly, the Meralco acquisition is the biggest change in the portfolio. The equity stake should probably make it second in terms of contribution to the company after Universal Robina Corp. (URC),” said JG Summit president and chief operating officer Lance Y. Gokongwei.
Late in September, the Gokongwei family bought 27 percent of Meralco for P72 billion from San Miguel Corp., which is focusing on various investment opportunities like infrastructure projects and oil and gas acquisitions.
Snacks and beverage giant URC and RLC will continue to perform well this year, Gokongwei said, adding that Singapore-based property firm United Industrial Corp. is also seen to record improved earnings due to higher sales of condominium units.
To prepare for the Asean Economic Integration in 2015, JG Summit is beefing up its presence here and abroad.
“I think we’re one of the most prepared groups in the country,” Gokongwei said.
For instance, URC already sources more than 25 percent of its revenues from the Southeast Asian region while Cebu Pacific is the leading carrier between the Philippines and the region, Gokongwei said.
“Certainly, we always have a global view point in terms of preparing our business for competition,” Gokongwei said.
The regional integration would facilitate free flow of goods, services, labor, investments as well as capital in the economic bloc starting in 2015.
URC, the company behind brands like Jack n’ Jill, Hunt’s, C2, Blend 45, Uno Feeds and Cream All, is set to open its new factory in Myanmar late this year, Gokongwei said.
For local operations, URC’s 50-50 joint venture with Japanese snacks giant Calbee Inc. will initially invest P600 million. “We signed a memorandum of agreement and MOA and we’re working on a detailed business plan. we expect that to be completed by the second quarter of this year,” Gokongwei said. Calbee, for its part, brings certain snack technologies URC doens’t have so far.
The Philippines has been attracting foreign investments, prompting leading global consumer companies to partner with Filipino companies like URC, Gokongwei said.
In the nine months to September, profits of JG Summit slipped 21.8 percent to P8.41 billion from P10.76 billion a year ago due to the depreciation of the peso against the dollar.
The conglomerate’s strategic focus is to establish and maintain leadership across all of its businesses; maintain the strength and diversity of its portfolio; continue to invest for sustainable growth; and pursue disciplined growth into selected international markets.
