LT Group sets P10-B capex for firms’ expansion efforts
LT GROUP, Inc. is counting on a better business environment alongside the Duterte administration’s intensive infrastructure program to help boost its performance in 2017.
The holding firm of businessman Lucio C. Tan will be rolling out P10 billion to fund the expansion of its businesses this year, primarily for its property and banking segments. This is a 42.85% jump from the firm’s actual spending of P7 billion in 2016.
Bulk of the capital expenditure (capex) has been allotted for Eton Properties Philippines, Inc. at P4 billion to P5 billion. The listed property developer is taking advantage of the growth of the business process outsourcing (BPO) — information technology sector as it continues construction of more commercial and office spaces.
Eton broke ground for Eton WestEnd Square, a mixed-use development in Pasong Tamo in the second quarter of 2016, as well as its fifth BPO office tower in Eton Centris in Quezon City. Together, the two buildings will add 52,000 square meters of leasable office space to the company’s portfolio.
“We’re consciously moving forward in real estate by doing it ourselves and also partnering with other developers, just like the strategy with other business segments,” LT Group President and Chief Operating Officer Michael G. Tan said in a press briefing after the company’s annual stockholders’ meeting in Manila on Tuesday.
Philippine National Bank will receive the second largest share at P2 billion to P3 billion to upgrade to new technology, particularly for Europay, Mastercard, and Visa chips and for its automated teller machines and point of sale terminals.
“There’s a brick and mortar strategy but also a digital strategy, we’re still expanding,” Mr. Tan said.
The remaining capex will be for the company’s other operations. Mr. Tan noted that the allotment for 2017 will be financed through internally generated funds and bank loans.
FOOD AND BEVERAGE
For the food and beverage segment, Asia Brewery, Inc. (ABI) is pushing with the local production of the Tiger beer brand this year, after partnering in a 50-50 joint venture with Netherlands-based Heineken International B.V. in 2016.
“It’s promising… [The goal is] just to be a decent sized player, not at the current 5%... to grow it profitably. There will be other investments, like upgrading the breweries,” Mr. Tan said, citing that their market share for beer products is currently below 5%. ABI currently has two breweries in the country, with one each in Cabuyao and El Salvador, Cagayan de Oro.
Asked on how much will be the company’s investment to upgrade the breweries, Mr. Tan said it would take “a couple hundred millions.”
The company will further look into the local production of the Heineken beer once they start producing Tiger products here.
For Tanduay Distillery, Inc., Mr. Tan said they are looking for continued export of Tanduay products after seeing the recovery of the rum market in the country, especially in the Visayas and Mindanao where Tanduay is strongest.
Meanwhile, the company said the government’s smoking ban will affect their cigarette business through PMFTC, Inc. Last year, the company has already seen a decline in market share due to the increase of prices as taxes increased as well as the placement of graphic health warnings in the cigarette packs. The firm’s market share currently stands at 71%.
“But there are designated smoke areas naman… It’s harder ( to compete) because taxes are high, and coupled with issues of illicit trade,” Mr. Tan said.
For international expansion, Mr. Tan said they are eyeing the Southeast Asian market for export of non- alcoholic products through a partnership with Spanish dairy firm Calidad Pascual.
“We’re exploring... That’s the strategy, if we go out we look at the non-alcoholic,” he said.
The company’s attributable net income for the first quarter of 2017 was flat at P2.2 billion, following a 6% growth in gross revenues to P17.27 billion in the same period.
Shares in LT Group were down by 28 centavos or 1.84% to close at P14.94 each at the Philippine Stock Exchange on Tuesday.