JG Summit sets P48.2-B spending plan

JG SUMMIT Holdings, Inc. is jacking up its capital expenditure budget this year to jump-start the $700-million expansion of its petrochemical business.

JG Summit President Lance Y. Gokongwei told reporters on Tuesday the conglomerate is setting aside P48.2 billion to expand its business. This is higher than the P41.9 billion spent in 2016 that excludes the P33.4 billion in additional investment to acquire a stake in Global Business Power Corp. and Australia’s Consolidated Snacks Pty Ltd.

Mr. Gokongwei said Cebu Air, Inc. will corner bulk of the capex at P18-P20 billion to finance fleet expansion followed by Robinsons Land at P15 billion and Universal Robina Corp. at P7 billion The bank will invest a “few hundred millions” and the balance will be allocated for the petrochemical business.

JG Summit intends to award the engineering, procurement and construction contract for the $700-million petrochemical expansion before year end, Mr. Gokongwei said. They are expected to be operational by 2021.

The contract covers the expansion of the naphtha and polypropylene capacity by half and the development of a new polyethylene, butadiene and aromatics factories. The expansion will be funded by free cash flow of the existing petrochemical business and borrowings.

“Most people expect that petrochemical demand will grow one and a half times ( gross domestic product) demand. We hope polymer demand will continue to grow by 9-10% in the Philippines and the region. We think we’ll be able to have a world- class cost structure to compete in this business,” Mr. Gokongwei said.

Meanwhile, Robinsons Bank is expected to become one of the country’s 15 biggest banks in terms of asset size in the next two to three years even without acquisitions, making it the “fifth leg” of JG Summit after food, property, airlines and petrochemicals.

Robinsons Bank is currently the 20th largest bank in asset size and 19th in loans and deposits. Under its Roadmap 2020, the lender plans to grow its asset base to P200 billion from P80 billion and its branch network along with it to 200 from 140 branches.

“The industry itself is doubling every six years. If you don’t double in six years, mahuhuli ka ( you will be left behind),” Mr. Gokongwei said, noting that expansion of the bank took a backseat in favor of the food, airline and telecommunication business, which has been sold to PLDT, Inc.

Shares in JG Summit climbed P1.25 or 1.58% to end at P80.25 apiece on Thursday.