Sustained and strong businesses
THE JG Summit conglomerate that people know today began as Universal Corn Products, Inc., operating a cornstarch plant in Pasig City in 1957. From that modest beginning, the company gradually became a conglomerate, and one of the largest and most diversified in the Philippines at that.
The multifarious businesses of JG Summit have the same general goal: serve the needs of the growing middle class, not only in the Philippines but also in Southeast Asia and Australasia. These businesses are Universal Robina Corporation, a fast-growing food and beverage company; Cebu Pacific Air, the first budget airline in the country and the largest domestic carrier; Robinsons Land Corporation, a mixed-use property developer with a network of diverse real estate projects; JG Summit Petrochemicals, which is the first and only integrated petrochemical manufacturing operation in the country; and Robinsons Bank, a growing commercial bank answering the needs of the employees and business partners, among others, of JG Summit and Robinsons Retail Group.
Year 2016 was a bit challenging for the corporation, but it also revealed how resilient it was. In a joint message published in JG Summit’s 2016 annual report, James L. Go, chairman and chief executive officer, and Lance Y. Gokongwei, president and chief operating officer, noted that the strength of the company’s business portfolio was tested by such factors as the turbulent global economy, geopolitical concerns and commodity price instability.
“Despite this, JG Summit managed to grow its core net income by 6.9% year on year,” the executives said, noting that the strong performance of the petrochemicals and airline businesses was the main driver of the upswing. “While the near- term outlook of the country is challenging, the long- term fundamentals of the country remain buoyant because of continued growth in disposable income levels, infrastructure spending, and the increasing urbanization of all the markets we compete in.”
The conglomerate’s remarkable expansion in the face of a difficult business environment was a reflection of its vision and disciplined strategy. Mr. Go and Mr. Gokongwei said they continue to align with their vision of being a leading conglomerate in the Philippines with a growing presence in the Asia-Pacific region, and to be focused on benefitting from the growing middle-income class in the country and around ASEAN.
“With this, we have successfully aimed and have become among the market leaders by sustaining a strong competitive profile and achieving economies of scale that make it hard for new competition to enter our market. Our products and services have sustained their brand equity of best value for money,” the executives said.
By employing strategic innovation and discipline in efficiency and scale, JG Summit has been able to achieve a well-balanced, well- diversified and well- run portfolio of businesses. Since 2015, the group’s net income is almost evenly spread among its three business categories: consumer businesses, which include Robinsons Land and Universal Robina; high- dividend-yielding core investments in the likes of PLDT, Inc. Manila Electric Company, and Global Business Power Corp.; and cyclical businesses, composed of Cebu Air, Inc. and JG Summit Petrochemicals.
Mr. Go and Mr. Gokongwei emphasized that the corporation has maintained a robust balance sheet through the years. Last year was no different. “In 2016, our total assets grew by 11.7% as we expanded our core businesses. Specifically, the group spent over P41.9 billion in capital expenditures in 2016 with 46% of the capital expenditures accounted for by CEB’s [ Cebu Pacific Air] aircraft acquisitions, 30% or P12.7 billion accounted for by RLC’s [Robinsons Land Corp.] construction of malls, offices, hotels and residential assets as well as for land banking; and 18% was spent for the food and beverage business’ capacity expansion in the Philippines and around Southeast Asia,” they said.
Among the biggest milestones of the conglomerate in 2016 was the Cebu Air’s announcement of the formation of the world’s first panregional low-cost carrier alliance, the Value Alliance. This collaboration of Cebu Pacific, its subsidiary Cebgo, and seven other low-cost carriers is expected to deliver great value, connectivity and choice for travel throughout Southeast Asia, North Asia and Australia.
Another important event that occurred in 2016 was URC’s 60th anniversary celebration, which included the launch of its new brand identity, reflective of its ambition to become a borderless multinational company armed with the brand promise of delighting consumers with brands of exceptional quality and value.
It was also in 2016 that Robinsons Land launched, in partnership with Marriott International, Inc., The Residences at The Westin Manila Sonata Place. This 50-storey development, the first themed-residential development of the Westin Group in Southeast Asia, would feature 350 private residential apartments.
“We remain optimistic on the long- term growth prospects of the group as all subsidiaries are poised for continuous growth and sustained profitability,” Mr. Go and Mr. Gokongwei said. “To continue to be successful, we will remain focused and disciplined in our efforts. We will leverage on our leadership position, scale and on our core competencies and capabilities. We mandate ourselves to continue to innovate and create value. We continue to aim to transform our businesses to meet our customers’ new needs and lifestyle.” —