MPIC expects debt to weigh on earnings
Metro Pacific Investments Corporation (MPIC) expects near-term profitability to be affected by rising financing costs as it takes on more debt to fund its huge various investments in infrastructure and utilities.
“Our extensive investment program is leading to rising finance costs,” said MPIC President Jose Ma. K. Lim during the firm’s third quarter media briefing.
He noted that, “it will be some time before our new road, water and logistics projects are completed, and able to make a contribution to earnings. In the meantime, the immediate debt costs incurred to support these investments during their completion period would likely have an effect on near-term profit outlook.”
MPIC’s consolidated core net income rose to 112.2 billion for the first nine months of 2018 from 111.3 billion in the same period last year, slowing slightly in the third quarter from the previous two.
Core net income was lifted mainly by an expanded power portfolio following further investment in Beacon Electric Asset Holdings, Inc. in 2017; continuing traffic growth on all domestic roads; and steady volume growth coupled with inflation-linked tariff increases at Maynilad Water Service Inc.
Power accounted for 18.5 billion or 55 percent of net operating income; Tollroads contributed 13.3 billion or 21 percent; Water contributed 13.0 billion or 20 percent; the Hospitals Group provided 1586 million or 4 percent; and the Rail, Logistics and Systems Group delivered 126 million. Consolidated reported net income attributable to owners of the parent company rose 12 percent to 112.5 billion in the period.
Non-recurring income amounted to 1297 million, compared with nonrecurring expenses of 1202 million a year earlier, driven mainly by foreign exchange gains at Manila Electric Company (Meralco).
“Our Core Income growth year to date is strong. Volume growth in the third quarter slowed due to a combination of rising inflation and unusually damp and cool weather, to which our residential customers in the power sector are especially sensitive,” said Lim.
He added that, “I expect volumes to recover to more normalized levels in the last three months of the year.”
MPIC Chairman Manuel V. Pangilinan said “we are beginning to see resolution of some of our long-pending tariff issues. Despite this partial resolution, this should go some way to assuaging investor concerns that the (Republic of the Philippines) or its agencies might not honor their agreements.”
However, he noted that, “the shape of these resolutions in terms of staggered implementation and concession extensions, while constructive, means shortterm revenue gains won’t be enough to offset rising financing costs arising from our accelerating investment program.”
Thus, Pangilinana said that “I think it is fair to say that these ongoing challenges would make us focus largely on enhancing our current infrastructure projects, rather than on new ones. Accordingly, we now expect this to be a drag on earnings in the near-term.”