LT group earmarks up to 119 billion capex

LT Group Inc., the flagship of taipan Lucio Tan, is looking at capital expenditures of 119 billion — a marked increase from last year’s budget of 111 billion.

In a press briefing after the firm’s annual stockholders’ meeting, LT Group President Michael Tan said about half of this year’s capex will be spent by Philippine National Bank which will be funded by its planned 112 billion stock rights offering.

“Going forward, we expect the Bank to realize higher returns, create value for LTG, as well as contribute to a bigger share to LTG’s earnings,” said Tan.

Eton Properties Philippines Inc. will get about 12 billion of this year’s capex as it plans to construct more office buildings for business process outsourcing firms to expand its leasing portfolio.

Tan noted that, “Eton should be able to continue its growth momentum as more space is added to its leasing portfolio with the completion of its pipeline projects.”

“The rest of our businesses are not capital intensive but more of regular operating expenses. The normal capex for the other subsidiaries is about 11 billion (a year),” Tan said.

These units include Tanduay Distillers, Asia Brewery and Fortune Tobacco which operates through PMFTC Inc., a partnership with Philip Morris Philippines Manufacturing Inc.

Tan said LTG’s tobacco business will continue to be the firm’s main source of earnings but faces challenges from smuggled tobacco and government plans to increase taxes.

“We are not against tax increases, but we believe that the hikes should be moderate,” he said pointing out that, “continual price increases to pass on higher excise taxes may result in a further drop in industry volumes.”

Meanwhile, Tan said it is too early to tell of 2019 will be a good year for the firm as sales have been affected by the delay in the approval of the national budget which had resulted in lower consumer spending.

“We will have to see after the elections,” he said.(JAL)