Flagship Ayala companies on tight budget this year

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The Ayala Group is slashing its capital expenditures for the second year in a row, as its flagship property and telco segments cut their respective budgets to maximize existing assets.

The Ayala Group will reduce its capex guidance by around 10 percent in 2024, from P264 billion in 2023, marking the second consecutive year it will reduce its consolidated budget.

Ayala Corp. CFO Alberto de Larrazabal said the capital reduction is reflective of Ayala Land Inc. (ALI) and

Globe Telecom Inc.’s decision to bring down their spending.

De Larrazabal said ALI would operate on a lower budget this year compared to 2023’s P85 billion. The real estate developer will also pursue the expansion of its portfolio, but at a pace slower than in previous years due to risks hounding the property market.

He said uncertainties remain on when the Bangko Sentral ng Pilipinas (BSP) will cut interest rates to encourage borrowing. Recently, the BSP has retained the benchmark rate at a 16-year high of 6.5 percent, as it waits for inflation to sustain its downward trajectory.

“We do not see the interest rate environment settling down, (and) so that is creating a little bit of uncertainty,” De Larrazabal said.

Globe will also reduce its capex spending to a five-year low of P55 billion in line with its strategy to meet a certain level of cost efficiency.

As announced in its financial briefing, Globe hopes to return to a positive cash flow by 2025, and this can be achieved if it winds down its capex to pre-pandemic levels.

Earlier, Globe president and CEO Ernest Cu expressed hope borrowing rates would be slashed soon to bolster business expansion and consumer demand. Globe expects revenue to rise in 2024, but in the low to mid-single digit levels only.

De Larrazabal said only ACEN Corp., the energy venture of the Ayala Group, will hike its capex for the year. As ACEN works on achieving a capacity of 20 gigawatts in renewables by 2030, it will require elevated spending for the remainder of the decade.

Eight GW of the 20-GW target will come in the form of clean energy projects to be located in the Philippines, and these facilities will cost as much as $7 billion.

“They (ACEN) announced their target from five GW to 20 GW by 2030, and so that is a series of builds we will have to do quite a bit over the next three to four years,” De Larrazabal said.