ALI cuts capex this year to ₱70 billion

Published April 22, 2020, 12:00 AM

by manilabulletin_admin

By James A. Loyola

Real estate giant is slashing its capital expenditure budget to ₱70 billion this year from the initial ₱110 billion allocation as it expects business to be adversely affected by the COVID-19 pandemic.

Ayala land inc. logo | Grabbed from

During the firm’s annual stockholders’ meeting, ALI President Bobby Dy said the crisis “will have a major impact on the short term and our performance for the year 2020, with high likelihood of a spillover into 2021.”

Because of the pandemic, Dy said “our operations were brought to a standstill, with the exception of our BPO offices and hotels that continue to operate on a limited basis to accommodate current business needs.”

“We are now in the process of adjusting our plans to ensure that we adapt quickly to this new reality and remain resilient throughout this crisis,” he added.

ALI Chief Finance Officer Augusto Bengzon said “Our priority right now is to ensure that the company has more than ample liquidity.”

“In the past 4 weeks, we have asked all our business units to review their existing plans, to immediately implement a zero-based budgeting program, and to validate all costs and spending requirements. We have also mandated them to focus only on essential expenditures and what we deem as critical projects,” he said.

With this exercise, Bengzon said “we have rationalized a number of potential investments and land acquisitions. We have also decided not to launch any new projects this year.”

He explained that, “We believe we have sufficient projects in our development pipeline to sell once the situation normalizes, given the ₱158.9 billion worth of projects launched in 2019.”

“We recognize that we may miss out on some opportunities but we believe that this is the right decision to ensure that Ayala Land is in a healthy and strong financial position throughout this crisis, for however long it may persist,” Bengzon noted.

He said that the firm can cover its reduced capex even after taking into account a possible slowdown in residential sales, the rent concessions provided to mall tenants, as well as the significantly lower occupancy in its hotels and resorts portfolio.

ALI is currently refinancing relatively expensive short-term loans, and has launched a debt capital market transaction that will further lower cost of debt while extending maturity profile.

“We are targeting to issue a 2-year bond in early June,” said Bengzon.
ALI Chairman Fernando Zobel de Ayala said “We allocated ₱2.6 billion in rent condonation for mall merchants throughout the one-and-a-half-month duration of the enhanced community quarantine.”

He added that, “For our 78,000 inorganic employees (composed mainly of employees of our service providers, construction workers, security and maintenance personnel), we have provisioned ₱600 million in financial assistance to help them during this crisis.”