JG Summit’s profits eaten up by airline losses

Published May 14, 2021, 3:17 PM

by James A. Loyola

JG Summit Holdings, Inc. (JGS), the flagship of the Gokongwei group, reported a consolidated net income of P122 million in the first quarter of 2021 from P1.9 billion in the same period last year.

Based on the firm’s disclosure to the Philippine Stock Exchange, earnings were weighed down by losses of its airline business as well as by some foreign exchange losses on its US-dollar bond.

JG Summit registered revenues of P67.6 billion for the first quarter of 2021, steady versus same period last year.

“Our food and banking segments remain stable, while businesses that were heavily impacted by the strict mobility restrictions and quarantine measures have shown sustained quarter-on-quarter recovery since the significant decline during the ECQ last year,” said JG Summit President & CEO Lance Gokongwei.

He added that, “We are also pleased to see substantial EBITDA contribution from our petrochemicals unit with the constant improvement in its operations in the recent quarter.”

The improved utilization of its petrochemical plants, the contribution from its Chengdu real estate project, and the resilient topline performance of its food and banking segments offset the decline in its air transport revenues.

“First quarter of 2020 was a relatively high base for some of JGS’ businesses as the Enhanced Community Quarantine only started in mid-March of last year,” the firm noted.

On a positive note, the Company said it continues to see sustained quarter-on-quarter improvements in airline, malls and hotels. JGS also recognized higher earnings in the first quarter of 2021 from its core investments in Manila Electric Company and PLDT from the same period last year.

JG Summit posted a core net income of P295 million as margin gains from Universal Robina Corporation and JG Summit Petrochemicals Group cushioned the negative impact of the pandemic in Robinsons Land Corporation, Cebu Air, Inc. and Robinsons Bank Corporation’s bottomline.

Excluding airline, JG Summit’s core net income and net income amounted to P5.4 billion and P5.1 billion, respectively, up 18 percent and 88 percent year-on-year.

The expansion was mainly driven by the improvements in its food and petrochemical manufacturing operations, favorable forex and mark-to-market movements, as well as some benefits from CREATE law.

These also include minimal gains from the sale of its 30 percent stake in Global Business Power Corporation (GBPC).

“It has been more than a year since the pandemic has begun disrupting the global economy and our business and operations. We continue to cautiously navigate this very turbulent environment leveraging on the strengths of our diversified portfolio and our balance sheet,” said Gokongwei.

He noted that, “While we remain optimistic about the long term prospects of the group in a post COVID world, we are realistic with our view that short term volatility will continue to persist.”

“Although we have seen sequential improvement in our business results in the last 2 to 3 quarters, the implementation of a stricter lockdown in the NCR+ bubble which impeded mobility is like a reset once again,” Gokongwei pointed out.

But, he said “We expect though that the headwinds will start dissipating once the vaccine rollout is accelerated but surmise that the shape of the recovery will vary across industries in our portfolio.”

For the balance of this year, Gokongwei said “we will continue to focus on the execution of our recovery game plan. We believe that the group is well positioned to answer the shift in consumers’ needs and behaviors as well as the lasting shift to digital channels in a post COVID world.”

He said “Our digital and agile transformation continues to accelerate with the ultimate goal of driving innovation faster, improving the customer experience and enabling us to gain productivity in operations.”