EEI Corporation, one of the country’s top engineering companies, is seeking to diversify its business portfolio to include real estate, energy, healthcare, and off-shoring to provide a long-term hedge against the cyclical risk in the construction market.
“To de-risk itself from construction, EEI has decided to pursue and evaluate potential investments in real estate and energy, as well as pivot its manpower business towards healthcare and off-shoring,” the firm said in its latest financial report.
While it remains optimistic about recovering its domestic construction business, EEI said it continues to face challenges in its overseas projects, particularly in the Kingdom of Saudi Arabia.
Amid the country’s strong second-quarter economic growth and higher government spending on infrastructure, “EEI sees room for more growth opportunities and is actively preparing to take part in new projects, particularly those involving significant infrastructure, which will serve as the primary source of possible projects for EEI's domestic pipeline in the medium to long term.”
In the private sector, the company also expects a recovery in the residential high-rise market in Metro Manila alongside faster growth in the residential mid-rise property market outside Metro Manila.
For the industrial market, the company has also observed a recovery with capital projects for new facilities and expansions to existing ones, which are again being tendered.
Internally, the group continues to be in the midst of operational reorganization and transformation, majority of which shall continue throughout 2024 and first quarter 2025.
“The biggest challenge remains to be our international operations, the recovery of which shall only accelerate upon the completion of the legacy projects.
“For domestic construction, while there is visibility towards a healthier pipeline, the Company will continue to work on recovering its current projects,” it noted.
For the first half of 2024, the Group reported an attributable net income of P88.42 million, a 112 percent turnaround from its net loss of P700.97 million in the same period last year.
Consolidated revenues inched up four percent to P8.18 billion from P7.85 billionin the same period last year as revenues from domestic construction contracts increased by two percent or P161.88 million due to production from ongoing domestic projects particularly in the infrastructure and building segments.
Meanwhile, revenue from services increased by P308.05 million (28 percent) which is attributable to higher trading and service revenues from wholly owned subsidiary EEI Energy Solutions Corporation.
Revenue from merchandise sales decreased by P149.09 million (54 percent) due to the decrease in delivery and supply of construction materials of EEI Business Solutions, Inc., the Group's trading and supply subsidiary.
The Group's domestic construction business benefited from long overdue approvals of various change orders and variations. This helped increase gross margin for the period.
For the period in review, EEI registered losses amounting to P91.88 million from equity in associates and joint ventures. This is primarily comprised of the performances of Al Rushaid Construction Company (ARCC) and EEI's other joint ventures in domestic construction projects.
The ARCC business continues to face operational headwinds from legacy issues and projects and the evolving competitive landscape in Saudi Arabia.
“Notwithstanding these challenges, the Group is committed to turning this business around and participating in the growth of construction in the Middle East,” EEI said.
Financing costs were 39 percent higher in the first half of 2024 compared to the same period in 2023. This is primarily due to the increase in bank loans, which are used to support funding for existing and new projects.
At the end of the second quarter of 2024, the Company's unworked portion of existing contracts stood at P46.86 billion. EEI is expected to continuously improve this number and grow its pipeline until the end of the year.