Aboitiz businesses optimistic of sustained strategic growth amid pandemic challenges

Amid the ongoing challenges posed by the Coronavirus Disease 2019 (COVID-19) pandemic, the various business units of the Aboitiz Group expect to maintain their momentum and proceed with their projects and plans for the year.

“Despite the headwinds of the first nine months, the Aboitiz Group’s business continuity plans have proven effective and will remain in place as we continue to exhibit resilience in our operations toward the end of the year."

Sabin M. Aboitiz, Aboitiz Group President and Chief Executive Officer

Power

Aboitiz Power Corporation remains committed to helping ensure the reliability, affordability, and sustainability of the country’s energy system for the long term. The company has set a target of 4,000 MW of attributable capacity by 2020 and has surpassed it with the ownership of GNPower Dinginin, which will serve the country’s baseload demand.

Unit 1 of GNPower Dinginin will synchronize by the end of 2020 and will commence commercial operations by the second quarter of 2021. Unit 2 will synchronize and earn commissioning revenues by the second quarter of 2021 and will commence commercial operations by the third quarter of 2021.

Meanwhile, the 39-MW Naga Power Plant Complex in Cebu started commercial operations last August after obtaining a Provisional Authority to Operate from the Energy Regulatory Commission.

AboitizPower has set its eyes on aggressively expanding its ‘Cleanergy’ portfolio in the next 10 years, with the goal of shifting its overall energy mix into almost 50:50 Thermal and Cleanergy capacities by 2030.

Banking & Financial Services

Meanwhile, Union Bank of the Philippines sees continued traction of its digital take-up.

In the third quarter, UnionBank breached 1.5 million retail digital customers from only 1 million retail digital customers in the second quarter. Of this figure, over 335,000 were digital accounts opened via the UnionBank mobile application (app). Consequently, UnionBank Mobile App transactions grew by almost three times to 3.6 million transactions for the month of September versus January 2020.

Similarly, corporate digital customers onboarded via the UnionBank ‘The Portal’ nearly doubled to over 14,500 from more than 7,900 at the start of the year.

Given the increased shift of customer behavior amid the pandemic, UnionBank will continue its customer acquisition and engagement initiatives via digital channels and platforms. 

However, the bank maintains its previous expectation of a flat loan and asset growth for the banking industry in 2020, given the continued weakness in the country’s economy and a slower demand for credit until the end of the year. The bank also expects the Bangko Sentral ng Pilipinas’ reverse repurchase (RRP) rate and reserve requirement ratio (RRR) to be kept unchanged this year to give the economy some time to absorb the excess liquidity freed up earlier this year. As of end-September, RRP rate and RRR is at 2.25% and 14% respectively, lower by 175bps and 200bps from the start of the year.

Food

Despite the pandemic, the Food Group continuously prioritizes vital capital expenditures to protect its bottom line.

The Farms business’ planned expansions in Northern Luzon have been recalibrated in 2020 and the Food Group has started looking for opportunities in Visayas and Mindanao. Nevertheless, sow-level capacity is still expected to reach 29,000 heads by 2030.

The Food Group has operationalized its meat fabrication and processing plant, which will provide more stability in profitability through selling high-margin pork meats compared to live hog selling.

Meanwhile, Feeds Philippines will operate its third feed mill in Iligan, which will serve the growing requirements of its Visayas and Mindanao customers by end-November 2020. 

Lastly, Food Group International will pursue fast-growing segments like aqua and attractive geographies where there is a captive market and the ability to compete. Carefully-selected and strategic investments of the group can capture outsized returns while steadily building a strong, diversified regional food business integrated across the business system.

Infrastructure (Aboitiz InfraCapital)

Aboitiz InfraCapital is optimistic about its small cell sites venture and is anticipating an uptick in leases in its current pole network in the next two years on the back of increased demand.

Meanwhile, the Aboitiz Integrated Economic Centers or Industrial and Commercial Business Units, newly-transferred from AboitizLand, only saw minimal disruptions as a majority of their locators remained operational through the strictest portions of the community quarantine.

Aboitiz InfraCapital’s three industrial zones, namely, Lima Technology Center (LTC) in Batangas,  Mactan Economic Zone II (MEZII) and West Cebu Industrial Park (WCIP) in Cebu will be expanded and transformed into smart cities over time to maximize potential while earning value from the sale and lease of industrial land and exploring new product lines to offer the market.

Lima Water Corporation, with its recently DENR-accredited laboratory services unit, will be ready to support the growth of LTC. At Apo Agua Infrastructura, Inc., construction of the Davao City Bulk Water Supply Project is ongoing despite the challenging environment brought about by COVID-19. While the company continuously reassesses the impact of COVID-19 on its program, it remains optimistic for a 2021 target completion. 

Infrastructure (Republic Cement)

Despite construction being among the industries heavily affected by COVID-19, Republic Cement’s cement milling capacity is expected to increase by 2.3 million tons per annum (MTPA) to 9.7 MTPA after the mills in Bulacan and Iligan come on stream. 

Once commissioned, these new mills will enable Republic Cement to further support the government’s Build, Build, Build program, and the private sector’s infrastructure needs.

Republic Cement’s main focus over the past few months has been to maintain operations at full capacity while ensuring the health and safety of its teams. This is done through the stringent implementation of above minimum health and safety protocols while simultaneously ensuring that all collaborators and customers are properly educated on the latest COVID-19 health protocols and government mandates.

Land

Aboitiz Land, Inc. is expected to exceed its pre-pandemic sales performance on the back of shifting market needs and its innovative selling techniques.

The quarantine shifted real estate preferences as houses and lots in suburban locations became more attractive to property seekers, according to industry watchers. Riding on this wave are AboitizLand’s residential developments, located in emerging growth centers in Central Luzon, Batangas, and in Cebu. 

AboitizLand is also banking on digitization efforts to mitigate the operational impact of the pandemic. Aside from augmenting construction efforts through digitization to build houses more expediently but with the same level of quality, it is also looking to increase efforts in the digital space to convert sales and introduce more competitive payment terms to attract a broader market.

AboitizLand’s reservation sales for the months following the community quarantine have averaged above 80 percent of original targets despite lockdown restrictions and is well on its way to exceeding its 2019 performance.