Lopez Holdings

Articles

REPORT OF THE PRESIDENT, CHIEF OPERATING OFFICER 
AND CHIEF FINANCE OFFICER 

Fellow shareholders, a pleasant and safe morning to all!

Your company reported the audited net income attributable to equity holders of the Parent amounting to P5.322 billion for the year 2019. This is 10% lower than the P5.893 billion audited net income attributable to equity holders of the Parent reported in 2018. The financial performance of First Philippine Holdings Corporation or FPH offset by the significant impairment losses of ABS-CBN Corporation (ABS-CBN) accounted for the decrease. FPH benefited from the favorable operating results of its energy, real estate, construction and manufacturing businesses while ABS-CBN determined the consequences of the Resolution passed by the House Committee on Legislative Franchises denying the franchise application of the Company, as impairment indicators on its nonfinancial assets.

Consolidated revenues increased by 7% year-on-year to P133.594 billion from P125.389 billion. This was primarily based on the Group’s favorable performance from the sale of electricity (+8%); real estate (-5%), contracts and services (+11%) and sale of merchandise (+5%). Sale of electricity accounted for 84% of revenues in 2019 versus 83% in 2018.

Equity from investment accounted for at equity method (-140%) represents the performance of ABS-CBN for the year, net of the share in the performance of FPH units. ABS-CBN incurred a net loss of P2.645 billion, with net loss attributable to equity holders of the Parent at P1.625 billion. This was after recognizing impairment losses amounting to P5.598 billion, relating to its telecommunications equipment, theme parks and attractions facilities, movie in-process and filmed entertainment, and tax credits.

For the full year 2019, Lopez Holdings’ total consolidated assets grew to P392.584 billion from P390.630 billion in 2018. This figure mainly includes assets of FPH. Debt-to-equity ratio improved at 0.34x in 2019 versus 0.39x in 2018. Also, book value per share was up at P15.35 a share at the end of 2019 from a value of P14.61 a share in 2018.

As of December 31, 2019, the Parent Company, Lopez Holdings had no more direct obligations. On a consolidated basis, total liabilities stood at P193.527 billion at year end-2019 versus P202.469 billion at year end-2018. FPH benefited primarily from the strong performance of First Gen Corporation (FGEN) which means the energy group would have sufficient resources to meet obligations and fund committed investments.

Total equity attributable to Parent stood at P69.991 billion as of December 31, 2019, up by 4% from P67.332 billion year-on-year. In 2019, Lopez Holdings received P784 million in cash dividends from conglomerates FPH and ABS-CBN. In the same year, your company paid out P459 million in cash dividends to its shareholders which is 59% of dividends received in 2019 vs. 48% in 2018.

Focusing on our Power and Energy portfolio, the FGEN Batangas LNG Terminal Project (the Project) received formal approval from the Department of Energy (DoE) for a Notice to Proceed as defined in and required by the Philippine Downstream Natural Gas Regulation. This Project will be built in the First Gen Clean Energy Complex (FGCEC) in Batangas City under the management and ownership of FGEN LNG Corporation.

The DoE also issued a Certificate of Energy Project of National Significance or EPNS in favor of the Project. EPNS means that the project is needed to maintain grid stability and security, and is aligned with the policy thrusts and specific goals of the DoE’s Philippine Energy Plan.

FGEN selected JGC Corporation of Japan as the Preferred Tenderer in respect of the engineering, procurement and construction of the Project. If DoE acts favorably on its application for a Permit to Construct, Expand, Rehabilitate and Modify, FGEN aims to bring in a Floating Storage Regasification Unit (FSRU) on an interim basis. This will allow it to receive LNG even prior to the expiration of the Malampaya gas contracts in 2024. The imported LNG can then be supplied directly to FGEN’s existing power plants, should Malampaya be unavailable for any reason.

FGEN’s pioneering work in the LNG industry in the country is anchored on our commitment to investments that improve the lives of Filipinos, as stated in our company vision. The entry of LNG may encourage both industrial and transport industries to consider it as a replacement to more costly and polluting fuels. Even more important, we believe that the development of the Project may prove critical in ensuring energy security for consumers in the Luzon grid.

As for the Media and Communications group, despite lacking a franchise, as a multimedia company, ABS-CBN’s mission has always been to be in the service of the Filipino worldwide. It introduced Filipino programming overseas through The Filipino Channel or TFC, first in North America and then to the rest of the world. It digitized its news and entertainment content and pioneered on-demand viewing, first through catch-up programming, and later through iWant and TFC Now platforms. These two services have recently merged to serve both local and international audiences who may now access thousands of hours in the ABS-CBN video library through basic or premium subscriptions on the iWant TFC app or website.

Throughout the development of these digital platforms, ABS-CBN has proven true to its commitment to unite audiences worldwide and bring out the very best in the Filipino. Its hit TV programs and blockbuster movies are accessed repeatedly by loyal viewers, engaged by stories and characters that reflect the struggles, failures and victories of ordinary Filipinos.

Let me now report on the financial performance of Lopez Holdings for the first half of 2020.

Based on unaudited financial statements, your company reported a net income attributable to equity holders of the Parent of P275 million. This is 93% lower than the P4.181 billion in net income attributable to equity holders of the Parent reported in the first half of 2019. Lower revenues from all business sectors and higher costs that include one-off expenses related to the group’s COVID-19 response and share in the net loss reported by ABS-CBN’s media and entertainment businesses accounted for the results.

Unaudited consolidated revenues decreased by 21% year-on-year to P53.880 billion from P67.913 billion. Sale of electricity accounted for 89% of revenues in 1H2020, compared to 86% of revenues in 1H2019. Operating companies held by FPH experienced slower sales of electricity (-18%), real estate (-52%), contracts and services (-23%) and sale of merchandise (-26). Likewise, unaudited consolidated costs and expenses decreased by 21% to P40.635 billion from P51.300 billion year-on-year.

Share in net losses of ABS-CBN through Lopez PDRs and FPH units accounted for at equity method amounted to P2.023 billion from an equity share in net earnings of P972 million for the same period last year mainly due to lower advertising revenues. ABS-CBN booked a net loss of P3.930 billion for 1H2020, compared to a net income of P1.468 billion in 1H2019. It reported a 36% decline in revenues where Ad sales accounted for 39% of ABS-CBN revenues, compared to 54% in 1H2019. ABS-CBN ceased the use of government-assigned broadcast frequencies on May 5, 2020 in compliance with an order by the National Telecommunications Commission. Its legislative franchise was effective only until May 4, 2020 and its application for a new franchise, as mentioned earlier, was denied by the House of Representatives on July 10, 2020.

Despite this setback, we are convinced that ABS-CBN has so much more to offer. Even as it closed whole business units and retrenched a substantial portion of its workforce, the company is making use of existing opportunities and searching for means to open more channels to engage its audiences. The people of ABS-CBN have the talent, the creativity and the heart to serve. They will continue to reach out and stay relevant to viewers worldwide through our shared values and programs that inform, entertain and inspire.

Our vision, mission, values and people drive us to always work for the good, even during challenging times and when circumstances are not in our favor.

On behalf of the Lopez Holdings Board of Directors, officers and staff, I thank you for your continued trust and confidence. Good day to all!

Salvador G. Tirona
President, Chief Operating Officer 
and Chief Finance Officer

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CONTACT US

Lopez Holdings Corporation 
16/F North Tower, Rockwell Business Center Sheridan, Sheridan St. corner United St., 1550 Bgy. Highway Hills, Mandaluyong City, Philippines

  • Trunkline: (632) 8878 0000
  • Fax: (632) 8878 0000 ext 2009