REPORT OF THE PRESIDENT, CHIEF OPERATING OFFICER AND CHIEF FINANCE OFFICER
Fellow shareholders and kapamilya, a pleasant and safe morning to all!
For the year 2023, Lopez Holdings reported P2.850 billion in net income attributable to equity holders of the Parent. This is 48% lower than the P5.439 billion in net income attributable to equity holders of the Parent in 2022. This was primarily due to the significant equity share in net losses of ABS-CBN through Lopez PDRs and other associates and joint ventures amounting to P5.128 billion from P935 million year-on-year (YoY). The financial results reflect primarily the Parent company’s net equity share in the losses of ABS-CBN Corporation, following the latter’s recognition of impairment losses. ABS-CBN provided for impairment losses on its various assets, goodwill, program rights and other intangible assets totaling P9.125 billion. The impact on the Parent company was tempered by the solid performance of First Philippine Holdings Corporation or FPH and its subsidiaries.
On the financial position, Lopez Holdings’ total consolidated assets grew by 10% to P473.047 billion from P428.426 billion as of December 31, 2023 and 2022, respectively. This figure mainly includes assets of FPH which accounts for the movements from net cash generated from the group’s operating activities, proceeds from short-term loan availments, and additional right-of- use assets (from leasing) for LNG Floating Storage and Regasification Unit (FSRU) and tugboats charter hires. Since 2017, the Parent Company, Lopez Holdings has had no more direct obligations. However, on a consolidated basis, total liabilities stood at P227.559 billion at year end-2023. Total equity attributable to Parent stood at P83.263 billion as of December 31, 2023 from P78.776 billion as of the previous year on account of the net income attributable to the Parent of P2.850 billion for the year and share in the equity movements of investments in FPH and ABS-CBN through Lopez PDRs. Debt-to-equity ratio slightly declined at 0.54x in 2023 from 0.58x in 2022 while the book value per share increased at P19.68 a share at the end of 2023 from a book value of P19.41 a share in 2022.
Let us now move to the performance of our investee companies. FPH reported a 19% increase in net income attributable to equity holders of the Parent to P15.066 billion from P12.676 billion in 2022. Recurring net income attributable (RNI) to FPH was at P13.801 billion or 8% higher than P12.784 billion of the previous year. Its year-on-year consolidated revenues were slightly lower by 3% at P164.952 billion from P170.338 billion.
Eighty-four percent of FPH revenues came from its power generation units under First Gen Corporation or FGEN. However, the better news in 2023 is the group’s successful participation in the largest privatization of a state power asset so far under the current administration. FGEN’s wholly owned subsidiary Fresh River Lakes Corp. or FRLC was declared as the winning bidder for the 165 MW-Casecnan Hydroelectric Power Plant (CHEPP), a run-of-river type of facility, located in Pantabangan, Nueva Ecija. The Power Sector Assets and Liabilities Management Corporation (PSALM) issued the Notice of Award on May 26, 2023.
FGEN owns and operates through First Gen Hydro Power Corporation the 132-MW Pantabangan-Masiway Hydroelectric Power Plant and is constructing the 120-MW Aya pumped storage hydro project, also located in Pantabangan. Together with Casecnan Hydroelectric Power Plant, which was turned over to FRLC in February 2024, FGEN will control over 400 MW of hydroelectric power assets in the same area. This not only boosts the combined capacity of FGEN’s low-carbon power plants which now stands at 3,666 MW, but also provides a rare scale for efficient operations, environmental stewardship, and regenerative power production.
The other businesses under FPH group also performed well in 2023. It is noted that Rockwell Land Corporation’s lease income improved in 2023 due to higher occupancy and average rental rates following the improvement in sales of retail tenants. Its office leasing business also posted better results with higher average rental rates. On the other hand, First Philippine Industrial Park also had higher recurring industrial land and RBF or ready-built factory leasing income due to the increase in total leased area, especially from new locators as well as revenues from water utilities, following higher locator consumption in 2023. First Balfour likewise posted higher earnings from its ongoing and new construction contracts, primarily the projects under its Overhead Transmission Line Division.
Moving on to ABS-CBN, it reported in 2023 a net loss of P12.835 billion, 387% more than the net loss of P2.636 billion reported in 2022, even if year-on-year revenues were practically unchanged at P18.511 billion from P18.552 billion the previous year.
ABS-CBN recognized some impairment of its investments in SKY Cable, after the latter’s projected sale did not push through. It is now looking at the best possible option for SKY to be able to continue providing much-valued services to its loyal subscribers.
As a multimedia content provider, ABS-CBN did not disappoint with its offerings which are now available on a wider array of platforms since it lost its broadcast license in 2020. Aside from a host of channels, including its flagship Kapamilya Online LIVE on YouTube, iWantTFC, cable and satellite, free-to-air channels, namely TV5, GMA-7, GTV Ch. 27, and AllTV Ch. 2 and A2Z Ch. 11 are now partners in airing ABS-CBN programs.
Its joint venture with Prime Media Holdings, Inc. in 2023 restored the Teleradyo news service that ABS-CBN had pioneered and which can now be seen on cable, YouTube, Facebook, Instagram, X, and TikTok. ABS-CBN content also remain favorites on subscription services like Netflix, Viu and Prime Video.
The company also resumed live events with concerts and musicals, not limited to local productions. For example, the Sunday staple, ‘ASAP Natin ‘To’, was staged in Las Vegas in 2022 and then Milan in 2023. It will be in California later this year, with TFC celebrating 30 years of service to the Filipino worldwide in 2024.
Successful content creation is firmly built on creativity, teamwork and agile responsiveness to target audiences. We only have to remember the phenomenal patronage received by the movie, “Rewind” both at the 2023 Metro Manila Film Festival and the 2024 Manila International Film Festival in California. The movie is now the highest grossing Filipino film of all time, surpassing another Star Cinema production, “Hello, Love, Goodbye” which came out in 2019.
As ABS-CBN’s reach grows, there is reason to believe it is much closer to a turnaround as its operating losses have trended down in the last three years. Transforming a broadcasting company, all 74 years of it in 2020, to a pure content creator, which is the story of the last four years, is an ongoing challenge. But ABS-CBN certainly has the people, the skills and the talent, as well as the mindset to make this transformation work for all stakeholders.
Let me now report on the unaudited financial results for the first quarter of 2024. Lopez Holdings consolidated net income amounted to P7.007 billion for the period ended March 31, 2024, 12% lower than the P7.948 billion net income for the same period last year. This was primarily caused by the lower revenues and margins from business operations of the FPH
Group and lower equity share in the net losses of ABS-CBN through Lopez PDRs. FPH posted a 5% decrease in net income attributable to equity holders of the parent to P4.136 billion from P4.342 billion in 1Q2023. On the other hand, ABS-CBN reported a net loss of P994 million, which is 18% lower than the net loss of P1.218 billion for the same period last year. As a result, net income attributable to equity holders of the Parent amounted to P1.752 billion for the first quarter of 2024. This is 5% higher than the P1.666 billion in net income attributable to equity holders of the Parent reported in the first quarter of 2023.
Unaudited consolidated revenues decreased by 8% year-on-year to P39.125 billion from P42.491 billion. It is mainly due to slowdown in the electricity sales of EDC reflecting the combined lower average spot market prices and volume. The San Gabriel gas plant likewise registered lower revenues following the end of its Power Supply Agreement with Meralco in February 2024 and the scheduled major maintenance outage in the first quarter of 2024. All revenue items were generated by units under FPH. Sale of electricity still accounted for 85% of revenues in both quarters.
On the financial position, consolidated total assets increased by 7% to P504.091 billion as of March 31, 2024 from P473.047 billion as of December 31, 2023. It reflected the significant increase in noncurrent assets resulting from the provisional values of the fixed assets and water rights intangible assets recognized by FGEN on the acquisition of the Casecnan power plant. Consolidated total liabilities increased by 11% to P252.663 billion as of March 31, 2024 from P227.558 billion as at year-end 2023. The increase was primarily due to higher period-end levels of the long-term debt of the FPH Group. This reflected the drawdowns made by FGEN and Rockwell business units. Total equity attributable to Parent stood at P83.657 billion as of March 31, 2024 after accounting for net income attributable to the Parent of P1.752 billion for the period and share in the equity movements of investments in FPH and ABS-CBN through Lopez PDRs.
Finally, last May 30, your company declared a cash dividend of P0.10 per common share to shareholders of record as of June 14, 2024 payable on or before June 28, 2024. This marks the 13th year that your company paid cash dividends since the complete resolution of the parent company’s long-standing debt issues in 2010. Be assured that we do endeavor to provide all shareholders with as much cash as is available, even as we fulfill our obligations to our other stakeholders. This is certainly the time for unity and discernment, while we address the challenges and risks to the continued growth of our investees.
We thank you, fellow shareholders, for your continued support and confidence in your management team. Good day!
Salvador G. Tirona
President, Chief Operating Officer
and Chief Finance Officer