Aboitiz businesses to strengthen ‘agile’ approach in 2020 amid COVID-19 woes

BUSINESS
April 29, 2020

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Capex adjusted to P47 billion; P1.8 billion of internal and external aid to-date

The Aboitiz Group and its business units are carefully weighing opportunities and further embracing an agile strategy in the execution of its 2020 plans with the ongoing global threat of Coronavirus Disease 2019 (COVID-19),

“Digital infrastructure investments in previous years and regular business continuity planning have allowed us to cope with the adverse impact of COVID-19. While it’s anyone’s guess how the future will unfold, we assure our stakeholders that we are fully equipped and prepared to guarantee the continuity of all business transactions,” said Sabin M. Aboitiz, Aboitiz Group President and Chief Executive Officer.

This comes as the Aboitiz Group began adjusting to a work environment that has vastly changed since the middle of March due to the COVID-19 pandemic.

“One of the first steps we took was to protect our team members. We earmarked P900 million in assistance (early release of end-March salary and the 13th or 14th month pay) to help our team members cope with the COVID-19 pandemic. We did more online work, more work from home--preventive measures are going to be the name of the game until a COVID-19 vaccine is developed,” Aboitiz noted.

Under the Department of Energy’s new Department Circular No. 2020-04-00080, communities that host power generation projects can now use their Energy Regulations 1-94 (ER 1-94) revenue shares from these facilities to combat the effects of COVID-19. About P500 million worth of ER 1-94 funds are currently available for AboitizPower’s host local government units for their COVID-19 response efforts.

In addition, about P400 million in monetary and in-kind assistance were extended to serve affected communities as well as medical and government frontliners nationwide. To date, the Aboitiz Group has contributed P1.8 billion for its COVID-19 response efforts. This excludes various payments waived, reduced, extended, or restructured to help customers cope with the impact of COVID-19.

For the most part, the Aboitiz Group is optimistic that it can weather potential headwinds.

 “Most of our businesses are in industries that are vital to keeping the economy running. Filipinos need electricity, food products, and money, for example. And for our other businesses, we have been prudent in capital expenditure spending so this should not be much of a problem,” Aboitiz said.

To keep the economy going, the Aboitiz Group is looking to spend P47 billion in 2020. Down by a third from the originally-set P73 billion capital expenditure (capex) figure, the new capex moves back some spending, considering the impact on the group’s and country’s future growth.

Most of the capex reductions were from the infrastructure, power, and land units. These mostly covered operating, maintenance, and expansion costs.

Power

At present, Aboitiz Power Corporation’s power generation and power distribution facilities continue to operate 24/7 nationwide, delivering much-needed energy to areas under enhanced community quarantine (ECQ). 

 “While the country’s total demand for power has dipped since the start of the ECQ, we are seeing an increase in consumption due to higher temperature. We also expect a gradual increase in demand as we adjust to the gradual easing of the quarantine,” said AboitizPower President and Chief Executive Officer Emmanuel V. Rubio.

Unit 1 of GNPower Dinginin, an ongoing AboitizPower project considered to be of national significance, will synchronize by the fourth quarter of 2020 and will commence commercial operations by the first quarter of 2021. Unit 2 will synchronize by the first quarter of 2021 and will commence commercial operations by the second quarter of 2021.

 Bank and Financial Services

Union Bank of the Philippines has leveraged its successful digital transformation strategy in addressing the challenges posed by the COVID-19 crisis with a large percentage of its branches remaining open. UnionBank’s balance sheet remains robust enough to withstand significant  financial impact, given its strong income results in 2019. 

According to UnionBank President and CEO Edwin R. Bautista, the crisis has accelerated the coming of the digital world as the bank saw its digital customers increase tenfold during the ECQ.

UnionBank had announced an upgrade of its existing UnionBank Online application to now enable users to directly transfer funds nationwide to remittance centers such as Cebuana Lhuillier, LBC, PeraHub, and soon, Palawan Express. This is very useful for clients who may need to transfer funds in areas under ECQ.

Food

Pilmico Foods Corporation’s plants in Tarlac and Iligan, as well as the company’s swine and poultry farms, continue to be operational since the start of local ECQs. Despite challenges, Pilmico continues with its operations and helps stakeholders meet their needs.

Operating in an evolving retail landscape, Pilmico continues to address local demand for pork, meat, and eggs with “The Good Meat”, its food solutions brand and fulfillment center. An e-commerce platform has also been launched  in order to widen its reach and serve customers in Metro Manila. 

For 2020, the Food group will continue the integration of Pilmico and Gold Coin, optimizing synergies in procurement, cross-selling across countries, and shared services in its corporate services units, and opening opportunities for the Aboitiz Group as a whole.

Infrastructure

Aboitiz InfraCapital, Inc. reiterated its support to the government’s ‘Build Build Build’ program as the private sector remains committed to collaborating with the country’s leaders to mitigate the crisis’ impact on the Philippine economy.

The infrastructure business unit is closely reviewing the impact of COVID-19 on its projects, especially in the airport sector. For its bulk water supply unit Apo Agua Infrastructura, Inc., the company  is closely coordinating with its contractors on which specific work streams can be executed amid Davao City’s ECQ, recovery time, and any implications on obligations with Apo Agua’s partners.

Land

Aboitiz Land, Inc. continues to prepare for an expected upswing in commercial real estate demand with its continuous planning of integrated townships such as LIMA Estate in Lipa City, Batangas, where it plans to develop commercial buildings and sell commercial lots in its upcoming business district.

AboitizLand’s industrial business unit also expects fresh demand for new distribution centers and warehouse-type logistics facilities, especially as e-commerce booms. Aside from the said opportunity in the logistics space, there is an emerging demand related to manufacturing companies planning to exit China. Expansion plans to create additional inventory are underway for LIMA Technology Center in Batangas, and West Cebu Industrial Park in Cebu, to take advantage of this demand.

Overall, AboitizLand expects the local real estate market to be quite resilient, with the large unmet demand for housing a significant contributing factor. AboitizLand’s early investments in contactless residential sales and marketing continue for the year and are now paying early dividends.

Construction

The Aboitiz Group’s privately-held construction arm Aboitiz Construction, Inc. continues to operate and work on its projects in Balamban, Cebu, and Mindanao, albeit with stricter precautions. The company hopes to immediately resume work on all its first and second quarter projects in ECQ-affected areas.

 This is in line with the Aboitiz Group’s goal of keeping the economy stimulated with the immediate implementation of the government’s infrastructure program, especially projects of national significance.

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