CONGLOMERATE Metro Pacific Investment Corp. (MPIC) on Wednesday said its net income was flat last year as higher interest costs on borrowings made to finance capital expenditures for growth held down its profits despite higher contribution of its main units.
The company said it had a core income of P15.6 billion for the entire 2019, a mere 4-percent growth from the previous year’s P15.1 billion.
Operating revenues rose 6 percent to P88.15 billion from the previous P83.02 billion.
“Our 7 percent growth in contribution from operations reflects a decade and more of sustained capital investment to enable meaningful volume increases in all our major businesses. Our high-quality management and thousands of dedicated front-line employees work hard to deliver world-class service levels and improve operating efficiencies,” said Jose Ma. K. Lim, the company’s president and CEO.
Power accounted for P11.6 billion or 55 percent of net operating income; toll roads contributed P5.2 billion or 25 percent; water contributed P3.6 billion or 17 percent; and hospitals provided P867 million or 4 percent of the total; while the rail, logistics and other businesses combined for a net loss of P352 million.
Last year it had a non-recurring income of P8.3 billion, due primarily to the de-consolidating of its investment in the hospitals portfolio, partly offset by restructuring costs for its logistics business and a reduction in the carrying values of some water investments.
In comparison, 2018 had non-recurring expenses of P930 million, due primarily to the net effect of peso weakening, project write-downs, loan refinancing and provisions for asset impairment.
Strains with government
“The continued expansion in our overall service coverage and attempted constructive engagement on tariffs has not endeared us to the government, which now deems various long-established and operationalized contracts as having onerous provisions. Meanwhile, the fall in our share price, along with the prices of other listed companies with government concessions, shows that despite our growth, investors now attach sharply higher risk premiums for government adherence to contract,” Lim said.
Maynilad Water, the concessionaire for the west zone of Metro Manila, is currently unable to pay dividends, thereby forcing MPIC to recast its investment program in light of lower inbound cash flow, higher regulatory risk lack of investor enthusiasm for this asset class.
“Ironically, even though there is huge demand for the services we provide, our discretionary investment spending beyond committed infrastructure projects will divert to less risky businesses like warehousing, real estate, and tourism,” Lim said.
The company has also launched a P5-billion buy-back program as it believes its share price is trading at a heavy discount at the Philippine Stock Exchange. MPIC shares was last traded at P2.97 apiece.
“Our record of consistent growth in earnings and book value per share—the latter at P6.05 at 31st December 2019—is not translating to share price performance. While we might attribute some of this to market factors and some to conglomerate discount, the discount, so we are advised, reflects concern on political developments,” MPIC chairman Manuel V. Pangilinan said.
“In these circumstances, questions have been raised regarding investment in Philippine regulated infrastructure and the sources of capital to support this. There are no quick or easy answers to these questions, but the current model of a listed infrastructure business with a wide pool of dedicated Philippine and foreign shareholders putting their faith in these long-term contracts needs serious review,” he said.