JG Summit Holdings, Inc.

JG Summit spending P78.1-billion capex this year

JG Summit Holdings Inc., the holding firm of the Gokongwei family, said it is increasing its capital expenditures (capex) this year to P78.1 billion, with most of the spending on its property-development arm after it sees declining residential sales.

Lance Y. Gokongwei, the company’s president and CEO, said P30 billion will be allocated for its property-development arm, near double than last year’s spending of about P17.3 billion. Net income of its property arm, Robinsons Land Inc., last year came flat at P5.9 billion, while revenues fell by 1 percent to P22.4 billion. It showed some recovery during the first quarter.

This year’s capex was 22 percent higher than the previous year’s P43.5 billion in actual spending.

Gokongwei said P20 billion each will be allocated for its petrochemical and airline businesses, and food group Universal Robina Corp. (URC) will spend between P7 billion and P8 billion. The rest will be allocated to its other smaller businesses, such as banks.

He added that for the first quarter alone, the company already spent P11 billion.

“Profitability remains a challenge for URC as our domestic operations face declines in volumes and changes in product mix particularly for our coffee business,” Gokongwei said.

“For URC, we will accelerate our sales and profitability for different categories. We will drive portfolio optimization for brand renovation, performance-driven promotions and review of our current assortments,” he said.

The new tax package, which slapped taxes on sugary drinks, has put a strain on its sales. Gokongwei said the company had an average price increase of about 22 percent to 23 percent.

“This effectively just recovered the increase in sugar taxes. We’ve seen a significant reduction in volumes from 12 percent to 15 percent in the first quarter because of the higher prices,” Gokongwei said.

He added the effect of the fuel price and currency has been significant for the company, which owns Cebu Air Inc., and the country’s second-largest airline, Cebu Pacific.

“The effect of fuel, approximately P20 million per month for every dollar increase in fuel and the effect of currency, is about P65 million per month…because of the weaker peso,” he said.

“In aggregate, it is costing us P700 million more per month to fly the same net worth. So we will have to avoid losses and we will really have to. We will really try to become more efficient, but likewise, we have to put in, we have applied for fuel and fare surcharge increase with the Civil Aviation Authority of the Philippines.

“The fuel surcharge we’re asking for ranges from P70 to P250 for domestic flights. This approximately recovers the cost that we’re facing. We’re really trying to minimize the increase to the lowest possible amount.”

Meanwhile, Robinsons Retail Holdings Inc., another Gokongwei-led firm but separate from JG Summit’s, said it will spend some P3.5 billion in capex this year, slightly higher than last year’s P3.1 billion.


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