Hong Kong, 28th March, 2017 - First Pacific Company Limited (HKSE: 00142) ("First Pacific" or the "Company") today reported its audited financial results for the year ended 31st December 2016, showing a 28% rise in net profit even as contribution from operations fell 6%. To signal optimism over the medium term, First Pacific's Board of Directors recommended no change to the dividend on expectation of improved earnings going forward.
Total contribution from operations fell 6% to US$400.2 million from US$426.5 million, pulled down primarily by PLDT Inc. ("PLDT"), hurt by a changing business model and competitive market conditions. Stronger results from PT Indofood Sukses Makmur Tbk ("Indofood"), Goodman Fielder Pty Limited ("Goodman Fielder") and Philex Mining Corporation ("Philex") offset much of the decline in PLDT's contribution. Recurring profit fell 8% to US$264.9 million from US$287.5 million a year earlier on lower contribution from operations, partly offset by lower corporate overhead.
First Pacific is a leading investment management and holding company focused on the economies of emerging Asia, and is a major or controlling shareholder in the Philippines' biggest/leading telecommunications, infrastructure and mining companies and in Indonesia's biggest vertically-integrated food company as well as in one of Australia's and New Zealand's biggest food companies.
Net profit after exceptionals rose 28% to US$103.2 million from US$80.6 million on lower foreign exchange losses. Turnover rose 5% to US$6.78 billion from US$6.44 billion largely as a result of continuing sales growth at Indofood and Metro Pacific Investments Corporation ("MPIC").
"Lower revenues and margins at PLDT hurt profit at one of our bigger investments, and this was enough that strong results at other companies couldn't lift the overall contribution in 2016," said Manuel V. Pangilinan, Managing Director and Chief Executive Officer of First Pacific. "However, we are confident that PLDT is on track to stability and a return to earnings growth. Notwithstanding a disappointing 2016, we are confident in the prospects for the First Pacific Group moving forward."
First Pacific has committed since 2010 to a dividend payout ratio of at least 25% of recurring profit as a key plank in a capital management program balanced between returns to shareholders and new investments for growth.
"As a sign of our confidence in the outlook for the First Pacific Group over the medium term, we consider it prudent to leave the distribution unchanged on a per-share basis and declare a final distribution of 5.5 HK cents per share," he said. "This will leave our full-year distribution unchanged at 13.5 HK cents in 2016 and represent a payout ratio of 28% of recurring profit."
In U.S. dollar terms, the final dividend recommended by First Pacific's Board amounts to 0.71 U.S. cents per share, and brings the full-year regular dividend to 1.74 U.S. cents.
PLDT saw its contribution decline to US$127.7 million from US$180.7 million a year earlier while the negative contribution from FPM Power, the holding company for PacificLight Power Pte. Ltd., Singapore's newest power plant, rose to US$13.9 million from US$10.7 million. The contribution from MPIC fell to US$117.2 million from US$118.2 million owing to a decline in First Pacific's economic interest in the company at the end of May last year. However, in local currency terms, MPIC recorded its highest-ever earnings in 2016.
Indofood saw the largest increase in contribution, rising to US$137.9 million from US$123.9 million as stronger sales and margins lifted its bottom line. Goodman Fielder was next, lifting its contribution to US$24.0 million from US$13.3 million on stronger earnings and a full year of ownership in 2016 compared with just nine months in 2015. Goodman Fielder, one of Australia's biggest food producers, is owned by a 50:50 joint venture between First Pacific and Wilmar International Ltd.
The contribution by Philex rose to US$10.2 million from US$4.9 million on stronger prices for the gold and copper it produces slightly offset by poorer grades of ore.
FP Natural Resources Limited, the holding company for sugar and coconut investments in the Philippines, reduced its negative contribution to US$2.9 million from US$3.8 million in 2015 on stronger sales volumes and prices for refined sugar and ethanol, offset by losses at the coconut business.
Foreign exchange losses narrowed sharply to US$9.1 million in 2016 from US$48.5 million in 2015.
Non-recurring losses in First Pacific's full-year earnings were little changed at US$155.2 million versus US$158.6 million in 2015. The 2016 figure is made up mainly of impairment provisions for assets, including goodwill related to the investment in PLP (US$44.8 million), PLDT's investment in Rocket Internet shares and other intangible assets (US$35.4 million), and Philex's deferred exploration costs and other assets (US$31.4 million). The 2015 figure principally reflects the impairment provision for the Group's investments in Philex and PLDT's investment in Rocket Internet and network assets.
First Pacific received US$199.7 million in dividend and fee income from its operating companies in 2016, down from the US$268.9 million received in 2015 mainly due to lower earnings and payout ratio at PLDT and lower earnings at Indofood owing to foreign exchange losses.
At 31st December 2016, gross debt at the Head Office stood at US$1.8 billion and net debt at US$1.5 billion. Fixed-rate debt made up 82% of the total, with floating-rate debt making up the remaining 18%. First Pacific's blended interest cost amounted to 5.3% and the average maturity of its debt was 3.1 years. Just US$218.5 million of the July 2017 bonds remain outstanding following a tender in January 2017. Committed banking facilities have been arranged to finance the full redemption of the bonds due July 2017.
Further details of earnings by First Pacific's subsidiary and associated and joint venture companies follow.
REVIEW OF OPERATIONS
PLDT reported a 21% decline in core income last year to ₱27.9 billion from ₱35.2 billion in 2015 owing mainly to lower wireless service revenues due to intense competition, and higher depreciation and financing costs, partly offset by an increase in other income in relation to the sale of the 25% interest in Beacon Electric to MPIC, lower provision for income tax and higher revenues from the fixed line business.
More details are available at www.pldt.com.
Indofood reported a 12% rise in core income to Rp4.0 trillion from Rp3.6 trillion a year earlier on higher average selling prices for its noodles and Agribusiness products, higher sales volumes by the Dairy division and improved margins at the Bogasari group.
More details are available at www.indofood.com.
MPIC reported a 17% increase in core income to ₱12.1 billion from ₱10.3 billion in 2015 as each of its main businesses delivered strong growth in spite of regulatory challenges. The contribution by Maynilad Water Services, Inc. declined owing to the expiration of its income tax holiday in December 2015.
More details are available at www.mpic.com.ph.
Philex reported an 83% jump in core income to ₱1.7 billion from ₱905 million in 2015 on higher metal prices and lower operating costs.
More details are available at www.philexmining.com.ph.
Goodman Fielder contributed a profit of US$24.0 million in its first full-year contribution compared with its first-ever contribution of US$13.3 million to the Company for operations in the last nine months of 2015.
More details are available at www.goodmanfielder.com.au.
OUTLOOK
As an investment management and holding company focused on the markets of emerging Asia, First Pacific has always maintained a long-term investment perspective. In 2016, telecommunications brought in 32% of total contribution, the food businesses 40%, followed by infrastructure with 26%, and natural resources with the remaining 2%. A year earlier, these numbers were quite different, with telecommunications contributing 42% of the total.
We have observed a sharp change with the continuing growth in demand for quality food products in Asia, particularly Indonesia, and in the many markets served by Goodman Fielder. The economies we serve can look forward to steadily rising disposable incomes in the years ahead and as we keep seeing, consumers are spending more on themselves when they can. We can safely expect to continue seeing strong demand for the kind of high-quality food products made in the kitchens and bakeries of Indofood and Goodman Fielder.
For more information, please visit http://doc.irasia.com/listco/hk/firstpacific/annual/2016/respress.pdf.
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