JG Summit experiences turbulence as first half airline profits fall
Lackluster food and beverage, real estate sector also hurt bottom line
CLIFF VENZON, Nikkei staff writer
MANILA -- JG Summit Holdings, a diversified Philippine conglomerate with regional exposure, reported on Friday that its net income slipped 16.5% to 14.64 billion pesos ($287 million) with its low-cost airline leading the falloff.
Net profit at Cebu Air, which flies to domestic and regional destinations as Cebu Pacific Air, fell 43.6% to 4.33 billion pesos after it was hit by rising fuel costs and an appreciating U.S. dollar.
Jet fuel prices have risen around 30% year on year, the International Air Transport Association said on Aug. 4. The Philippine peso is meanwhile trading at an 11-year low on the U.S. dollar, adding to the costs of fuel and new aircraft.
Cebu Air also lost 1.15 billion pesos on hedging, a reversal of its gain of 2.19 billion pesos last year. Airlines hedge with fixed contracts to try and shield themselves from volatile fuel prices.
Universal Robina, the group's food and beverage unit with operations throughout Southeast Asia and Oceania, saw its net income fell 13.7% to 6.39 billion pesos due to lower foreign exchange gains and higher costs. It also had to increase spending in Vietnam to recover business after a food safety scandal last year. Universal Robina's sales nevertheless rose 9.6% to 60.80 billion pesos, with improved performances in Thailand and New Zealand, where its wafers and crackers sell well.
Robinsons Land, the real estate unit, reported 9% lower net income of 2.92 billion pesos after residential sales grew by only 1%.
Other parts of the group fared better. The petrochemical unit recorded net income of 3.20 billion pesos, up 31.5% with higher polymer volumes. The banking unit meanwhile logged net income of 161.33 million, up 20.3% with higher trading gains and interest income. Equity earnings from other investments rose 14.6% to 4.62 billion pesos, driven by higher dividends from Manila Electric and UIC, a Singaporean real estate developer.
Shares of JG Summit, the holding company of the Gokongwei family, gained 0.07% to close at 69.50 pesos, while Manila's benchmark index dropped 0.47% on Friday