Aboitiz Equity Ventures, Inc. (AEV) Earnings Call Transcript & Summary

Hello, everyone. Welcome to our analyst briefing. Today, we're going to report financial and operating performance for the second quarter of 2022 of our publicly listed companies, namely Aboitiz Equity Ventures, Aboitiz Power and Union Bank as well as our nonlisted businesses, namely our One Food Group, AboitizLand, Aboitiz InfraCapital and Republic Cement. So first, here are the house rules. [Operator Instructions] Questions have been requested from our guests in advance. These will be prioritized in the Q&A today. [Operator Instructions]. The briefing will be recorded for documentation purposes. By joining this session, you could send your name, voice image and chat comments being recorded for use and dissemination. If you do not concern to the foregoing, please do not join the session. Our program will flow as follows: To present for Power, we will have Mr. Manny Rubio, President and CEO of AboitizPower. To present for Banking, we will have Mr. Carlo Enanosa, SVP and Head of Corporate Planning and Investor Relations of Union Bank. To present the Food, we will have Mr. Tristan Aboitiz, President and CEO of Food Group Philippines. To present for Land, we will have Mr. Dave Rafael, President and CEO of AboitizLand. To present for Infrastructure, we will have Ms. Cosette Canilao, President and CEO of Aboitiz InfraCapital. To present for Cement, we will have Mr. Vara Kalepalli, CFO of Republic Cement. To present AEV's consolidated financials, we have Mr. Dmi Lozano, CFO of Aboitiz Equity Ventures. At the end of the presentation, we will conduct a Q&A session. And at the end of the event, when the Zoom platform closes, a pop-up screen will appear which will allow you to provide the feedback regarding the event. To encourage this, we are raffling off 5 greeting boxes which we are currently showing on your screen. These greeting boxes are sponsored by our One Food Group and feature 4 different ham products from the Good Meat Brand, celebration ham, [ hyomandibular ], brick ham and classic ham. And now on to our presentation. [Presentation]

And now to present for Power, I will turn you over to Mr. Manny Rubio.

Thank you, Judd. Good afternoon, everyone. Good afternoon, and welcome to Aboitiz Power's First Half 2022 Analyst Briefing. Well, just to start off, I'd just like to tell everyone that last July 16 was the 15th listing anniversary of Aboitiz Power at the Philippines Stock Exchange. We opened the business to investors in 2007 because we saw a once-in-a-lifetime opportunity and decided to grab it. The economy was expanding, EPIRA in the privatization of government assets were gaining momentum, and it was apparent that we needed additional capacity to ensure that the country has enough capacity to sustain the economic growth agenda moving forward. So 5 years ago, during Aboitiz Power's 10th listing anniversary, then AP CEO, Erramon Aboitiz said that what inspires us in our group purpose of driving change for better world. We uplift the lives of millions of Filipinos with the promise of advancing business and communities. Many things have progressed since then. And these statements continue to motivate us today. And we remain steadfast in our push for balanced energy mix to support the country's economic growth and sustainable energy position toward greater prosperity for Filipinos. And we believe that we can do well by doing good. And as a testament to this, I'm proud to announce that for the fifth year in a row, we have now have been included in the FTSE4Good Index, which gauges the performance of companies demonstrating strong environmental, social and governance or ESG practices. And in the past 5 years, we have made big strides in health and safety, labor standards and biodiversity among others. And last month, we also signed up for membership in the Philippine Financial & Inter-Industry Pride or PFIP, a nonprofit community of LGBT+ advocates and allies from various private organizations. This is a step towards strengthening our diversity, equity and inclusion program. I believe the initiatives focusing on human capital play a crucial role in organizational performance. And now let me share with you AboitizPower's first half results. So we're happy to report that our Beneficial EBITDA for the second quarter has improved significantly by 29% versus last quarter and 27% compared to the same quarter last year. Our strong first half performance allowed us to catch up with last year's first half results. This was due to fresh contributions from GNPower Dinginin Unit 1 and 2, high availability of GNPower Mariveles or GMEC, higher water inflow and timing windfall on account of higher indices. To note that we were completely hedged in our fixed contracts, which are -- on our fixed contracts, which protected us in the midst of the coal price increases. Our EBITDA in 2022 was also impacted by Typhoon Odette, last December, for which the effects were felt up to February of this year. Without liquidated damages and BI claims and the Typhoon Odette impact, EBITDA would have been higher by 11%. Taxes were higher due to higher provision for income tax of GMEC and Therma South. And as a result, our core income decreased by 9%. Without LD and BI claims and Typhoon Odette, core income would have been higher by 15%. The group recognized net recurring gains of PHP 792 million, mainly due to gain on Therma Luzon's hedge and appreciation of U.S. dollars. As a result, AboitizPower's net income for the first half was essentially sustained PHP 10 billion versus last year. If we are to exclude the impact of LD and BI claims Typhoon Odette, net income for the first half of 2022 would have been higher by 23% compared to the same period in 2021. Cash decreased by 13% due to dollar loan prepayment and decline in operating cash flows of core business units for higher working capital requirements due to more expensive coal. Investments in advances decreased by 8% mainly due to share in equity earnings build up. As a result, our total assets increased by 5%. Total liabilities increased by 4%, mainly due to current bond insurance. With that, our net debt to equity was the same at 1.1x. Capacity sales increased by 5% year-on-year. This was due to fresh contributions from both units of GNPD and higher WESM dispatch resulting from high availability of GMEC units. Unit 2 is selling to the spot market as original plan, that's Unit 2 of GNPD. Our total revenue increased by 63%, primarily due to fresh contributions from both units of GNPD, higher availability of GMEC and higher effective bilateral contract quantities and spot rates driven by higher indices. Our total energy sold was higher by 17% due to the same reasons mentioned in the previous slide. Our peso margin increased by 18% year-on-year, mainly due to the previously mentioned drivers. And the purchased power cost was higher, driven by higher WESM prices, while purchased power volume increased by 60%, mainly determined by our trading strategy. Our retail business was buying from WESM and external sources to serve our retail contracts and reselling these contracted quantities. As you can see from the quarterly performance charts on the right, our gross margin increased by 29% due to higher availability of GMEC and timing windfall driven by indices. Our energy generated increased by 23% due to testing and commissioning of GNPD Unit 2 starting last April. High availability of GMEC and higher water inflows on our inbounding hydro and run-of-river hydro. As mentioned earlier, our purchase power increased as a result of pertaining strategy and retail contracts. Spot selling prices increased by 16% to PHP 6.62 per kilowatt hour, driven by higher WESM prices due to higher indices and higher volume of capacities on outage in the market and, of course, higher short-term marginal cost of fuel of clearing plants. Our trading strategies also allowed us to take advantage of higher peak prices and BCQ selling prices increased by 31% to PHP 5.95 per kilowatt hour because of higher indices. Average NEWC for the first half of 2022 was $320 per metric ton versus $99 per metric ton in 2021. The recent movement in coal prices underscores the risks attached to fixed price contracts. The availability of our coal plants for the first half of 2022 improved to 83%. This was above the NERC benchmark, which was much higher than the first half of 2021 at 75%. Overall availability also improved to 86% compared to 83% in the first half of 2021. We continue to have success -- sorry, we continue to have issues with GMEC in the first quarter. But we have resolved some of these concerns and both units are actually operating at maximum capacity. But we are going to resolve the balance of these issues with finality when we did the major plant outage by fourth quarter of this year when spot prices after they are forecasted to be lower than today's rates. We have now taken over the management of GMEC. For our distribution business, Beneficial power sales increased by 1% year-on-year. Energy sales from residential customers increased by 1%, driven by lower consumption due to Typhoon Odette and cooler weather. On the other hand, Commercial and Industrial energy sales were higher by 2% due to recovery and demand -- recovery from the Typhoon Odette. And we received information that Malacanang vetoed House Bill 10554, expanding the franchise area of AboitizPower subsidiary, DLPC to Davao del Norte [ NADECOR ]. Let's assure that we will cooperate with the relevant authorities and respond to the directions and follow the order. The average gross margin declined from PHP 1.64 per kilowatt hour to PHP 1.37 per kilowatt hour. This was due to the timing difference of pass-through charges brought about by higher coal prices. Except for Cotabato Light and Power Company, all our system sources were below the regulatory cap of 5.5%. Cotabato Light system losses ended above the regulatory cap due to nontechnical losses, which have minimal impact on the bottom line. But given the CapEx adjustments, this was a significant drop from 7.37% to 5.7%, showing that we are on the way to being lower than the cap imposed by ERC. On WESM, average year-to-date Load Weighted Average Price was PHP 6.87 per kilowatt hour, 62% higher compared to the same period in 2021. This was due to the thin supply in the market caused by an increase in unplanned outages of baseload plants, advanced maintenance outages of baseload plants in preparation for the national elections and an increase in indices driven by the ongoing Ukraine-Russia war, which impacted fuel prices. So on average, we expect higher WESM prices this 2022 compared to last year due to depletion of Malampaya gas and the upward impact of higher indices given the ongoing crisis in Ukraine. We also have -- we also expect higher demand this year due to the recently concluded elections and less or softer expected quarantine restrictions versus last year. So for better appreciation, we will show you the Luzon supply and demand situation in the next slide. The Luzon supply and demand situation continues to remain tight and continues to tighten. To meet existing critical market needs, we are optimizing our existing baseload facilities. Over the past few months, we have been seeing NGCP alerts for the Luzon grid. And as our economy recovers and we open once again, and assuming that the recent surge in COVID cases does not happen -- many other economic shutdown, we expect that the tight situation will continue and become tighter still in 2023 and remaining probably for the next 2 years, next 3 years. We anticipate that new capacity will only come late 2025 or 2026. For the benefit of those who are unfamiliar with this chart, please closely note the broken black line, which represents the intersection of annual peak demand and the reserves of private requirements. Amidst this evolving supply and demand situation, which includes the impact of the DOE moratorium on the building of new coal plants and depletion of the Malampaya gas fields, we expect our GNPD units to play a significant role in addressing supply gaps and meeting critical market needs. Units 1 and 2 are currently addressing peak demand. We have almost 1,000 [ megawatts sailing ] through our strategy of decarbonization and transition to a cleaner portfolio of 50%-50% thermal to renewable energy. We have almost 1,000 megawatts of disclosed projects so far, and these have delivery commitments within the next 3 years. And with that, we are well on our way towards delivering 3,700 megawatts additional RE capacity by 2030. This in spite of our decarbonization journey. And allow me to update you on some of the projects in the next few slides. PVC net powers, the 94-megawatt peak plant located in Barangay Cayanga municipality of Bugallon, Pangasinan. Construction activities of PV module installations, control building, transmission line and Cayanga substation are ongoing. And overall project status at 65% completion with 0 lost time incident and the project is expected to commercially operate by first quarter of 2023. The Laoag Solar Project, 159 megawatts PV plant located in Barangay Laoag municipality of Aguilar, Pangasinan. EPC contracts were awarded to SUMEC Complete Equipment & Engineering Company Limited and Hansei Corporation for DC and AC, respectively. This will be a second solar venture in province following the Cayanga solar plant in the town of Bugallon and is targeted for commercial operations in June 2023. Last March, SNAP signed an engineering, procurement and construction agreement with Hitachi Energy for the development of the Magat BESS project. Following a technical evaluation, more compact and efficient configuration of the battery energy storage was determined, allowing an increase in capacity from 20 to 24 megawatts. The project formerly programmed in April and the construction is slated to begin in August. Commercial operations targeted for the first quarter of 2024. Next slide is an update on the APRI steamfield operator initiative, the Steam Production Enhancement Campaign, which aims to drill 12 new production wells with a minimum of 15 megawatts aggregated individual well capacity by 2023. So in addition to the 3 wells in MakBan in 2021, 3 new wells have been flowing to the system this 2022 and have completed the incremental steam measurement. The current plan in total for Tiwi and MakBan is 7 out of 12 target wells with a total capacity now of 44 megawatts out of the target minimum of 50 megawatts. So with 5 more wells, we're quite confident that we'll be making the 50-megawatt minimum requirement. So with additional wells expected flowing in MakBan before the end of this year, 2 new wells will be flowing in Tiwi for the first half of 2023. And in Tiwi, APRI signed an agreement with the Philippine Geothermal Production Company last April 29 for the supply of [ steam ] that will fuel the new binary facility of 15 megawatts. The project construction is targeted to be completed by end of 2023. PMI, Battery Energy Storage System has achieved another milestone in completing the part of the control system, which automates the hybrid operation of the diesel barge and the battery barge when serving contingency reserve ancillary service. The team continues to close the remaining commissioning works and [indiscernible] to the -- hand over the operations by third quarter of this year. It will serve as a model for our future battery investments as well as hybrid renewable energy projects for AboitizPower. And finally, just an update on the GNPD project, GNPD Unit 1 began running as service BSK from its own generations last January and subject to completion of certain test and works by the EPC contractor. It will go on full commercial operations. Meanwhile, Unit 2 synchronized last April 23, 2022, and is currently delivering 668 megawatts instantly under testing and commissioning. And we expect COD of this unit at the same time end of August 2022. So suffice it to say, it has been a good first half, and there is so much more to look forward to in the next 5 months. As you may know by now, the Aboitiz Group led by Sabin is embarking on its great transformation to become the country's first conglomerate by 2025. And at AboitizPower, we are in full support as we also transform our business and move closer to our sustainability targets of growing our renewable energy portfolio. So last year, we announced that we aim to generate a net attributable capacity of 9,200 megawatts by the end of the decade, all of which will be sourced from renewable energy and without a new coal plant. It seems like a daunting task back then, but I'm pleased that where we are now. We are on track to meet our targets of 3,700 megawatts of additional RE capacity by 2030 in spite of our decarbonization journey. With 954 megawatts of disclosed RE projects already in 5 stages of development, we are very optimistic. We are eager to complete these projects to continue meeting the country's growing power needs with RE and achieving a sustainable energy position. And we are also building the capabilities of our team members to ensure they embrace our digital transformation and the future ready skills. We are leveraging technology and innovation to improve our operations to better serve our customers and bring a greater positive impact to the communities where we operate. The more we succeed in reshaping our business, the more we are enabled to create the world RE ambition. This is our part in the Aboitiz Group's great transformation. We have already come so far, and yet this is just the beginning for AboitizPower and we will be relentless in pursuing energy solutions towards a more sustainable future. And this is one of the keys to remaining through to our mission and promise. We will continue to strive to transform how power is made, how it is distributed, and how it fulfills the potential of a growing economy in every Filipino, and we will transform the country by powering progress and helping build prosperity for all. So to summarize my presentation, here are our key takeaways for you today. On the occasion of our 15th year listing -- 15th year anniversary, we will persistently continue to push for our balanced energy mix. Our Q2 Beneficial EBITDA improved significantly. So our strong first half performance allowed us to catch up with last year's first half results. Overall availability improved to 86% compared to 83% in the first half of 2021, allowing us to optimize our existing baseload facilities to meet critical market needs. We are on track to deliver 3,700 megawatts of additional RE capacity by almost 1,000 megawatts of disclosed projects in various stages of development. And this will help us achieve our 2030 target of 9,200 megawatts in total. And finally, with ongoing and upcoming projects mostly focused on renewable energy, we will be relentless in pursuing energy solutions toward a more sustainable future. [Presentation]

And now to present for financial services, I will turn you over to Mr. Carlo Enanosa.

Thank you, Judd. Good afternoon to everyone in the call. Let me share with you an update on our performance for the first half of 2022. UnionBank posted a net income of PHP 6.1 billion for the first 6 months of 2022. Our earnings performance was 27% lower year-on-year because we had one-off trading gains in the first half of 2021 last year. For the second quarter of 2022, we booked PHP 3.4 billion, which is 32% higher versus the first quarter net income. So we had a good first half and a strong second quarter, particularly in terms of recurring income growth. If you exclude the impact of trading gains, recurring net revenues grew 26% year-on-year with net interest income up by 15% due to the growth in higher-yielding consumer loans and SME loans plus a better CASA ratio. Fee income almost doubled coming from digital transactions. Net interest income grew 15% as we were able to keep control of our funding costs even as we increased our earning asset base also by 15%. Yields were up by 6 basis points to 5.74% due to the growth in higher-yielding consumer loans plus better yields on investment securities. Funding costs only marginally increased from 0.97% to 1.03% as we were able to contain the growth in our high-cost deposits because we funded a portion of our assets with CASA. Loans were up 5% on an average daily balance or ADB basis, and it's up by 12% based on outstanding balances. More importantly, the drivers of loan growth came from higher yielding segments. Example, [ savings ] bank features loans and UnionBank credit cards are both up by 10%, and SME loans is also up by 8% on an ADB basis. Total deposits are up by 13% with CASA leading the way. It's higher by 26% year-on-year. The growth in CASA were a combination of 3 factors: First, there was strong demand by the corporates for our cash management solutions; second, we launched our MSME app that contributed to the ADB balances; and third, the higher balances in the growth of our digital retail customers. As a result, our CASA ratio has improved from 51% last year to 57% on an ABB basis and 65% on an outstanding balance basis. Noninterest income was down 57%, mainly due to the impact of the one-off trading gains that we booked last year. But here you will see that if you exclude that, noninterest income almost doubled. Service charges and fees are up by 92% or by PHP 1.1 billion, mainly from transaction fees on fund transfers, bill payments and interchange. Miscellaneous incomes were also up coming from ForEx transactions and gains from foreclosures and assets sold. On the operating expense side, this is down by 1% year-on-year, but we had onetime expenses last year related to goodwill impairment on our subsidiary. If you exclude that, core operating expenses are only up by 5%, which means it remains to be very, very manageable. The growth in OpEx is attributable largely to the business volume growth. For example, PDIC and DST grew because of deposit growth and GRP because of revenue growth. That's why you see here that the volume-related expenses are the ones that are really driving the OpEx growth and they're up by 23%. Credit risk stabilized. NPL ratio is now trending downwards at 4.9% from 5.2% last quarter on a consolidated basis. For the parent bank, NPL ratio is also down to 4.2% from its 4.4% peak. NPL cover is kept at 67% on a consolidated basis and 70% on the parent side. Here are some updates. Last May we completed our 40 billion stock rights offering. As a result, this increased our capital adequacy ratio to 23.5% and our common equity Tier 1 ratio to 21.4% as of May. Note that the proceeds of the stock price offering shall be used to partially fund the acquisition of the Citi Consumer business. Next slide, please. As part of our initiatives to provide -- to promote blockchain technology, we work with the PDDC to launch the first digital bond that is recorded using blockchain. Now while we have pioneered previous digital bonds in the past using blockchain in parallel, this is the first issuance that really uses blockchain as the primary source of truth. We hope that this will eventually lead to a digital bond trading system in the future. We have raised 11 billion through this, and it was 11x oversubscribed. In July 18, we have received the last stage of the regulatory approval process for Union Digital Bank. Union Digital have started operations, and UnionBank is beefing up its capital so that we can accelerate the feature builds. In fact, the UnionBank Board has approved the infusion of up to PHP 2 billion additional capital to Union Digital. Next, we also received the monetary board approval and the acquisition of the Citi Consumer Banking business in the Philippines last July 14. Hence, we will officially complete the acquisition on August 1, this coming Monday. So starting August 1, UnionBank will be the legal owner of the Citi consumer business portfolio and the income shall start accruing to us. We also want to update everyone that all the KPIs that we are tracking with regards to this transaction, such as customer attrition, employee recognition, meet the bank customers and the like are all within and ahead of our expectations. So in summary, we had a strong quarter anchored in recurring income. Our net interest margins are sustained as we are able to grow higher-yielding mass market, consumer and SME loans. We are also in our third year of record CASA growth. We're tracking a third year of over 30% growth. Fees are also trending upwards as we are benefiting from the transactions coming from the growth of our digital customers over the past 2 years. Next, starting August 1, we will begin to accrue the value of the Citi consumer business into our books. This will further increase our recurring income in the short term. But more importantly, it will also unleash synergies in the consumer business of UnionBank on a longer-term horizon. And the last, the launch of Union Digital completes our strategy in becoming a retail bank. Moving forward, with Union Digital, we will be able to extend financial services to the unbanked or underserved mass market segment. Why do we believe we can do this? It's all because digital has no boundaries in terms of reach, and because the cost to serve a customer is much lower in Union Digital. It has no branch legacy cost. It has lower reserve requirements and the license cost per account is lower than that of a universal bank. Hence, it is now viable for us to cast a wider net in serving the Filipino consumers. This ends our update for UnionBank. Thank you very much.

And now to present for Food, I will turn you over to Mr. Tristan Aboitiz.

Thanks, Judd. I don't know about you guys, but our ham looks delicious. Good afternoon, everyone, and thank you for spending your time with us this afternoon. I will start this afternoon presentation with the Food Group's financial highlights for the first half of 2022. So for the first half of 2022, our revenues in the Food Group increased 32% year-on-year, ending up PHP 53.3 billion or about USD 1 billion, with improvements in revenue contribution coming from both the agribusiness and Food and Nutrition business units. The agribusiness unit was up 20% and Food and Nutrition was up 39% year-on-year. Likewise, EBITDA grew 18% to PHP 3.1 billion or USD 60 million, driven by a 28% increase year-on-year in EBITDA contribution from the agribusiness unit. This was, however, tempered by a 16% decline in the contribution from the Food and Nutrition unit. EBITDA margin posted a decrease in the first half by 68 basis points. This was pulled down by 722 basis points and 621 basis point decline in our Farms and Farm divisions margins, respectively. Lastly, our [indiscernible] in the first half was down drastically by 84% year-on-year, finishing at PHP 194 million or USD 4 million. The drop was due to the subdued performance in both the agribusiness and Food and Nutrition units as we saw contractions of 128% and 71% in the near contributions, respectively. Further to this, the gains in the agribusiness EBITDA were offset by a series of provisions made to reflect the impact of adverse macroeconomic factors on our operations in Sri Lanka, Thailand and the Philippines. Let me dive into this for a bit. So pertaining to Sri Lanka, a provision was made to reflect an unrealized FX loss of about PHP 485 million or USD 9.3 million, which was brought about by the devaluation of the Sri Lankan rupee from about LKR 203 to the dollar to LKR 365 to the dollar as of the end of May this year. This FX losses related to payables of GCFL, which is a Sri Lankan fee unit. Given the magnitude of the devaluation of the Sri Lankan rupee and the likelihood of recovery of this investment, we also recorded a PHP 311 million or USD 6 million right now in Sri Lanka's goodwill and made a provision on this investment of about PHP 151 million or $2.9 million. We also recognized a PHP 120 million or USD 2.3 million goodwill impairment on our gold coin specialties, Thailand operation, which is our feed unit in Thailand. We felt it best to ensure that we were reflecting the impact of the challenging market conditions in this Thai feed business in a primary manner and are making this provision does just that. Lastly, with the depreciation of the Philippine peso against the U.S. dollar, our agribusiness Philippines unit and our Food & Nutrition business in the Philippines incurred FX losses in the amount of PHP 261 million in the first half or approximately USD 4.9 million. And this was related to its U.S. dollar-denominated payables largely reflective of our importation of grades for the businesses. We will look to offset a portion of this as we continue to pass on increases in selling prices in the second half of this year. Excluding these items, EMEA for the first half of 2022 would have been about PHP 1.3 billion, which is 5% over the first half of 2021. Focusing now on revenue. The Food Group's revenue grew 32% year-on-year to PHP 53.3 billion or approximately USD 1 billion, again attributable to increases in selling prices across all the business units. The Food & Nutrition business unit contributed about PHP 10 billion or about USD 194 million in the first half of the year, which is 39% higher year-on-year. Double digit year-on-year revenue growth was seen across all of the divisions in the Food & Nutrition unit, which encapsulates our farms and trading businesses here in the Philippines. Our Farms division revenue increased 33% year-on-year on the back of a 39% increase in volumes sold. And this is due to the successful -- the continued successful recovery of our operations in our breeder farm 1, which you will recall, was hit by [indiscernible] in 2020, and which we began to repopulate in the first half of 2020. The trading division continues to benefit from the impact of shortages in soybean mill and feed wheat in the Philippine market, which was at its peak -- the shortage of which was at its peak in the last quarter of 2021 and first quarter 2022. This enabled us to drive sales volumes up 25% year-on-year. And combined with a 31% increase in selling prices, revenue for our trading division was 62% higher than what we saw in the first half of 2021. Our flour division meanwhile saw revenue growth of 31% year-on-year to PHP 5.3 billion or about USD 102 million. This was driven by price increases, which were necessary to offset the sharp increases in the cost of wheat seen throughout the first half of 2022. Cost of wheat remains elevated due to global supply shortages exacerbated by the ongoing war in Ukraine. Lastly, the agribusiness unit delivered a total of PHP 38.7 billion in revenue, approximately USD 751 million in the first half of this year. This was 20% higher than the first half of 2021. The increase of PHP 6.4 billion or about $122 million was driven again by increases in average selling prices of about 2%. Prices have needed to be increased throughout the first half of the year, again to offset the impact of higher raw material costs as well as rising costs related to local and global freight. In terms of revenue contribution of the business units, 73% of our total revenue came from the agribusiness unit and 19% was contributed by Food and Nutrition. This compares to the first half of 2021, in which the share of agribusiness and Food and Nutrition was 8% and 18%, respectively. Turning now to the Food Group's EBITDA. EBITDA in the first half of 2022 grew by 18% year-on-year to PHP 3.1 billion or about USD 60 million due to a 28% improvement in the contribution coming from our agribusiness unit, which costs under 16% year-on-year shortfall is coming from the Food and Nutrition unit. The 16% decrease year-on-year in the contribution of our Food and Nutrition unit to PHP 817 million or USD 16 million was attributable to a 36% decline in the EBITDA contribution of our Food and Nutrition, which saw a drop in volume of about 7%. And in its margin about 9% versus the first half of 2021. Meanwhile, our Farms and Trading division saw growth in their EBITDA contributions year-on-year, coming from significant increases in volumes sold by both divisions. Our volumes sold in our Farms division increased about 39% year-on-year and for trading has increased about 25%. Meanwhile our agribusiness unit saw a 28% increase in EBITDA contribution, which was the result of 20% increase in gross profit per unit, as we were able to catch up and slightly recover from some of the increases that we have been seeing in commodity costs since 2021. In terms of EBITDA contribution of the business units, for the second half -- for the first half of 2022, 66% of total EBITDA was derived from the agribusiness unit and 26% was contributed by the Food and Nutrition business unit. This is compared to last year, where 61% was contributed by the agribusiness unit and 37% was contributed by the Food and Nutrition unit. So shifting now to the Group's NIAT. Overall, the Food Group's NIAT of PHP 194 million or USD 4 million, fell 84% behind the same period as last year. The lag in NIAT versus the first half of 2021 was due to a drop in NIAT contribution from both the agribusiness and Food and Nutrition units of approximately 128% and 71%, respectively. The 28% growth in the agribusiness's EBITDA was unfortunately raised by the one-offs that I described at the top of the presentation, and it finished at a negative PHP 167 million for the first half of 2022. The Food and Nutrition 16% drop in EBITDA was further pulled down by the consolidated FX loss of about PHP 174 million or USD 3.2 million for the first half of the year. And this is reflective of its U.S. dollar-denominated payables for raw materials needed to produce our finished goods in the first half of the year. And there was also an increase in taxes attributable to our farm operation in 2022 due to a PHP 86 million income tax holiday adjustment that was recorded last year. These resulted in a 71% reduction in the Food and Nutrition bottom line to about PHP 166 million or USD 3 million. If we exclude the nonoperating write-offs that I mentioned earlier from our Sri Lanka and Thailand operations as well as our FX loss in the Philippines, income contribution for the Food Group would have ended the first half of 2022 with a NIAT of PHP 1.3 billion, which is 5% better year-on-year. So turning now to the strategic projects that are ongoing in 2022. So the lease of our Kunming plant in the Hunan province of China expires in April of 2024. And as a result, we have to move to a new location and are in the process of beginning the construction of a 150,000 metric tons per annum capacity feed mill with the potential capacity to expand to about 270,000 metric tons. This will also have an additional ruminant production line and mass conditioning line, which will allow us to enter into other segments of the livestock feed market. We have purchased the land for this new mill in China and we are done with the soil topographic survey. In the southern province of Vietnam, our [ Ninh Thuan ] mill will give us the ability to grow our livestock feed business in that region. This mill will have an annual capacity of 200,000 metric tons and can potentially increase by another 100,000 metric tons when we add a third line. This will supplement Binh Duong and Dong Nai plants in the South of Vietnam, which currently are at near maximum capacity at this point in time. So I will focus more on the first 2 projects that you see on the table in front of you. Our TGL stores [ and beta 53 ] in the succeeding slides. So for our Farms division under the Food and Nutrition business unit utilities, we continue to grow our brand and channel of meat distribution, which we call the Good Meat. On top of the 2 existing stores that we have now, the latest of which opened last month in Paranaque, 5 new physical stores will be fully operational by October 2022, with a capacity of 2 metric tons per day per store. The remaining branches are behind schedule by approximately 1 or 2 months, but we will be seeing additional stores open in Paranaque and Las Pinas in the third quarter this year and the balance in the fourth quarter of 2022. Furthermore, the Good Meat will expand its supermarket presence to grow from 260 stores in 2021 to 330 stores by the end of 2022. This is a combination of retail concessionaires and sports carrying our value-added Good Meat products. This initiative will do 2 things for the Food Group, further develop its B2C channels and provide an expansion to the supply chain, which will ensure better distribution to all customers in the relevant areas of distribution. With this, we hope to capture a larger percentage of the margin that is available along the value chain and be able to unlock the value that is created by getting much closer to the end customers of our products. So coming from the same area of business in the Philippines, our farm group, the construction of our third breeder farm in Nueva Ecija, which will have a capacity of about 2,500 gilts and broke ground in August of 2021 is almost near its completion at about 75%. Loading of the yields for this farm began in June of 2022, as scheduled. And we currently have about 450 gilts on site at this point with no negative news to report regarding biosecurity issues. We will continue to load the facility with animals with new batches of gilts estimated to arrive about every 5 weeks or so from here until the end of the year. While the construction of some barns have been delayed on the farm, we opted to begin a partial operations on site, so as not to delay the output to the farm any further. Market hams produced from this facility are expected to be available by the late second quarter of 2023. We intend to continue investing in our swine raising business, supporting the ham raising industry. And with our improved biosecurity protocols in place, we are confident that we can expand our capacity amidst the continued spread of ASF throughout the country. So to recap, here are the key points of the Food Group's first half 2022 financial and operating results and project milestones. Despite very challenging conditions around the region, the group registered revenue improvement due to increases in selling prices, which are designed to help us keep up with the elevated commodity prices. Despite the commodity headwinds, our Food Group's EBITDA to surpass last year's performance, however, EMEA dropped down by one-off expenses in our agribusiness unit and foreign exchange losses in our Philippine-based businesses. We would also like to highlight the successful loading of our first batch of gilts into breeder farm 3, which we believe is a significant milestone for our farm operations and a step forward for us in our strategy to build a strong integrated mill to meal business in the Philippines. For our agribusiness units, we will start the construction of our 230 ton per hour mills in China and Vietnam by the end of July or August of this year, and we look forward to the completion of those mills in 2023. So that's all for the Food Group this afternoon. Back to you, Judd.

Now to present for Land, I will turn you over to Mr. Dave Rafael.

Thank you, Judd. Good afternoon, everyone. Thanks for being here to listen to me for the first half performance of AboitizLand. So key financial metrics for the first half of 2022 show that AboitizLand is on track versus budget and has exceeded last year's performance for the same period. AboitizLand contributed total revenues amounting to almost PHP 3 billion with the first half, a [ 68% ] increase from the same period in the previous year. Consolidated EBITDA grew by 59% to PHP 684 million, mainly driven by the residential business unit. EBITDA from core operations is expected to meet the full year target. Next slide, please. The residential unit -- business unit contributed 52% of total revenue. The residential business had a significant increase in its revenue contribution year-on-year due to increased construction activity and significant positive site accomplishments in a number of prior objects. Revenue growth for the industrial and commercial business will be covered in the economic estates of the ICE later on. AboitizLand continues to capitalize on our momentum, pushing residential sales to PHP 2.5 billion, record -- we recorded the highest net book sales to date in June. At this rate, we are confident that we will be able to exceed our sales target by the end of the year. In North Luzon, the [indiscernible] campaign, which kicked off last April, has positively gained traction in our targeted markets and have steadily increased sales performance in our North Luzon projects. We are also on track for our second launch for the year, Malvar village at The Villages at Lipa will be the most premium village to be launched in September within a community, highly commended the best housing development in Southern Luzon. Next slide, please. As part of the Aboitiz Group, which is embarking on the great transformation, AboitizLand's innovation journey is also underway. One of the clear ways this is manifesting is our big investment in construction technology, where we innovate the way we plan, design and build structures, as well as the manufacture and installation of its components. In partnership with Connovate Philippines, AboitizLand recently installed its first precast concrete panels in the housing units of the Seafront Residences. This is a milestone for us in innovating and building more eco-friendly houses for Filipinos as it will make our developments more resilient against earthquakes, typhoons and fires, translating to more savings on home repair and maintenance -- and higher future resale value. In line with the innovation push, we also recently entered into a partnership with the Philippine subsidiary of Sumitomo Mitsui to introduce Japanese precast concrete panel technology in The Villages at Lipa. Together with other innovations, we are adopting in design, planning and construction, such as the use of smart box systems, [indiscernible] Trimble 3D modeling and integrated construction management platform in Nova. We are greatly transforming our ability to build and deliver our homes faster, and better. Our very own Vecino App also continues to be enhanced. The launch of Phase 1 in January allowed us to provide seamless, contactless home buying experience, which improved overall operational efficiency by shortening the booking period. As of last quarter, Phase 2 has successfully been implemented, which added features on the digitalization of submission of required documents, leads management and inventory site map overview of available units. Phase 3 is slated to be launched next quarter, and this will aim to cover post purchase process as well as other Vecino and seller retention tools. In summary, here are our key takeaways. We are -- we met most of the key operational and financial metrics for the first half of the year in spite of the ongoing market volatility and uncertainty. We're optimistic that we will be able to exceed our residential sales targets and meet the full year target for EBITDA from core operations. Operational milestones are on track, with a marketing campaign increasing sales performance for different geographical areas. We are also on track to launch another village in September, which is the most premium village at The Village at Lipa. Our innovation initiatives are on track for designing, planning, construction, sales, marketing and [indiscernible]. We expect a tough second half of the year as prevailing market uncertainties may impact our operations and financial performance for 2022, while major construction materials, such as cement and rebars are owner supplied and have been hedged with long-term supply contracts. Contractors have passed on the sizable increases in fuel and labor costs to AboitizLand. Now all these additional costs can be passed through pricing increases, thus causing some margin squeeze. We need to watch out for subdued interest in land as an investment, and an increase in forfeitures. Mitigation measures include a refreshed campaign highlighting our residential lots as a stable and reliable form of an investment. The innovation and resilient mindset that allowed AboitizLand to successfully pivot during the COVID pandemic period in 2020 and 2021, will carry us through the second half of 2022. As we exit the COVID period, we now enter an environment with a whole new set of challenges, uncertainties and opportunities. AboitizLand will need to pivot once again, a new direction and strategy, one that is defined by innovation and aligned with a great Transformation is being developed that will allow AboitizLand to thrive and grow the property business into the future. Thanks, and back to you, Judd.

Now to present for infrastructure, I will turn you over to Ms. Cosette Canilao.

Thank you, Judd, and good afternoon, everyone. Aboitiz InfraCapital remains on track as of midyear, posting almost 8x higher EBITDA versus the same period last year. The Economic Estate are on course to achieve 50% average completion of ongoing expansion projects with PHP 12.8 million worth of inventory. Recently, LIMA Estate became the first industrial park to receive a BERDE-district certification with a 5-star rating, the highest rating of the Philippine Green Building Council. Meanwhile, Unity now has about 700 active sites, comprising 300 active tower sites in various stages of development and 400 small cell sites. Apo Agua is also about 80% complete. On the other hand, our Estate Water operations registered a 6% average nonrevenue water for the first half of 2022. This is a significant improvement of about 45% in NRW for Cebu water operations. Our CapEx for the first half more than doubled as compared to the same period last year, driven by the various expansion activities in our Economic Estates. Our Water business also contributed to the CapEx increase as Apo Agua round up its TBDs in preparation for operations. Unity Tower build also scaled up CapEx. Our Economic Estates contributed around PHP 885 million to our year-to-date EBITDA up 5.3x from last year, which is attributed to sales from new inventory in the Phase 1 -- Phases 1 and 2 of LIMA's expansion and the increase in percentage completion of developments in LIMA Phase 1. The Economic Estates kept its momentum throughout the first half with expansion projects in Batangas and Cebu on track for completion. The 47-hectare Phase 1 expansion in LIMA is 90% sold out and development is expected to be completed by quarter 3. Four locators have also started construction, contributing to the level of activity and job generation at LIMA. Its 57-hectare Phase 2 expansion started land development in January and projected to be 50% done by the end of 2022. Finally, master planning for the 46 hectare Phase 3 expansion is almost complete and is set to start construction by early next year. On the other hand, West Cebu Estate 39-hectare expansion started construction in January and is also projected to be 50% complete by year-end. The development of the central business district of our Economic Estates is also progressing well, starting with LIMA Estate 30 hectares CBD. Phase 1 of the commercial lot is almost fully complete and nearly sold out, while Phase 2 and 3 are being constructed for completion this year. Planning for the further expansion of the CBD is underway and to be concluded by year-end. LIMA Tower 1, the first of the 7 building office park is also under construction and on target to be completed by 2024. At West Cebu Estate, planning for its CBD is also underway with the first phase of the West Cebu Exchange set to start construction by 2023. As mentioned earlier, LIMA Estate has been hailed as the country's first BERDE-certified district, demonstrating how sustainability is at the forefront of our business. The 794 hectare LIMA Estate is also the largest projects certified under BERDE districts. The certification process is also ongoing for Lima Tower 1, the outlets at Lipa and West Cebu Estate. For our Water businesses, Apo Agua is fully focused on the project's completion set for this year. Works on the river diversion and intake are complete, while mechanical and electrical works for the water treatment plant are in full swing. Hydro testing and road restoration are [indiscernible] water pipeline as well. As for our Estate Water business, with the rollout of nonrevenue water road map in our Cebu Water operations in January of this year, the NRW level in both [indiscernible] and West Cebu Estate significantly improved to 45%. This was achieved through continuous leak detection activities, along with regular water meter validation and supply and pressure management. By the end of the year, the target is to manage and maintain the NRW level at 5% or better across the 3 Estate water operations. This target is significantly better than the regulator's [indiscernible] more efficient than in other industrial estates, which ranges from 10% to 20%. Unity has 300 active ground-based sites in various stages of construction, 70% of which have been elected. They are spread across the country, but predominantly in Visayas and Mindanao. During the first half, Unity completed its acquisition and integration of AIZ small cell site business. To date, we have deployed 400 small cells in key cities nationwide, improving network quality and services. Overall, Aboitiz InfraCapital is optimistic about achieving our plans for larger-scale BU operations by the end of 2022. Each sector is on track to hit targets for Economic Estates, LIMA expansion Phase 1, including the commercial lots are substantially complete, and LIMA Phase 2 and West Cebu Estate expansion are expected to be 50% complete by year-end. Apo Agua is nearing the start of commercial operations while LIMA Water is set to complete its smart water network project. Unity is set to achieve their target of operating approximately 1000 combined macro towers and small cell sites by year-end. And lastly, with the new administration's plans to shift back to public private partnership, we are looking forward to participating actively, especially in moving forward our [indiscernible] for Bugallon, Lingayen and [indiscernible] airports, which we have original performance status. That ends my presentation. Thank you, Judd. [Presentation]

And now to present for Cement, I will turn you over to Mr. Vara Kalepalli.

Thank you, Judd. Once again, good afternoon to everyone. As usual, for cement, we will not have the full presentation since it's not a listed company, but what we will provide you is the perspective of our understanding of the market and what we do to control our high inflation and also what is our contribution to AEV in H1. Now coming to the market, I think, in H1, the cement demand almost contracted around 5% versus the previous year. Probably, this is very unusual for the Philippines market, maybe except for the pandemic time to have any contraction in the market demand. But I think there are 3 main contributors for this as per our understanding. The first one is the huge commodity inflation, especially the steel prices. So many contractors could not perform their contracts, their bids and they had to return their bids. So that was a situation due to the increasing steel -- due to high steel prices. We see some downward movement in the steel prices over the last few months, and that should help in the coming months. The second one, I think the preconstruction bank -- preelection construction bank, which also affected the cement demand in the last few months. And also the postelection transition will take some time for the contractors to restart their projects. So these are the 3 main reasons for the contraction in the market in H1. While we have seen good improvement from -- in the market from June month onwards, and we are hoping for a good recovery in H2 for the cement demand. Now coming to our cost control measures. I think our operational excellence programs are going very well and also coupled with our Gorilla procurement strategy to procure fuels at lower prices in order to survive this high inflation markets are going very well. So I think we are able to mitigate, to some extent, the high commodity inflation pressure. Now coming to RCBM's contribution to AEV, I think our contribution to AEV in the H1 is around PHP 180 million. Of course, this is lowered by roughly PHP 600 million versus the previous year. Mainly for the reason of -- mainly for 2 reasons. One is the reduction in the market demand, consequently reduction in the lower volumes and also the fact that we could not pass on the high inflation to the market. So with this, I end our Cement presentation and back to you, Judd.

Thank you, Vara. And now to present AEV's financials, I will turn it over to Mr. Dmi Lozano.

Good afternoon, everyone. Let me just start off with some of the quick highlights of our key performance. AEV recorded consolidated net revenues of PHP 136 billion for the first half of 2022. This was 33% higher year-on-year. This was really due to better performance across all of the SBUs. In particular, our Power and Food business was one of the biggest contributors here. Power had higher revenues due to fresh contribution from both of the units of GNPower Dingini as well as higher availability of GMEC. Aside from this, they also had better rates for their BCQs and the spot transactions, which is driven by higher index -- indices in their formulas. Food on the other hand, had higher revenues due to the selling price increases across all of the business units in their lines. Moving on. Our first half beneficial EBITDA was 24% lower compared to last year. This was mainly due to the following: 22% decrease from Power due to the fact that we sold the portion of AP late last year, 4% decrease from financial services, mainly due to the recognition of extraordinary trading gains in the first half of 2021, which we didn't replicate in 2022. 2% increase from the Food Group due to the better gross profit as a result of increase in selling prices in the agri business unit. As you might -- just to explain a little bit on the first point. As part of our transformation strategy, recall that AEV's ownership and therefore, share in earnings in AP has declined from 77% to 52% at the end of 2021. This is a result of the strategic partnership with JERA, and the sale we did last year. If we retain the same ownership as last year and remove the extraordinary trading gains realized for Union Bank, beneficial EBITDA for AEV would have been higher by 12%. What's important, though, is if you look at this on a quarter-on-quarter basis, our second quarter performance versus the first quarter of this year was 28% higher, mainly due to improved performance across all of our business units, but mainly because of Power and Infrastructure simply -- as explained by our business unit CEOs earlier. However, it was lowered by 5% compared to the same period last year, again, mainly due to AEV's change in ownership, and the extraordinary trading gains. If you look at this on a consolidated level, the EBITDA was basically flat. Now going on to the core income. Core income for the group for AEV was down by 35%. Taxes and others were lower versus last year -- or sorry, were higher -- lower than normal last year versus this year, because of the one-off tax adjustments that we benefited from last year as a result, tax is actually almost tripled. But this is really the more normalized level for us. In addition, and I had mentioned this earlier, our noncontrolling interest also increased from PHP 3.2 billion to PHP 5.5 billion as a result of the sale of AP -- portion of AP to JERA. With that, our core income for the first half was PHP 9 billion, 33% lower year-on-year. Again, if we retain the same ownership of AP and remove the extraordinary dragging gains of Union Bank, our core income would have been higher by 19%. The group also recognized net nonrecurring gains of PHP 2.7 billion, mainly due to the revaluation of dollar-denominated assets. And when you net off the one Food Group write-offs, we saw after netting off, sorry, the one Food Group write-offs. As a result, net income for the first half of 2022 was PHP 11.8 billion, 12% compared to the same period last year. And this translates on earnings per share of PHP 2.1. Let's move on to the balance sheet. On a consolidated level, cash and cash equivalents decreased by 27% as we continue to fund the growth of our business units, which include Infrastructure projects, digitization efforts in our bank as well as the City acquisition. [indiscernible] from basically a net cash position, but we still -- despite our spending this year, that we continue to have a net debt level of almost just a little over PHP 4 billion. And what's critical here is we ended last year with PHP 87 billion, because of the JERA sale, and we'll continue to have a significant amount of cash and cash equivalents that will be used for all of our expansion and new investments. The reduction from PHP 87 million to PHP 54 million was mainly due to our share of Union Bank's stock rights offering. Our debt levels continue to be strong and within all of our internal risk parameters. So what are the takeaways that I want you to go with. To summarize, revenues are up from better performance across all consolidated SBUs. This is probably driven significantly by the opening up the economy in the first half of this year. Normalized beneficial EBITDA would have been higher by 12% and normalized core income would have been higher by 19% if we adjusted for the sale of AP. Balance sheet continues to be very strong and is poised for investments across our various strategic business units. And finally, our great transformation into a [indiscernible] has ramped up in scale and speed, and we expect this to be a key driver of our performance for not just this year and next year, all through the decade and beyond. Thank you, and back to you, Judd.

Thank you, Dmi. Before I move on to our Q&A, we would like to request our audience to complete [indiscernible] on your screen. [Presentation]

Thank you for answering our call. [Operator Instructions] Now for our first question, this will be addressed to our non-power strategic business units, beginning with the bank followed by food, followed by land, followed by infra, followed by cement. So for all non-power segments, can you provide updates on the heightened commodity price situation, particularly the impact on your SBUs demand, margins or stock accumulation, and is there any changes to your prior plans or strategies? Can we begin with Carlo?

Okay. Higher commodity prices do not have a direct impact to the bank, given that we are providing services and not goods. But there are indirect effects through higher inflation rates, which could lead to higher interest rates and, of course, lower the consumption spending. Now on our balance sheet, a higher interest rate environment is actually slightly positive for the bank, because our balance sheet is positioned that more assets are floating, so we can reprice this. So pricing interest rates is actually favorable to us on a net interest margin perspective. But of course, we have to watch out for lower consumption spending, because this could affect spending of credit cards and of course, application of the consumer loans, but not in a significant way. If we also [indiscernible] in other human banking products. Thank you Judd.

Yes. Thank you for that Carlo. Food, Tristan?

Yes. Thanks, Judd. So I mean just you all can imagine, I think our business is quite heavily influenced by the movement in commodity prices, particularly with the [indiscernible] commodities, right green sector. And I mean so I think the long and the short of a piece at this point in fine is that commodity prices seems to be stabilizing, but stabilizing at elevated levels, right? And I think there still remains quite a bit of volatility in the sector, right, with risk to the upside as we wait to see how the harvest of various crops in Europe, North America, Australia and South America pan out between now and the first quarter of 2023. Currently, the weather in several of these key markets is quite dry. And so we've seen estimates in terms of quantity come down over the last couple of weeks, particularly in corn and soybeans. And so this has been impacting, I think, if you pay attention the futures prices, impacting future prices over the last couple of days, right? Another major factor here, of course, is the ongoing war in Ukraine, right? And whether or not we actually see grain begin to flow out of that region, I know an agreement was signed the other day, in Turkey between Ukraine and Russia, but I think what's more -- this is a case where I think actions speaks louder than words, right. So let's see how that evolves. And then lastly, of course, foreign exchange rates in the region might have depreciated lately and this affects the overall land and cost of products in industries across the regions where we operate. Effect on demand. I mean, I think -- as prices continue to play, demand for our products such as feed and Flour will slow. That's the reality of it. We've seen a slowdown in some key markets. But overall, we're quite close to our budgeted expectations to this point. And I think as far as the impact on strategy, we continue with the strategy we have in place, which is really intended and designed to try and be able to push ourselves against movements -- adverse movements in commodity prices. And so we're -- I talked about earlier, moving into -- further into farming here in the Philippines, we're looking for opportunities to do the same across the region. And looking forward to continuing to balance the sources of revenue across the group, and, of course, invest in areas that drive efficiency across our operations, as we continue to push probably one of the lowest cost producers in our industry.

Thank you for that, Tristan. Can hear from our land unit, Dave?

I think for the property business with respect to the supply -- the supply chain, fortunately, I think AboitizLand was able to lock in through long-term supply contracts and major construction materials like rebars and cement and so forth. So we were able to protect ourselves from that. However, what we were not able to protect ourselves from are the increases in labor costs and fuel. So these are now being passed on to us by contractors. And we can pass all of them price increases. So I think that's causing a little bit of a squeeze on our margins. So the 2 other factors that were sort of [indiscernible] course interest rates. And I think we continue to elevated levels of the interest rates are -- could negatively impact demand, because that will result in higher lending, loan -- home prices, home loans. So I think that might -- and at the same time, I think banks would also be stricter now in terms of the credit approval. So we're monitoring that very closely for possible -- for futures or a slowdown in demand. And lastly, the exchange rate -- the deteriorated exchange rate, I think that can work both plus or minus for us. A lot of our sales are with -- are from [indiscernible] so I think they will benefit from the weakening peso. So I think that's a wash. So that's it.

Okay? All right. Thanks for that, Dave. Can we hear from our infra unit. Cosette?

Yes. Well, generally, the higher prices for commodities will impact the cost to build the -- construction costs for our Economic Estate and the various projects that we're doing, including the Tower construction as well as the completion of Apo Agua. But we do have provisions in our contracts -- in our construction contracts to manage this risk. So there's no significant change in our plans as we constantly monitor commodity prices. And we are also looking at opportunity to offset the impact by -- via value engineering.

And last, we will have Vara for Cement.

Yes. Okay. I think -- see, I will be addressed on the demand side, actually, in the effect of the heightened commodity price situation. And as we all know, I think more than 50% of our variable cost is contributed by energy. So I think that the energy is most hit by the high commodity prices right now. So it is impacting -- of course, it is impacting our margins adversely. And not all the costs can be passed on to the customers. And even if we can pass on, there will be a time lag between the two. So that is on the demand side and also on the margin side. But however, we hope that in the second half, I think I already told that from June onwards we could see good demand in the market. And we are hoping that we continue in H2. Coming to the strategy side, I think -- I don't think there's any change in our plans or strategy, but what -- what I can say is that it has accelerated our sustainability strategy. Like last -- compared to last year, we have almost doubled our alternative fuel consumption to substitute our fossil fuels that is basically coal. So I think -- and also accelerating our plans of waste heat recovery and also solar power in order to mitigate our -- this high energy prices. So that is what I can share as of now.

Thank you for that, Vara. We'll go on to our next question. So this next question will be directed to all our SBUs. We're going to begin with non-power SBUs and end with Power. So what are the priority agenda policies or reforms that you want the new government to institute to improve your industry prospects. We will begin with the Bank, Carlo?

Thank you, Judd. Well, I cannot speak on behalf of the Bank on this matter. So this is more of a personal view. But we have seen digital as an important component in terms of financial inclusion and extension of banking to the underserved segment. So for me, to be good at the digital road map of the government will be sustained by the administration. It has to be in the area of improving infrastructure, collaboration across the private and public sectors and cyber threats and data privacy as well as the enhancement of digital KYC initiative like the national ID system. Second, it would be on the providing incentives on financial institutions in assisting the MSMEs, because they are considered as the engines of growth. And lastly, probably the revisiting of intermediation cost in banking, because there's a lot of [indiscernible] et cetera, maybe we can review this, because this will allow banks to lower its cost to serving the consumers and therefore, we'll be able to cater to a larger customer base, particularly in the sector.

Thank you for that, Carlo. Can we hear from you, Tristan.

Yes. Just speaking in general. I think I'm personally quite excited by the amount of attention being paid by the President on the agri sector. I think obviously, clearly demonstrated by his taking on the current leadership of the Department of Agriculture. And this is directed and push really to improve the production coming out of the agri space and the thrust towards food security for the Philippines. I think, we believe that our investment should also be currently in the Food Group as can be seen through our investments in facilities like [indiscernible] meat master, which is our processing facility in Balamban or our latest breeder farm in Wartsila, where we're incorporating kind of the latest technology in farming and [indiscernible] security. I think it's quite aligned with this desire to see an overall improvement in the agri sector value chain, and an improvement in the quality and the quantity of production coming out of this space. And so I think that overall, he's speaking kind of -- he's speaking in the language that we understand that we can very easily get it behind, because at the end of the day, he is posing for a real improvement in the agri sector. So I think we're going to continue to invest in this space and we believe that there's quite a bit of opportunity to continue to do so. So that's it for me, Judd.

Can we hear from Land, Dave?

I think that overall his emphasis on trying to really generate foreign direct investment, I think that's a very -- that's very positive because for real estate, not because I think there's really a correlation between the property sector and overall economic growth, demand and capacity for real estate purchase. I think that in general, I think is very encouraging. But specifically, though, I'm also very keen and watching very closely his desire to continue the building project that was started by the previous administration, particularly when it comes to the infrastructure side, railroads and roads and all that because ultimately, real estate is all about location. So with the better access, more areas that you can develop for development to infrastructure, I think, will be very beneficial for the property industry.

Thanks for that, Dave. Can we hear from Infra, Cosette?

Yes. Thanks, Judd. So First of all, like what Dave mentioned, we welcome the new administration's plans to continue with its infrastructure program. And the shift to BDT or reengaging the private sector in the delivery of critical infrastructure projects across -- from hard infrastructure to soft infrastructure to support the digitalization, tourism and real estate development. So this is good news for us and for the country as infrastructure projects are proven to have immense multiplier effect during the various stages, not from development and planning, execution and operation. In addition, the societal returns from infrastructure development [indiscernible] are always higher than in private structure gains. So we look forward to helping this administration in creating an enabling environment for private sector to be more involved in infrastructure delivery. Starting with the review and amendment of the BOD implementing rules and regulations, clearer and margins are evaluation and review and approval process, and ultimately, the amendments of the build operate transfer.

Yes. Thanks for that, Cosette. Can we hear from Cement?