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

Hello, everyone. Welcome to our analyst briefing. Today, as part of our great transformation and ongoing efforts to improve the delivery of our briefings, we are going to report the financial and operating performance for the first half of 2023 of our publicly listed company Aboitiz Equity Ventures, as well as our nonlisted businesses, namely our One Food Group, AboitizLand, Aboitiz InfraCapital and Republic Cement. But first, here are the house rules, all microphones have put on mute by default to minimize unnecessary background noise. Questions have been requested from our guests in advance. These will be prioritized in the Q&A today. If you have additional questions, please submit them on the webinar controls. Those not taken up during the Q&A, will be answered via email. The briefing will be recorded for documentation purposes. By joining this session, you can send your name, voice, image and chat comments being recorded for use in dissemination. If you do not consent to the foregoing, please do not join the session. Our program will flow as follows; to present for our Food, we will have Mr. Tristan Aboitiz, President and CEO of Food Group; 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 for land, we will have Mr. Dave Rafael, President and CEO of AboitizLand; to present AEV's consolidated financials as well as discuss our proposed acquisition of Coca-Cola Bottlers Philippines, we have Mr. Toto Hilado, CFO of Aboitiz Equity Ventures. At the end of the presentation, we will conduct a Q&A session where we will address questions related to AEV, its nonlisted businesses as well as our proposed acquisition. Questions related to our other publicly listed companies, namely UnionBank and Aboitiz Power will be addressed off-line after this briefing. And at the end of the event, when the Zoom platform closes, a pop-up screen will appear, which will allow you to provide feedback regarding the event. And now on to our presentations, beginning with a video from our food group. [Presentation]

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

Thanks, Judd. Good afternoon, everyone, and thanks for choosing to spend your time with us. So I will begin with the Food Group's financial highlights for the first half of 2023. The Food Group ended the first half of this year with a net income after tax of PHP 181 million, completely reversing the net loss of PHP 534 million from the first quarter of the year. Year-on-year, however, this is lower by 7% due to the lingering challenges in volume generation across the group. The first half of the year saw total revenues declined 12% and driven by a 13% decline in the Food & Nutrition revenue, along with a 7% decrease from our regional Agribusiness unit. Key contributors to the decline in revenues from our Food & Nutrition unit were our Flour division, which saw a decrease of 7% and our Trading division, which saw a decrease of 35%. The decline in revenue across the company was driven by lower sales volumes versus last year. However, comparing to quarter 1, we do have -- or we have begun to see an uptrend in revenue from our Flour division, which is up 24% and our regional Agribusiness unit, which was up 9%. EBITDA was also down by 38% year-on-year to PHP 2 billion or USD 37 million, driven by a 108% and 3% decline in the EBITDA contributions from the Food & Nutrition business units and Agribusiness units, respectively. The Food Group's EBITDA in the first half was weighed down by the decline in demand as well as subdued profit margins. Correspondingly, EBITDA margins posted a decrease year-on-year by 187 basis points. Quarter-on-quarter, however, we have seen an improvement in EBITDA margins from 1.2% in the first quarter of this year to 7.1% in the second quarter. And this was mostly due to our ability to manage the decline in our selling prices amidst a lower raw material cost environment. Financing costs continue to pose a challenge to the group as they have increased 2.2x in the last year or by PHP 440 million. And this is primarily due to higher interest rates and loan borrowings across our operations. Combined with the decline in EBITDA, this resulted in a 7% year-on-year decline in the Food Group's net income which as mentioned finished at PHP 181 million or USD 3.3 million. So zooming in on revenue a little bit. The Food Group's revenue dropped 12% year-on-year to PHP 47 billion or USD 851 million, again, driven by lower revenue contributions from all divisions, except our Farms. The Food & Nutrition business unit contributed PHP 8.7 billion or USD 158 million in the first half of 2023, which is down 13% compared to the same period last year. Revenue reductions in our Flour and Trading divisions were, however, tempered by a 4% increase in revenue from our Farms division. The Farms revenue improvement was attributable to a 19% increase in the volume sold by the group as we increase the amount of meat imports and dedicated our internal production to sales of carcass which resulted in a higher volume yield. This rise in volume was, however, accompanied by lower average selling prices compared to the same period last year. And this was due to the influx of importations over the last few months to support the local supply of pork. Our trading division's 35% drop in revenue year-on-year was driven by a 49% decline in volumes sold. We have struggled to flush out higher-priced inventory of feed mill throughout the course of the year. This was further exacerbated by the shift of our customers to cheaper alternative ingredients, such as locally grown corn and the overall drop in feed production locally. Meanwhile, our Flour division's 7% drop in sales year-on-year was due to a 30% drop in volumes sold as demand in the Philippine market per Flour continues to remain weak. It is worth noting though that our Flour division has seen a slight increase in volumes sold in the second quarter of this year relative to the first quarter. And lastly, our Agribusiness unit delivered a total of PHP 36 billion or USD 650 million in revenue, which is down 7% year-on-year. The drag in revenue came from both our Aqua and livestock segments as we continue to face country-specific challenges related to demand across both. In terms of revenue contribution of the business units, 76% of the total revenue in the first half was generated by our regional Agribusiness unit, 19% was contributed by our Food & Nutrition unit and the balance was generated through the trading of Coal in Abaca. In the first half of 2022, the share of Agribusiness, Food & Nutrition and Abaca was 73%, 19% and 9%, respectively. Moving now to the Food Group's EBITDA for the first half. Our EBITDA in the first six months of 2023 decreased 38% year-on-year to PHP 2 billion or USD 37 million. Pulled down by the lower contributions from our Food & Nutrition and Agribusiness units by 108% and 3% respectively. Both our Flour and Agribusiness divisions operating profits were driven down by demand challenges, as mentioned earlier. However, despite our Agribusiness units revenue being lower year-on-year due to lower volumes, this was accompanied by a strengthening of gross profit per metric ton as we saw an improvement in raw material prices almost month-on-month in the first half of the year. Flour, on the other hand, is only starting to emerge from its losses in the first quarter, which were brought about by higher wheat prices and again, a depressed demand for our products. We have seen a better performance in the second quarter of this year as cheaper wheat has flowed through our mills. We have managed to bring up gross margins, though volumes continue to remain weak relative to the same period last year. Our trading divisions dropping EBITDA to negative PHP 50 million or negative $1 million was both due to lower volumes sold as well as a sharp decrease in margins because of lower prices for alternative feed ingredients available in the Philippine market at the moment. And lastly, for our Farms division, posted a negative EBITDA of PHP 131 million or minus USD 2.4 million, despite registering the aforementioned 4% growth in revenue. EBITDA was dragged down by lower selling prices, combined with a higher production cost which pertains to the carrying cost of underutilized assets in our farms and our mid processing assets. And lastly, moving on to the NIAT of the Food Group. The Food Group finished the first half of 2023 with a net income of PHP 181 billion or $3.3 million. We managed to fully reverse the PHP 534 million net loss or $9.7 million net loss in the first quarter, and this was primarily due to margin improvements in both our Agribusiness and Flour divisions. However, the group's NIAT was still short by 7% against last year. The subdued NIAT performance reflects a lower EBITDA contribution across all divisions and was exacerbated by a 2.2x increase in the rice of our financing costs due to increases in borrowing rates as well as higher working capital requirements in the first half of the year. Moving on now to strategic projects that are currently ongoing and we'll start with our Agribusiness division and the construction of a feed mill in the Yunnan province in China. The lease of our current feed mill plant in the Yunnan province will expire in April of 2024. And so we are in the process of constructing a feed mill with a capacity to produce up to 150,000 metric tons of feed per year. This facility can potentially be expanded to produce up to 270,000 metric tons and an additional room in our production line and mass conditioning line will be added to this facility to allow us to enter other segments of the livestock feed business in the region. Target completion date for this mill was adjusted from the fourth quarter of 2023 to the second quarter 2024 after a realignment of the schedule with our EPCM contractor. So as of now, the completion of filing works and construction of workshop pertaining [ walls ] are currently ongoing. Everything looks good. Moving now to Vietnam. In Long An, which is in the southern region of Vietnam. We are in the process of constructing a mill that will give us the ability to grow our livestock feed business segment in that area. This mill will have a capacity of up to 200,000 metric tons per annum, which can potentially be increased by another additional 100,000 metric tons per annum if we elect to add a third line to the facility. It will supplement -- this facility will supplement the production from our current facilities in Binh Duong and Dong Nai, which at this point in time are near maximum capacity in terms of production. Work on site continues for fencing, foundation, mill basement and silos basement, and we are also on track to deliver this project as scheduled. Moving on now to our Farms division, under the Food & Nutrition unit here in the Philippines. We continue to grow our brand and channel of meat distribution called The Good Meat, right? Last year, we were able to launch four physical stores around Metro Manila with a capacity of two metric tons per store per day. Our Batangas brands, which we launched in LIMA Estate was just launched last month, and we have a remaining branch in Kapitolyo, Pasig, which should be fully operational by the end of the third quarter of this year. The Good Meat is now available in the Philippines throughout different digital platforms such as Lazada, Shopee, MetroMart, Grab and our own website, thegoodmeat.ph, and we have strengthened our position in business-to-consumer channels for the meats business. With over 60 concessionaire stores and a presence in over 200 supermarkets such as Robinsons, Puregold, Shopwise and MerryMart. These initiatives will continue to allow the Food Group to develop our B2C chances further and expand the supply chain, ensuring better distribution to all our customers in relevant areas. So to recap the presentation, here are the key points of the Food Group's first half 2023 financial and operating results and project milestones. Overall, revenue was down due to demand challenges across the regional feed and Philippines Flour business. Group EBITDA declined 38% year-on-year to PHP 2 billion or USD 37 million due to lower operating profit. However, we have seen a significant improvement quarter-on-quarter due to better margins in both the Agribusiness and Flour businesses from, again, lower raw material costs that have begun to flow through our synergies. We finally stepped out of the red, reporting our -- after reporting a net loss of PHP 534 million in the first quarter. We finished the first half of the year with a net income of PHP 181 million. And lastly, for the two feed expansions of our Agribusiness unit, the focus on the first half of this year was really on the final design and civil works construction. And now we move on to the second half, where we focus on equipment installation. The new mills in Vietnam and China will be fully operational by December 2023 and April 2024, respectively. So Judd, that's all for the Food Group. Thank you very much.

Thank you, Tris. [Presentation]

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

Thank you, Judd. Good afternoon, everyone. I'm pleased to share exciting updates and milestones for Aboitiz InfraCapital. So let me start with our transport and mobility sector. We've witnessed remarkable progress at Mactan-Cebu International Airport. Our passenger traffic is steadily approaching pre-pandemic levels more than doubling year-on-year. We expect this momentum to continue as international routes resume and new destinations are established. Moving on to our digital infrastructure sector. Unity Digital continues to strengthen its position as a key player in the TowerCo industry. Right now, we are focused on the seamless transition of the 650 towers from PLDT-Smart and the 447 towers from Globe, which we acquired last year and early this year. In July, we successfully co-located three of the largest mobile networks equipment; Globe, Smart and DITO in one of our telco towers in Cebu. These developments further enhance Unity's Digital power footprint that drive growth in the sector. As for our economic estates business, we are continuously transforming our industrial developments into smart and sustainable estates by employing cutting-edge technologies in our operations. Last May, we also celebrated the 30th anniversary of our West Cebu Estate in Balamban, Cebu. Lastly, our water sector has achieved a major milestone. Apo Agua's laboratory has been accredited for drinking water analysis with the Department of Health and LIMA Water has obtained DENR approval to expand its laboratory services for the testing and analysis of affluent parameters. In the first half of 2023, AIC recorded a capital expenditure of approximately PHP 8.1 billion, this is 140% higher year-on-year. Our economic estate land acquisition initiatives have been the driving force behind this. Also contributing to this are the payments to PLDT and Globe for Unity's sale and leaseback towers that have been turned over. Meanwhile, our EBITDA had a 1% growth year-on-year. Note that AIC had a one-off gain from the sale of the coal business to Unity in 2022, hence the minimal growth. However, excluding this one of GAIN 2023, EBITDA would have shown a remarkable increase of 47% year-on-year because of the inclusion of MCIA earnings, Mactan-Cebu International Airport earnings. Now we go into more specifics about recent developments in our various business units. The first half of passenger traffic in Mactan-Cebu International Airport has exceeded expectations. This has been driven by a resurgence in domestic travel and gradual recovery of key international markets. MCIA passenger traffic reached almost 5 million, more than double the previous year. The rebound in domestic traffic has been robust with levels reaching around 80% of pre-pandemic levels. International traffic has also shown significant progress, reaching nearly 50% of pre-pandemic levels. The positive trend is expected to continue, domestic traffic is projected to exceed pre-pandemic numbers this July and international traffic has seemed to reach pre-pandemic levels by the fourth quarter of this year. We anticipate a faster recovery in the second half of this year as airlines resume major international routes and aircraft availability improves. I am also proud to share that last week, NCIA became the first airport in the Philippines to receive the airport customer experience accreditation for airport service quality from the esteemed Airports Council International. We are happy that our efforts to provide a seamless experience to all our passengers and promote excellence in our overall operations are being recognized. Our digital infrastructure Unity continues to boost the country's digital connectivity. In May, Unity entered into a sale and leaseback agreement with Globe Telecom. The agreement includes the acquisition of 447 telco towers located in Luzon. Furthermore, as part of the deal, Unity will also be building 200 towers for Globe in Visayas and Mindanao. To date, we have already closed 135 of 650 PLDT towers and 115 of 447 Globe towers under our respective sale and leaseback deal wedge. In July, we also successfully co-located the largest mobile network equipment in one of our telco towers in Cebu powered by Aboitiz Power's distribution utility visayan electric company. Aboitiz Infra for economic estates leads the way in creating a better future we continue to redefine business practices by employing sustainable solutions and leveraging smart technology in our operations. At LIMA estate, Lima Enerzone has successfully harnessed renewable energy sources for 21% of its total energy supply. These sources include geothermal and hydro power. Additionally, the retail electricity supplier of Aboitiz Power provides LIMA estates contestable customers with around 19.3 megawatts of renewable energy from its geothermal power plants. LIMA Central Business District as well as the majority of our industry allocators now utilize solar roof mounted systems to cover their energy demand. This has resulted in a total of 21.5 megawatts of solar power being generated. Our renewable energy initiatives help us reduce our carbon footprint. As to the Water Research Management in the estate, LIMA Water, Smart Water Network has resulted in 30% savings from its operational budget for repairs and reduced fuel consumption by 20%. This has also allowed the LIMA Water to significantly improve its response time during equipment failures and maintain a higher average facility uptime of about 99.3%. On to our other economic estate, the West Cebu Estate, which is a 540 hectares registered zone and a joint venture between Aboitiz and Tsuneishi Holdings of Japan. Home to 12 world-class companies that employ 14,000 Filipinos, West Cebu Estate is an emerging economic center in Balamban, Cebu. The ongoing 39-hectare industrial expansion will allow us to diversify our locator mix to include light to medium industries. We are also working on WC BERDE district registration to ensure alignment with global sustainability standards. The WC expansion will also include a central business district with commercial lots for sale. It is also planned to have a new neighborhood mall with a transport terminal and a communal park to support the everyday needs of the estate and the growing population in the area. To date, we have already begun to attract new investments that will generate new jobs for the communities investors in Cebu. Committed to ensuring sustainable water across generations. Apo Agua is now able to produce safe and reliable water for our -- for the customers of the Davao City Water District. Apo Agua's laboratory has also obtained accreditation from the Department of Health. The laboratory is capable of testing beyond the 10 mandatory parameters that the Philippine National Standards for drinking water. On the other hand, Lima Water has obtained approval from the DENR to expand services for testing and analyzing affluent parameters. The expanded services now include the examination of ammonia nitrate and color. So in summary, for the first half of 2023, AIC has already achieved remarkable results. We are looking forward to even more significant developments in the coming months. With three regional airport submissions now with the government, we are excited about building the first Philippine Airport platform. Additionally, we are committed to enhancing Unity digital infrastructure assets aiming to operate more than 1,000 macro towers and over 600 small sales poles by the end of the year. For our economic assets business, we anticipate the completion of our ongoing projects. Simultaneously, we are focused on developing new projects and acquiring new developments to further expand our portfolio. Lastly, the water sector, we are working on several aquifer studies to cover the expansion areas of our economic estates. Before I end, I'd like to extend my appreciation to my team, the members -- the team members in AIC for making these things happen. Thank you very much, Judd.

Thank you, Cosette. [Presentation]

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

Hi. Good afternoon to all. Okay. For RCBM, we wouldn't have the full financial update as usual, but we will provide you some market insights and also about RCBM initiatives in these days. Okay. We are seeing for the second consecutive year, a negative growth for the cement industry in the Philippines, which is quite unusual and also, I would say, unbelievable because cement normally has a positive correlation to the GDP with a GDP multiplayer of 1.3% or 1.4%. With a good GDP growth, still we see a negative growth in the cement industry as such, which is quite unusual. Hopefully, this would create the pent-up demand for the coming months or for the next year. Now what are the main reasons for the market to be negative in these days, okay? Apparently, there are basically three main reasons. We see the market -- our market contraction in the H1, to our estimate is roughly around 6% to 8%. So mainly three factors impacting the market demand. The first one is, of course, the global issue of high interest rates, which is also equally affecting Philippine. So this is leading to postponing of construction activities by many. Now secondly, there is a lot of delay in the government spending. Now apparently, it seems the allocation is not a problem, the fund allocation is okay from the government, but the problem is flying in the execution and or in the implementation. So where there is a lot of delay. In the last few months, we have seen some improvement in terms of releasing the plans and also execution activities is concerned. Of course, the weather at the beginning of the year is also negatively impacted the consumption in the first two months, at least, especially in the VisMin area. Hopefully, going forward, the interest rates in environment should be better, and I think we all believe that the interest rate environment has peaked now and then probably reverse trend should start either at the end of this year or maybe the beginning of the next year. So this thing should improve in the coming months. But the good news is that the government is still committed to 5% to 6% of the GDP for the infrastructure projects and also now the build better [ personal ]. So I think even the recent SONA meeting also, the President has a big -- the government's commitment towards infrastructure projects. And also, we have seen a big announcement on what should I say, on the housing sector, on housing sector, 1 million houses per year. Hopefully, all these things should improve the cement demand in the coming months. Now coming to the cost side. Okay. We have seen softening of energy prices in the last few months, which is quite good news. So in the H1, RCBM was not able to benefit from the softening of the energy prices mainly because we have -- we are impacted by the high inventory at the beginning of the year, mainly because we have a lower demand in the Q4 last year, so that has led to a high inventory which is lying in the plan. So that's the reason why H1 did not really benefit from lower energy prices, but H2 will really benefit from the lower energy prices, both in terms of fuel costs and also electricity prices are concerned. Now apart from this, we are also equally focused on our sustainability efforts. So we are committed to reducing our CO2 footprint. We are actively increasing our alternative fuel capacity. So we are -- we have also started new facilities, both in our Batangas Plant and also Bulacan and also in [ Pristina ] plants. Last year, if you remember well, we have doubled our capacity, our AF utilization. And this year, we are further improving by another 8%, so roughly around 24% to 25% of our fuel consumption will be coming from alternative fuels. This will not only improve our sustainability efforts, but also it will help in our operational excellence in terms of reducing our energy cost also. Apart from operational excellence, we are also actively working with the SNAP in supporting our -- the Philippine government by local campaign as a proud manufacturer of the best quality cement in Philippines. So these efforts hopefully should result in a much better environment and economic performance in H2. We hope to go back to BERDE in H2, That's what I can say. That's all from my side.

Thank you, Vara. [Presentation]

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

Okay. Good afternoon, everyone. Key financial metrics as of the second quarter of 2023 show that Aboitiz Land continues to be behind both against the year's budget and last year's performance. Our residential sales are down by 24% from last year, up PHP 1.9 billion. Aboitiz Land contributed total revenues amounting to PHP 1.8 billion for the first half of 2023, a 7% dip from the previous year. This is primarily due to construction-related delays. Gross profit declined by 8%, while our core EBITDA decreased by 13% from the previous year. Next slide, please. The negative revenue variance is primarily due to construction-related delays particularly in The Villages of Lipa and Seafront Residences. The causes of these construction delays have been identified. Aggressive action plans are being implemented that will see a catch-up in the second half that eventually will result in Aboitiz Land meeting most of its key financial and operational metrics by year-end. Sales in the first half of the year is slightly lower than year-to-date target, but we are confident that the full year targets will be met with the release of new inventory in some of our high-value projects. A portion of decline in sales year-on-year was expected as the midyear target was 10% lower than last year's actuals. Most of the sales in the first half were from mid-market projects versus the high-end projects of the book in the same period last year. A comprehensive sales recovery plan is in full swing, which includes strategic activations in manpower, expanded deployments and dynamic marketing initiatives that will elevate sales takeup across all our projects in the coming months. True to its promise of innovating ways to lead more families home, Aboitiz Land is dedicated to engage in with property seekers during this time of market growth and recovery. Our Bespoke and proprietary Vecino app sets us apart in international markets, providing OFWs with a reliable tool to check their investments. To date, successful post-pandemic international sales deployments in Dubai and Singapore have resulted in over PHP 421 million in reservation sales. These deployments have enabled us to move our mid-market inventory amidst high local inflation by effectively catering to the international clientele for optimizing the weak peso. Our hybrid or digital approach to marketing has resulted in steady yields in leads generation. The Land Your Future campaign targeted towards l Lot Only buyers have increased Lot Only sales by 15% year-on-year. At Aboitiz Land we believe in staying ahead of the curve but by leveraging innovative solutions that we define the way we operate and elevate the customer experience. Designed to create a seamless home buying journey, Aboitiz Land recently launched OneVecino, our digital ecosystem comprising of digital services that guide our vecinos from pre-purchase to property experience. It includes, number one, the Vecino app, our Bespoke and proprietary app that allows buyers to access virtual tours, reserve a unit, see payment records, track construction updates, have virtual turnovers and more. Number two, the Vecino Pay, which links buyers to payment portals that enable safety, convenient and hassle-free online payments. Number three, the Vecino Support, where our vecinos can submit service request tickets, find answers to common customer concerns in the knowledge base and view a history of certain tickets. Number four, the Vecino Properties, a digital property management app that enables access to community announcements, track billings and payments, submit tickets for service requests, visitor management and more. As part of our data-centric transformation, we also rolled out some internal optimizations within our team. We launched the vendor portal, a one-stop shop solution for optimized and convenient payment processing for our vendors. We have also started using GAVITI, an automated workflow solution that streamlines the collection process and accelerates cash flow generation. We believe that incorporating these solutions into our organization will boost productivity and deliver greater value to our stakeholders. Lastly, through the innovative use of generative AI tools, we are streamlining our efforts in content creation. By automating this process, we can focus on what truly matters, providing exceptional experiences for our valued customers and stakeholders. This approach is not only elevating the quality of our content, but also allowing us to stay agile and responsive to an ever-evolving market landscape. The strong market reception for our residential products in Cebu and Batangas has propelled us forward and we're excited to announce upcoming project phases in the second half of the year. We have recently released inventory in the latest phase of Priveya Hills, one of our prime lapse only developments in Cebu. We are also thrilled to unveil our latest project, the Strides at LIMA, a cluster of mid-rise buildings thoughtfully designed to cater to the housing needs in Lima economic state. With growing investor-driven demand in the area, this marks our first mid-rise development in Luzon, representing a significant milestone for Aboitiz Land. Elevating the lives of our future homebuyers, the strides at LIMA will redefine smart living in an accessible and connected vicinity, offering sustainable living at its finest. With the development master plan with the future in mind, we are highly optimistic about the financial and market success of this new product launches. To summarize, here are our key takeaways; Aboitiz Land continues to navigate headwinds, particularly construction-related delays that had an impact on our revenue and collections. However, we are finishing the obstacles head on with residue action plans. Our team is fully committed to catching up and meeting most of our year-end targets. In Aboitiz Land, innovation is engraved in our DNA. We launched OneVecino, our digital ecosystem comprising of digital services that guide buyers from pre-purchase to property experience. Our internal digital solutions have also been game changers from GAVITI in collections, fresh desk in customer service, the vendor portal in finance to the usage of platforms like Freshmarketer, Synthesia, Protium and Midjourney in marketing. We are revolutionizing the way we do our work and elevating customer experience. The second half of the year, as you see new phases of our esteemed developments, Priveya Hills in Cebu and The Strides at LIMA in Batangas. These new phases are proof of the strong market perception for our project. While we acknowledge the challenges both by the interest rate environment and surging inflation, we remain optimistic about the Philippine residential demand in the second half of 2023. We are seeing a robust steady demand for our mid-market inventory and the interest rate environment becoming less of an issue to our buyers. Our strategic initiatives, including new project challenges and a focused approach on overseas Filipino markets position us for continuous growth and improved financial performance. We are diligent in our efforts to navigate this volatile landscape, reinforcing buyer prequalification and equity checks to strengthen the health of our receivables. Thank you. Back to you, Judd.

Thank you, Dave. And now to present AEV's financials as well as discuss our proposed acquisition of CCBPI, I will turn you over to Mr. Toto Hilado.

Thank you, Judd. Good afternoon, ladies and gentlemen. Thank you very much for joining us this afternoon. I will present today the consolidated numbers for the first half to be followed by a presentation regarding the Coke transaction that we disclosed earlier this afternoon. AEV recorded consolidated revenues of PHP 159 billion for the first half of 2023, this was 17% higher year-on-year. This was mainly driven by AboitizPower as a result of higher plant availability across its portfolio. Consolidated EBITDA is likewise higher by 24%. Our second quarter performance was higher compared to the previous quarter, primarily due to higher portfolio trading and contracting margins and planned availability in our power business and better performance in gross profit from our Food Group as it saw improvement in raw material prices. It was also higher by 12% compared to the same period last year, mainly due to fresh contributions from GNPD. Our first half beneficial EBITDA was 13% higher compared to last year, this was mainly due to the 22% EBITDA increase of AP. Next slide, please. At the consolidated level, EBITDA was up by 24%, primarily driven by the Power business, which was up 38%. In terms of net income, net income was down 11%. But if we take out nonrecurring items, our core income rose from PHP 9 billion to PHP 11 billion or higher by 23%. Next slide, please. As for our balance sheet, we ended the first half with total assets of PHP 810 billion or just slightly higher than the PHP 808 billion level last year. Total equity for the first half reached PHP 359 billion from PHP 350 billion in '22. Total cash levels went down to PHP 108 billion versus PHP 128 million in the previous year due to investments in the SBUs, which included the SRO for UnionBank earlier this year. As for our ratio, current ratio stands at 1.8x, and debt ratio like debt to equity and net debt to equity remained pretty much at the same levels of 1.3x and 0.7x, respectively. At this point, allow me to explain the disclosure done earlier this afternoon about AEV having submitted a nonbinding bid for the bottling operation of Coke in the Philippines. Next slide, please. So let me start by providing the context under which we are diversifying in the consumer market. We have entered and exited multiple businesses since our Abaca and shipping days. Since then, our foray into the energy business in 1918 has proven to be one of the most successful investment we have ever done, to say the least. We entered the Food business in 1958 via the a Flour Milling company. We made our first offshore venture in 2014 via an Aqua Feeds business in Vietnam. We expanded our offshore footprint in 2018 by acquiring Gold Coin, which is our animal feed business with plants in Indonesia, Thailand, Vietnam, China, and Malaysia. In 2021, we entered into a strategic partnership with the entry of JERA in AboitizPower of up to 25% ownership. JERA is the largest power generator in Japan. This provided us with a strong technical partner for our energy business in our quest for energy transition. At the same time, it unlocks significant capital that has allowed us to diversify into infrastructure investments to avoid this [ intra ] capital and expand our consumer market presence with the acquisition of Mactan International Airport and the consumer banking business of Citibank through UnionBank. Today, we have announced our nonbinding bid for the buckling operations of Coke in the Philippines. This is a major milestone in our aspiration to increase our consumer-related business as part of our diversification strategy. So allow me now to provide the details of this proposed investment. The strategic rationale behind the proposed transaction is compelling. First, this is an opportunity for us to acquire a minority stake in an established and well-run business in an attractive and growing market. We have been reviewing the potential transaction and have invested significant time understanding Coca-Cola Beverages Philippines CCBPI's business and the attractive market in which it operates. And put simply, we are excited with the journey ahead. Second, we will work with a strong joint venture partner, Coca-Cola Euro Pacific Partners, or CCEP, which shares our passion and focus on people and culture, innovation and doing business sustainably. Third, with over 100 years of operations across multiple sectors, which leverages our local know-how and business acumen and familiarity with the Filipino consumer to bring added value to our partner's distinctive battling experience. Fourth, this is an opportunity to leverage best practice and talent from the 29 other markets served by CCEP, supporting our great transformation journey. It offers exciting learning experiences for Aboitiz on marketing, distribution, logistics and operations. And finally, this builds on Aboitiz portfolio diversification strategy to become the Philippines' first techglomerate. We have always taken a proactive stance to grow and diversify our portfolio, especially into non-power and consumer or retail-oriented businesses, which will provide us a bigger ecosystem for cross-selling, but better way to enter this space than to acquire a stake in an iconic and profitable global brand. Now on to the proposed transaction. The proposal is for CCEP and Aboitiz to acquire 60% and 40% of CCBPI, respectively, at an enterprise value of around $1.8 billion. This is a business with attractive profitability and growth prospects. Profit before tax for fiscal year '22 was at $90 million. As CCEP would be acquiring a majority stake CCBPI is expected to be consolidated into CCEP from an accounting perspective with Aboitiz minority stake recognized as a noncontrolling interest. Meanwhile, for Aboitiz investment in CCBPI will be accounted for using the equity method of accounting for investment in associates. From a financing perspective, Aboitiz intends to fund its share of the acquisition with an optimal mix of debt and cash. We recently announced a plan to offer up to PHP 17.5 billion worth of fixed rate retail bonds by the third quarter of this year. It also has cash generated on its recent sales from the JERA divestment in AP. The transaction will be immediately EPS accretive and by working together with CCEP, the Coca-Cola Company, we would be able to unlock even more potential for CCBPI. So clearly, a great use of our cash, and therefore, a great deal for our shareholders. Next slide, please. About our partner -- about the bottling business here. CCBPI operates in a large and attractive Non-Alcoholic-Ready-to-Drink or NARTD category currently valued at around USD 8 billion. With the NARTD category, sparkling or soft drinks is well established representing around 55% of volume with per capita consumption over 4x higher than the average for the Asia Pacific region. There remains attractive headroom for growth when compared to developed markets and with consumer trends following in their direction, future growth opportunities would include low and no sugar, energy and alcoholic drinks. It is also a market that comes with attractive macroeconomic indicators. The Philippines is the 13th largest country globally with solid GDP growth, a population of 115 million with 1.5% population growth every year, a young population and fast-growing middle class. So all in all, it is clearly a market that offers long-term growth prospects. Next slide please. Coca-Cola Philippines dominates the beverage market. It is the #1 beverage supplier currently accounting for over 40% of the NARTD category and nearly 70% of this sparkling category. Clearly, a very dominant market share. In the Philippines, CCBPI serves around 1 million outlets through an extensive supply chain supported by 9,000 highly engaged colleagues known as Coca-Cola Tigers. As an established business with a proven track record, CCBPI has delivered solid top and bottom line growth. Last year, CCBPI delivered around 650 million unit cases, $1.7 billion of revenues and $90 million of profit before tax. And like CCEP and Aboitiz, CCBPI, has a strong focus on people and sustainability. For example, around 50% of CCBPI's sparkling volume is in returnable glass packaging. As for our partners, CCEP, its precursor business in Australia, Coca-Cola Amatil was formed in 1904. Today, it is one of the largest consumer goods companies and the world's largest Coca-Cola Bottler by revenue, EUR 17.3 billion with a return of 9.1% in 2022. It operates in 29 countries across Western Europe, Australia, the Pacific and Indonesia with 33,000 employees serving 2 million customers and 600 million consumers. It is also listed on 4 stock exchanges, Nasdaq, London Stock Exchange, Euronext and Spanish exchange. More importantly, CCEP shares Aboitiz's focus on people, culture, innovation and sustainability supported by a long-term mindset. Aboitiz has access to Coke's second largest innovation center based in Belgium, where products for Europe, the Middle East, Africa and part of South Asia are developed. It is using -- it is already using 100% RE in Europe and has a clear ambition to be net zero by 2040. By working together with CCEP, we believe we will be able to unlock even more potential for CCBPI. And of course, we are proud of what we bring to the table as one of the leading conglomerates in Southeast Asia. We are a publicly listed company with over 100 years' experience working across multiple sectors, including Power, Banking, Food, Land, Infra and Construction and Data Science, and we are very familiar and comfortable working with JV partners across our business. Our considerable experience of the market and cultural dynamics, together with our strong local connections with no doubt being valuable to the partnership. We hope to leverage our local know-how and business acumen and familiarity with the Philippine consumer to bring added value to our partners distinctive bottling experience. Next slide, please. So at this point, in terms of the next steps, of course, this transaction is not yet finalized. It will be subject to completion of due diligence, which is well underway, and then all parties, of course, have conclude the respective agreements and the transaction will be subject to regulatory approval from PCC. And we are looking possibly at an early close by the end of November or at the latest by January of 2024. To summarize, here are our key takeaways for you today; our first half results showed good growth in our recurring income with core net interest -- net income after tax up 23%, our second quarter numbers are showing good growth, and we think this is sustainable for the rest of the year. We have deployed capital in Aboitiz Infra and UnionBank to execute on our consumer market strategy, examples of which are the acquisition of Mactan Airport and Citibank's consumer business. Our investment in Coke bottling business further increases the consumer market-based business and we are confident that there will be significant synergies with the Aboitiz ecosystem. We look forward to delivering on our commitment to continue the growth story of AEV anchored on our strategy to diversify the businesses we are in. Thank you. Back to you, Judd.

Thank you, Toto. Before we move on to our Q&A, we would like to request our audience to complete a survey that will pop out on your screen right now. [Presentation]

Now on to our Q&A. We will address questions related to AEV. It's nonlisted businesses as well as its proposed acquisition. Questions related to our other publicly listed companies and the UnionBank and AboitizPower will be addressed offline after this briefing. We have received advanced questions. We will take them up now. If we have time, you will address questions with live on the platform. First question, any update on AEV's corporate bond issuance, Toto?

We're planning to do transaction sometime in September, that will be a total amount of about PHP 17.5 billion, respectively, with tenors of 2, 5 and 10 years.

Next question. What is Junk food tax risk of Coke Philippines?