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

Hello, everyone. We're now going to report the financial and operating performance of our publicly listed company, Aboitiz Equity Ventures as well as our non-listed businesses namely our Food Group, AboitizLand, Aboitiz InfraCapital and Republic Cement. But first here are the house rules. Questions have been requested from our guests in advance. However, since this is a face-to-face event, we will prioritize those as live analysts present here today. Questions submitted prior to this event will be answered at the end of the Q&A, if there is enough time. Those who are not able to answer or address during the Q&A will be answered via e-mail. The briefing will be recorded for documentation purposes and will be uploaded on our website right after this event. By joining this session, you consent to your name, voice and image being recorded for use and dissemination. If you do not consent to the foregoing, please do not join the session. Our program will flow as follows: To present for Food, we will have Mr. Tristan Aboitiz, President and CEO of Food Group. To present for Land, we will have Mr. Dave Rafael, President and CEO of AboitizLand. To present for InfraCapital, we have Ms. Cosette Canilao, president and CEO of Aboitiz InfraCapital. To present for Cement, we will have Mr. Varaprasad Kalepalli, CFO of Republic Cement. And to present AEV's consolidated financials as well as discuss our proposed acquisition of Coca-Cola Bottles Philippines, we will have Mr. Toto Hilado, CFO of Aboitiz Equity Ventures. At the end of the presentation, we will conduct a satisfaction survey and then proceed to our Q&A session, where we will address questions related to AEV, its nonlisted businesses as well as proposed acquisition. Questions related to our other publicly listed companies, namely UnionBank and AboitizPower will be addressed off-line after this briefing. And now on to our presentations, beginning with a video from our Food Group. [Presentation]

All right. Good afternoon, everybody. Thanks for liking to spend your time with us. I will begin with the Food Group's financial highlights for the first 9 months of the year. The Food Group ended with a net income after tax of PHP 499 million. Year-on-year, this is higher by 99% due to improvements in margins from our Flour and Agribusiness and despite challenges affecting our sales volumes across all business divisions. The first 9 months of the year saw total revenues decline by 9% year-on-year, driven by a 10% decline in the Food & Nutrition segment's revenue, along with a 10% decrease from our regional Agribusiness unit. Key contributors to the decline in revenues from our Food & Nutrition unit were our Flour division, which is down by 5%, and our Trading division, which was down 27%. The decline in revenue across the company was driven by lower sales volumes versus last year. Comparing quarter-on-quarter, however, we see a sustained uptrend in the revenue from our Food & Nutrition unit along with a slight drop in revenue from our Agribusiness unit in the third quarter. EBITDA was also down by 21% year-on-year to PHP 3.3 billion or about USD 60 million, driven by a 103% decline in EBITDA contribution from our Food & Nutrition business unit, which was partially offset by our Agribusiness unit, which posted a 4% increase year-on-year. The Food Group's EBITDA was weighed down by a decline in demand as well as subdued profit margins in our Farms, Meats and Trading businesses. Correspondingly, EBITDA margins posted a decrease year-on-year by about 68 basis points. Quarter-on-quarter, however, we have seen an improvement in EBITDA margins from 1.2% in the first quarter to 7.1% in the second quarter and 5.1% in the third quarter of the year, mostly due to our ability to manage selling prices as our raw material costs declined throughout the year. Financing costs continue to pose a challenge to the group as they have increased 1.8x year-on-year to about PHP 486 million. And this is due primarily to the rise in interest rates across our operations. In spite of the challenges in volume, the Food Group posted a higher net income due to active management, again, of our pricing strategies and effective cost management across the region. Zooming in on revenue now. The Food Group's revenue dropped 9% year-on-year to PHP 73 billion or USD 1.3 billion, and this was driven by lower revenue contribution across all business units of the group. The Food & Nutrition business unit contributed PHP 13.1 billion or USD 237 million, which is down 10% compared to the same period of last year. Revenue reductions in our Flour division are due to the 11% decline in demand for our flour products as elevated wheat prices have really left their mark on the consumer. Farms meanwhile, declined 3% as our production volumes dropped over said period. They are expected to be higher on average in the fourth quarter of the year, however. Our Trading division's 27% drop in revenue year-on-year was driven by a 40% decline in volumes sold as we have struggled to flush out high-priced inventory of feed wheat. This was exacerbated by the shift of our consumers to cheaper alternative ingredients, such as local corn and the overall drop in feed production locally, which has hurt the demand for all feed grains. Lastly, our Agribusiness unit delivered a total of PHP 54 billion or USD 975 million in revenue, which is also down 10% year-on-year. The drop came from both our Agua and Livestock segments as a reduction in the population of hogs around the region and lower overall consumption of most classes of protein has had an impact all the way down the value chain. In terms of revenue contribution of the business units, 75% of the revenue came from our Agribusiness division, 18% was contributed by our Food & Nutrition division. And the balance of the revenue share was generated through the management of Coal trading in Abaca. The same percentage of revenue contribution applies to the same period last year. Moving now to the Food Group's EBITDA. Our EBITDA for the period decreased 21% year-on-year to PHP 2 billion or USD 60 million, again, pulled down by lower contributions from our Food & Nutrition unit which declined by over 100%, although this was partially offset by an increase in Agribusiness of about 4%. Both our Flour and Agribusiness division's operating profits were driven down by the aforementioned challenges with demand for products. However, despite our Agribusiness units revenue being lower year-on-year, this was accompanied by the strengthening of our gross profit per metric ton as we saw incremental improvement in raw material prices almost month-on-month across the region. Flour, on the other hand, continues to show better performance in the second and third quarters of this year, as cheaper wheat has continued to flow through our mills, and we have managed to bring up our gross margins along the way. Our trading divisions dropped in EBITDA to negative PHP 43 million or negative USD 781,000, was both due to lower volume and a sharp decrease in margins. Again, due in large part to lower prices for alternative feed ingredients available in the Philippine market. Meanwhile, our Farms division posted a negative EBITDA of negative PHP 298 million or minus USD 5.4 million. EBITDA was dragged down by lower selling prices for both live hogs and meats combined with higher production costs pertaining to the carrying costs of our underutilized farms. And now moving on to the Food Group's NIAT. The Food Group finished with net income of about PHP 499 million or USD 9 million. We managed to fully reverse the PHP 534 million net loss that we reported in the first quarter and continue our positive position well into the third quarter of this year, with margin improvements in both our Agribusiness unit as well as our Flour business. Heading now to the strategic projects that are currently ongoing across the region. Starting with our Agribusiness division and the construction of our Yunnan Mill in China. The lease of our current Kunming plant in the Yunnan province of China expires in April of 2024. And so we're constructing a feed mill with a capacity to produce up to 150,000 metric tons of livestock feed per year to replace this. This facility can potentially be expanded to produce up to 270,000 metric tons per annum. We've added an additional room in our production line and mass conditioning line to allow us to enter into other segments of the livestock feed market in the region, which typically contribute to higher margin per metric ton. The target completion and operational date still remain to be the second quarter of 2024, so we're on track to deliver this project as scheduled. Moving now to Vietnam. The Long An Mill in Southern Vietnam will give us the ability to grow our livestock feed business in the southern region of the country. This mill will have a capacity of up to 200,000 metric tons per annum, and this can potentially be increased by another 100,000 metric tons if we elect to add a third line in succeeding years. This facility will supplement the production from our Binh Duong and Dong Nai plants, which are near maximum capacity at this point in time. The target operational date of this expansion was moved slightly to the first quarter of next year from the fourth quarter of 2023. This is due to the potential extension of the construction -- sorry, by delays in the design and procurement portion of the mill. For our Farms division, which is under our Food & Nutrition business in the Philippines, we continue to expand and grow our brand and channel of meat distribution, The Good Meat. Last year, we were able to launch 4 physical stores around Metro Manila located in Libis, Paranaque, Quezon City and Los Piñas, each of these with the capacity to produce up to 2 metric tons per day per store. This year, we've opened two more branches, one located in Batangas in our LIMA Estate and the second in Kapitolyo, Pasig, fully completing the target number of branches for the year. The Good Meat is now available in the Philippines through different digital platforms, such as Lazada, Shopee, MetroMart, Grab and The Food Group's online meat stores, thegoodmeat.ph. Furthermore, the group has strengthened its position in the business-to-consumer channels for the Meats business with 60 concessionaire stores and a presence in over 200 supermarkets such as Robinsons, Puregold, Shopwise and MerryMart. These initiatives will allow the food group to develop its B2C channels further and expand our supply chain, ensuring better distribution to all customers in relevant areas. So to recap, here are the key points of the Food Group's year-to-date numbers. Our business segments across the region faced challenges in keeping up with our volume forecast, and this led to a reduction in revenue of about 9% year-on-year. Our group EBITDA declined 21% year-on-year to PHP 3.3 billion, dampened by the losses in our Farms and Meats division. We finished September year-to-date with a net income of PHP 499 million, which is higher versus the reported earnings over the same period of last year. And we are well on track with our feed mill expansions in China and have experienced a slight delay in our Vietnam expansion. That's all for the Food Group. Thank you very much.

Thank you, Trist. [Presentation]

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

Thank you, Judd. Good afternoon, everyone. So as of the end of the third quarter of 2023, AboitizLand's key financial metrics indicate a gradual recovery trend, instilling confidence that this positive trajectory will persist as we approach the year-end. Our residential sales are now only down 11% from last year, PHP 3.2 billion. AboitizLand contributed total revenues amounting to PHP 2.9 billion for the first 9 months of 2023, an improvement from the previous year. Gross profit and our core EBITDA also increased year-on-year. While our top line lags slightly behind this year's target, our bottom line remains positive due to lower project and operating costs as well as gains from asset monetization. Despite our revenue nearly reaching the prior year's level, it still falls behind year-to-date targets due to construction-related delays, particularly in the Villages at Lipa and Seafront residences. The cause of these construction delays have been identified. We have implemented comprehensive action plans to address these challenges that will result in AboitizLand meeting most of its key financial and operating metrics by year-end. While sales as of the third quarter are still slightly below year-to-date targets, we anticipate achieving our annual targets through the release of new inventory in our high-value projects. The majority of sales in the first 9 months were from mid-market projects compared to high-end projects booked last year during the same period. We expect recognizing increased sales from our expanded international sales deployments and new project launches this year. Along with the success of our dynamic marketing initiatives, we are optimistic that sales pickup will improve across all our projects for the remainder of the year. AboitizLand is proud to announce our achievements in 2023 from different award-giving bodies. We were awarded as one of the best employers in Asia, 2023. And Seafront Residences was awarded the best housing development in the Philippines as well as other awards for Ajoya Cabanatuan. The Villages at Lipa, Amoa and Foressa; our property online portal for digital home buying was also recognized at the International Finance Awards. These awards reflect AboitizLand's commitment to creating valuable living spaces for our [ Filipinos ] here and abroad. As we continue to innovate ways to lead more Filipinos home, AboitizLand remains committed to engaging with property seekers during this period of market growth and recovery. Our bespoke and proprietary Vecino App sets us apart in international markets, providing OFWs with a reliable tool to manage their investment. Our recent international sales deployments in Dubai and Italy held from September to October were highly successful, resulting in over PHP 417 million in reservation sales. These strategic efforts have allowed us to move our inventory and navigate high local inflation by effectively serving international clients who leverage the weaker peso. Year-to-date, our international sales have surged accounting for 20% of total sales generated for 2023. This makes an impressive threefold increase compared to the previous year when international sales only represented 6% of our total sales in 2022. This remarkable growth underscores the success of our international sales deployments and the significant impact in our overall sales performance. Set to redefine investment opportunities in Lipa, Batangas. We have recently launched our latest project, the Strides At Lima, the first condominium within the expansive LIMA Estate, that represents AboitizLand's competitive foray into vertical developments. This PHP 2.5 billion project comprises of 3 mid-rise buildings, Slate, Amber and Cider. Slate the first to be released is a 7-story building offering a total of 217 units, including studios and 1-bedroom units ranging from 18 square meters to 47 square meters. These options align perfectly with increasing housing demand in this esteemed economic hub of the South. To date, we have already achieved over PHP 130 million sales take up for the Slate building, which represents 20% of total inventory. The amenities promote work-life balance and include co-working spaces, a pool with lounges and a deck, a gym, function rooms and a roof deck garden and retail space. The development adheres to Edge certification standards, emphasizing our resource efficient design for water and energy conservation. The Strides in Lipa will be completed by building phases with Slate scheduled for completion in 2027, Amber in 2028 and Cider in 2030. A project embodies innovation, project -- progress and our commitment to sustainable living, fostering our optimism for this -- for its financial and market success. To summarize, here are our key takeaways. AboitizLand encountered challenges in 2023, notably construction delays that affected our revenue collections. Nevertheless, we put strategic plans in place to address these issues. It's worth noting that our efforts have already begun to show a positive impact on our bottom line, thanks to effective cost management in our projects and operations. Our commitment to excellence has been recognized. We've earned accolades as one of the best employers in Asia and for our outstanding projects in the country. These recognitions reflect our unwavering dedication to creating distinctive high-quality communities that provide lasting value for our stakeholders. We are resolute in our ability to hit our full year sales targets. We have a high level of confidence, supported by the success of our international sales deployments this year and the promising product launches on our horizon, which are poised to get us back on track. Next, we are proud to unveil our recent projects, the Strides at Lima, marking our first foray into vertical development at LIMA Estate. This mid-rise condominium cluster nestled in the vibrant community in Lipa, Batangas, embodies our commitment to pioneering new and innovative residential options. Lastly, despite economic headwinds, including interest rate fluctuations and surging inflation, we maintain a bullish outlook for the residential demand in the Philippines in 2023. We have observed growing demand for our mid-market inventory and we're adapting the shifting of buyer preference by focusing on affordable payment schemes as the interest rate environment becomes less of an issue for our buyers. With our strategic endeavors in compassing new project launches and a dedicated focus on overseas Filipino markets, we are positioning ourselves for sustained growth and an improved financial performance. Thank you very much.

Thank you, Dave. And now to present for Infrastructure. I will turn you over to Ms. Cosette Canilao.

Hi. Good afternoon, everyone. So for Aboitiz InfraCapital, AIC has demonstrated remarkable growth in the first 3 quarters of 2023 as reflected in the significant increases in both revenue and EBITDA during this period. Our strategic focus on investing in new and existing assets significantly contributed to sustaining AIC's growth trajectory. Today, we are proud to share the milestones that our businesses have achieved across our 4 sectors, namely economic estates, water, digital infrastructure and transport and mobility. We believe that these 4 sectors are crucial in driving the country's economic development. In the airport sector, Mactan-Cebu International Airport or MCIA continues to exemplify world-class standards in its operations, catering to the renewed interest in travel among both domestic and international passengers. For our water businesses, we are actively exploring innovative solutions to enhance the production and efficiency of our water and wastewater services while ensuring sustainable water supply for the future. And under the Digital Infrastructure space, Unity Digital Infrastructure is strengthening its position in [ power pole ] industry through the development and acquisition and operation of telecommunications towers and small cells, poles nationwide. Finally, for our economic aspects, we are proud to be known as Asia's leading developer of smart and sustainable industrial-anchored mixed-use developments. We continue to attract both local and foreign businesses to locate in our thriving industrial developments and create thousands of jobs up opportunities. Now let us go into AIC's financial performance. As of September 2023, AIC's revenues have already reached PHP 5 billion, 76% higher year-on-year, a 12% increase compared to the previous quarter. Our EBITDA now stands at PHP 2.1 billion, reached 42% higher year-on-year and more than double compared to the EBITDA of the previous quarter. This remarkable growth is driven by the acquisition of the 33% share in MCIA, allowing AIC to generate income from all the plant sectors. Contributing significantly to AIC's EBITDA growth is the ramp-up of MCIA's airport traffic and the robust sales of economic estates. With regards to AIC's NIAT, we achieved a year-on-year growth of 12%, inclusive of gains from debt refinancing of MCIA. In terms of capital expenditure, AIC reported CapEx of approximately PHP 9 billion as of September 2023. This supported the expansion of economic estates, the sale of leaseback -- the acquisition of the telecom towers of Unity Digital Infrastructure and the construction completion of the Davao City bulk water supply project by Apo Agua. With our continuous growth and expansion, I am proud to share that AIC has now scaled to PHP 47 billion in assets, PHP 21 billion higher than last year, reflecting the breadth and value of our operations. Now let's delve deeper into our economic estates performance. AIC economic estates further solidified its position as the country's leader in smart and sustainable industrial anchored mixed-use development in the country, having over 1,600 hectares of land and 200-plus locators. The latest financial performance of our economic estates reflects the company's strong growth. Its annual revenue increased substantially from PHP 2.7 billion to PHP 3.8 billion. Similarly, it's EBIT declined to PHP 1.8 billion from PHP 1.3 billion. Our economic estates recently bagged 8 awards from the Propertyguru Philippines Property Awards. And notably, AICEE was distinguished as the best industrial development, while West Cebu Estates earned the title of Best Industrial Development. We are also set to represent the Philippines in multiple categories at the Propertyguru Asia Awards later this month. Moreover, LIMA Tower One received well precertified -- precertification given to buildings that ensures the health and well being of occupants. It has also received [indiscernible] certification from the Philippines Green Building Council. Meanwhile, in a strategic move to expand our footprint, we have also announced the acquisition of 200 hectares from Central Azucarera de Tarlac in Tarlac City. This area is projected to emerge as the second largest manufacturing hub in the Philippines and will drive economic activity in the region. Moving to our airport sector. MCIA has witnessed a strong rebound in air traffic as it steadily increased towards prepandemic levels. Approximately 7.5 million individuals have visited Cebu to date, which represents a year-on-year increase of 104%. Due to the sustained momentum of resumption in travel, MCIA has experienced substantial revenue and EBITDA growth. As of the third quarter of this year, MCIA's revenue have reached PHP 2.4 billion, which is more than double last year's revenues. Simultaneously, the company's EBITDA has increased threefold, reaching PHP 1.4 billion versus the previous year. This robust recovery is largely attributable to the increasing number of domestic and international destinations offered by MCIA. At present, the airport has established connections with over 30 destinations which are serviced by over 15 airlines. Recently, MCIA began offering direct flights to Singapore and Hong Kong, which were made possible by Singapore Airlines and Royal Air. MCIA is widely acclaimed for exemplifying Philippine hospitality and world-class customer service. Recently, it became the first and only Philippines airport to be awarded with the Airport Customer Experience Accreditation by ACI world. Additionally, SSP-Mactan Cebu Corp took home the Front of the House award for Asia Pacific at the FAB Superstars 2023 Awards. And just yesterday, MCIA received the Austrian Green Planet Building Award from Advantage Austria, Philippines and the Austrian Federal Ministry of Climate Action Environment, Energy, Mobility, Innovation and Technology. Now let me share the developments in our Water business. Currently, we are actively exploring opportunities to expand our presence in the water sector. Our commitment is to deliver smart and sustainable water across generations through our water business units. Presently, Lima Water oversees the water and wastewater services for our economic estates businesses. Lima Water provides an average of 9.7 million liters of water per day to over 200 locators across our 3 economic estates in Batangas and Cebu. It posted a nonrevenue water of 6.2%, which is significantly below the World Bank's benchmark of 25%. It also recently announced the completion of 99.9 kilowatt solar panel installation in one of its sewage treatment plants. Aside from reducing the facility's energy costs, the transition to renewable energy is expected to eliminate approximately 100 tons of carbon dioxide emissions annually. Meanwhile, Apo Agua is set to become the country's largest operational bulk water supply facility. Once fully operational, it will provide over 300 million liters of water daily to the Davao City Water District, benefiting more than 1.5 million residents of Davao. In the digital infrastructure space, Unity Digital Infrastructure continues to expand our footprint across the country. As of now, Unity boasts 762 active macro towers and 538 installed small cell poles. Committed to enhancing the country's digital connectivity, the company persists in building telco towers and integrating its acquired sites for the mobile network operators. Unity has successfully closed 405 towers out of the 1,097 telco towers from the 2 sale and leaseback transactions with PLDT Smart and Globe Telecom. Unity Digital Infrastructure continues to advance, hosting multiple tenants in its portfolio of towers. It has successfully hosted 3 of the largest -- our 3 mobile network operators in 1 of its macro towers in Cebu. With these developments, Unity is well on its way towards realizing its invest -- its power investments. Revenues have increased more than 6x to around PHP 400 million with positive EBITDA. The first 3 quarters of the year have been very productive for AIC. Aside from the many operational milestones that I have just discussed, I'm also proud to share that both local and international organizations have recognized AIC. Recently, we have won accolades for our contribution to sustainability and our pioneering role in the infrastructure sector. Marking our debut at the recently concluded 14th Asia CEO awards, AIC secured 2 of the highly sought after Circle of Excellence Awards. AIC was among the companies honored with the Sustainability Company of the Year. And it's also an honor to be acknowledged as one of the outstanding Woman Leader of the Year, alongside others team's female presidents and CEOs. Aside from the Asia CEO awards, we were also named as a finalist at the 20th Annual Silver Stevie Awards for the Fastest Growing Women-led Company of the Year. While I am humbled and grateful for its recognition, I am hoping and looking forward to AIC being recognized as one of the best and fastest-growing infrastructure companies. AIC has demonstrated unwavering commitment and substantial progress across its diverse sectors. As we continually strive for growth, we are looking forward to establishing our presence in [ Tarlac ] through our economic estates. In the airport sector, we are optimistic that international travel will soon recover, further driving the growth of MCIA. Aside from this, the PPP projects for Laguindingan and Bohol International airports have been approved by the government. We are optimistic that the collaborative processes with government counterparts in the technical working group will streamline the government procedures. We are hopeful that the proposals under consideration will receive their awards and [ additional ] time possible. For our water sector, our Estate Water business is embarking on a comprehensive hydrology study to ensure that the long-term viability of water supply -- to ensure the long-term viability of our water supply in our economic estates. And lastly, for our digital infrastructure, Unity is targeting to reach around 1,000 active macro towers and close to 600 installed polls for small cells by year-end. As the year draws to a close, AIC is not only positioned for continued expansion, but also for groundbreaking developments that will enable more businesses and uplift communities. Thank you. [Presentation]

Thank you, Cosette. And now to present for Cement, I will turn you over to Mr. Varaprasad Kalepalli.

Hi, good afternoon to you all once again. Thank you for spending your time with us today. First, Cement is concerned, like you all know, we are not a listed company, so we'll not be able to share our financials, but we will give you the market's perspective for the industry and for the company. Now cement market in the first 9 months witnessed negative growth of around 6% to 8% in the current year. And this is the second consecutive year of negative growth for the industry, which is quite uncommon and normally, cement has a positive multiplier to the GDP, as you all know. The main -- two main factors that is impacting the cement consumption probably are the high inflation and also the high interest rates that is restricting people from taking construction activities. But the good news is that the country fundamentals as well as the government commitment for the infrastructure projects is, remains promising. And I think the industry is good for a quick rebound in the near future. We believe this is the bottom for the industry. Now the pricing and also the variable cost. The pricing is more or less flat in the 9 months versus previous year and then, but the margins start improving from Q2 and in Q3, also mainly because of the softening of the energy prices, both for power and also the where the fuel is concerned. Now coming -- I mean what are we doing in these difficult times? Of course, apart from various initiatives to improve our cost base, and we also focus on our sustainability goals. So we are spending like you see here, roughly 250,000 to 500,000 tonnes of alternative fuels, we are consuming in the industry. So this will help not only in our -- reducing our cost base for the fuels, but also improving our sustainability goals. Now cash is king. I think sometimes P&L is not in our hands, but then you need to keep our balance sheet intact. So I'm happy to say that we are still cash positive in this 9 months despite a difficult trading in the current year. And our net debt is slightly lower than what it is at the beginning. And our cash conversion ratio is more than 100%. If you go to the next slide. This is the slide where you see we have opportunities under the EPR law. So we are one of the leading what should I say, partners for the various companies to achieve their plastic neutrality goals. So we have improved our income from the plastic credits. And we -- during the current year, we entered into many partnerships with many leading companies, both local and also MNCs to achieve -- in helping achieving their compliance with the EPR law as well as achieving their plastic neutrality goals. Thank you. That's all from the Cement.

Thank you, Vara. 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.

Good afternoon, everyone. Thank you for joining us today. It's good to see you finally on face-to-face after almost 3 years of online briefing. So thanks to Mani Rubio, who recommended this format. You have heard from my colleagues how our respective SBUs fared for the third quarter and year-to-date September. Allow me now to summarize the performance of AEV as a group. Total revenues are up 7% at PHP 232 billion. Consolidated EBITDA is up 15% to PHP 62 billion. Net income is down 16% at PHP 18 billion. But if we take out the one-offs, our core net income is up 8% to PHP 17.3 billion. Our beneficial EBITDA was 7% higher compared to last year, mainly driven by the strong performance of AboitizPower coming from GNPD and the high availability of our power plants. We did see some reduction though in banking due to additional costs from the City Integration and the Food Group as the Farms division continued to encounter challenges. Net income was down 16% year-on-year, but if we net out the onetime gains mainly coming from foreign exchange gains in 2022 when the peso depreciated, our core net income is up 8%. As for our balance sheet, we ended the 9 months with total assets of [ PHP 813 billion ] or 3% higher than the PHP 808 billion level last year. Total equity for the first 9 months reached PHP 369 billion from PHP 350 billion. Total cash levels went down to PHP 121 billion versus PHP 128 billion the previous year due to investments in various SBUs, including UnionBank, where we had an SRO early this year. Last September 2023, we raised PHP 17.4 billion bonds for 2, 5 and 10 years at spreads of 15, 25 and 40 basis points, respectively. This was issued to refinance a PHP 10 billion maturity this year with additional PHP 7 billion to cover the reservoir requirements for the year. As for our ratios, current ratio stands at 1.8x with our debt-to-equity slightly improving to 1.2x and net debt to equity remaining at the same level of 0.7x. Last August, we announced that as part of our diversification to the consumer market, AEV, in partnership with Coca-Cola Europe, will acquire the bottling operations of Coke Philippines for USD 1.8 billion. CCEP will have majority at 60% and AEV at 40%. A lateral intent or LOI was submitted to Coca-Cola, and we are in the midst of completing all the necessary steps leading to a closing of the transaction, which we hope will happen in the first quarter of 2024. Let me now add this investor briefing by summarizing the key takeaways. So despite the headwinds from inflation and higher interest rates, AEV remains resilient with core net income up 8%. Our SBUs are optimistic with our plans moving forward. A strategic planning process is underway, which should guide us in our business plans for 2024. Power is expected to continue its strong performance as it executes its renewable energy expansion. Aboitiz InfraCapital is expected to further expand its economic states, airport management, and telco towers businesses. UnionBank is well on its way to fully integrating the City consumer portfolio. The Food Group is well on its way to recovery, led by its Agribusiness division and AboitizLand remains steady and innovating with a vertical development at the LIMA Estate. As mentioned earlier, we expect Coke to close in the first quarter of 2024. We are excited with the prospects of getting involved in the operations of one of the most iconic consumer brands in the world and learning more about the consumer market that will hopefully lead to more investments in the sector. Heading to 2024, we are confident that we can generate more revenue from the synergies that we can derive as a techglomerate with interests in power, banking, food, real estate, infrastructure and fast-moving consumer goods for the benefit of our shareholders and as our contribution to nation building. Thank you very much for joining us today. Have a pleasant evening.

Thank you, Toto. May we request our other AEV presenters, Tristan, Dave, Cosette and Vara to rejoin Toto here on stage. Before we move on to our Q&A, we would like to request our audience for 3 minutes to complete a satisfaction survey, which you may access 3 ways. First, you may scan the QR code on the screen right now. Second, you may scan the QR code labeled AEV on the survey form on your table. Or third, you may manually complete the survey form on your table, which we will collect after the event. Thank you for answering our survey. 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, namely UnionBank and Aboitiz Tower will be addressed offline after this briefing and during refreshments. Since this is a face-to-face event, we will ask questions live on the floor from analysts present here today. [Operator Instructions]

Yes. This is Jason Escartin from China Bank Securities. My question is on the proposed acquisition. Would you be able to discuss your financing strategy and possibly a bit more favor on the options that you are considering?

You mean the acquisition of Coke? So on the financing side, Yes. So the purchase price is about $1.8 billion. And most of that will be funded from -- at least the 40% that we have will be funded from our excess cash coming from our divestment before in AP. It's about the 80% will be funded from existing cash and 20% most likely will be from borrowings at the level of the operating company.

Thank you for that, Toto. Questions from the floor?

[ Eunice ] again from SB Equities. First question on food. When do you see the likelihood of recovery from your different business model? And when can we expect margins also to catch up?

Yes. So I'll start with Farms and Meats because I think that's the one that's a little -- that's dragging the business at the moment. So I think it's going to take a little bit of time, right? A lot of what we're experiencing at the moment is due to the fact that we have to repopulate our second breeder farm. And so this, the situation that we're currently in will probably extend into next year to one degree or another. I mean we expect improvement, but still will be a drive rate. The rest of the business, particularly the regional feed business as well as the Flour business, actually, I mean, as I mentioned earlier, have actually improved quite a bit starting from the beginning of the year. The first quarter was quite bad for both, right? But since then, they've been performing quite well. And so we anticipate the balance of the year to be good, right? And I don't, I know I'm not supposed to give any forward-looking statements. So I'll leave it at that, right. And I think moving into 2024, right? I mean the outlook is really dependent on a lot of different things, but primarily raw material prices, right? They've come down quite substantially from the highs of 2022. But there's still a lot to be -- that remains to be seen, I think, for 2024, given that a lot of the producing countries are currently in planting stages and are very dependent on moisture, right? So we anticipate that raw material costs will remain, let's call it, benign from this point forward, right? But there is always some risk in that. And so our expectation for both the regional feed business and the Flour business moving forward is that they should be, from a margin standpoint, they should do quite well, right? And really, I think the -- they should do as well as they're doing now, right? And the wildcard really remains to be volumes, which have been quite depressed due to the fact that prices are -- have been extremely high on to this point.

[ Eunice ], do you have a follow-up question?

Sorry, just a follow-up on that. In terms of like how you're trying to pass on those raw material costs. How fast also can you be able to adjust to market conditions? Like if you're seeing that raw materials are coming down, how soon can this be reflected also in terms of your overall pricing?