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

Good afternoon. Welcome to Aboitiz Equity Ventures Earnings Results Briefing for the first 9 months of 2025. My name is Jacqui De Jesus. And I will be your moderator for today's call. [Operator Instructions] And lastly, this meeting will be recorded. For today's call, the CFO of Aboitiz Foods, Ebbie Mabatid, will kick us off. She will be followed by Rafael Fernandez de Mesa, President and CEO of Aboitiz Land. After him, Cosette Canilao, the President of Aboitiz InfraCapital will update us with their performance. And finally, Toto Hilado, the CFO of Aboitiz Equity Ventures, will close us out with the half year results -- with the 9 months results of Coca-Cola Europacific Aboitiz Philippines and the group's consolidated financial performance. After the presentations, we will open the floor for Q&A. For questions on the earnings results of Union Bank and AboitizPower, which were already discussed in separate sessions, we will be addressing those offline after this briefing. With that, let me turn you over to Ebbie.

So good afternoon, everyone, and thank you for joining us today. Let me start off with an overview of Aboitiz Foods performance for the first 9 months of 2025. So we continue to deliver solid results through the third quarter, closing the period with a net income after tax of PHP 3.5 billion, which is 51% higher year-on-year. This reflects steady progress across our businesses and continued improvements in operational efficiencies. Our EBITDA reached PHP 6.9 billion, up 21% year-on-year with margins improving by 142 basis points. That growth was supported by stronger volumes and better margins across flour, farms, meats, trading and the livestock segments of our Agribusiness division. I also want to highlight that our meats business has turned around meaningfully from a loss last year to a modest positive EBITDA. With this period, that's a clear reflection of the cost efficiency initiatives and channel optimization efforts we put in place over the past year. On the top line, revenue grew 4% year-on-year, supported by higher sales volumes across our divisions. This was partly offset by lower average selling prices as the market continued to normalize. Let me take you through the numbers in more detail. So for our revenue performance, for the first 9 months, consolidated revenues reached PHP 68 billion, up 4% from last year. This steady performance demonstrates our ability to sustain growth, but still in a challenging market environment. Our regional Agribusiness unit delivered PHP 54 billion in revenue, growing 3% year-on-year, driven mainly by stronger volumes that helped offset softer prices. Within the Food & Nutrition unit, we saw improved momentum through the third quarter after a slower start for the year. meats was one of the bright spots, up 26% in revenue with stronger pricing in both supermarket and B2B channels, along with the increase in volume. Our trading business continued its recovery with volumes up 35% and revenue 15% higher year-on-year, driven largely by higher feed with sales from new customers. Our Flour business remained steady with revenue and volumes roughly flat given the competitive pricing landscape. And in Farms, revenue rose 4% year-on-year supported by higher market prices and a 5% increase in live hog volumes. So overall, top line growth has been modest but solid and the volume recovery across businesses gives us confidence in the underlying demand trends. Now looking at profitability. EBITDA for the period stood at PHP 6.9 billion, up 21% year-on-year. Importantly, all divisions contributed to this improvement. In Flour, EBITDA grew 42%, benefiting from lower wheat costs that more than offset softer selling prices. That said, polar contribution was down around 39%, mainly due to oversupply and ASF-related demand pressures. Our regional Agribusiness unit was up 5%, led by the Livestock segment's solid performance. The Aqua segment remained in lost territory, but turnaround initiatives are in place and progressing. The Farms business posted a strong 68% increase in EBITDA, driven by higher live hog prices and continued shift toward live sales, which helped optimize returns across the value chain. In trading, EBITDA was up more than 20x year-on-year, thanks to stronger spot and cost plus margins and higher feed wheat volumes in the third quarter. And as I mentioned earlier, meats achieved a meaningful turnaround from a PHP 295 million loss last year to a PHP 23 million positive EBITDA this year. That's a direct result of pricing improvements, cost efficiency measures and continued channel development efforts. Now all of that translated to the net income after tax of PHP 3.5 billion, up 51% year-on-year. The bottom line benefited not just from stronger operating performance, but also from improved financial efficiencies. We saw a 29% reduction in interest expense, driven by lower working capital borrowings as a result of stronger operating cash flows. That's a clear sign of disciplined capital and balance sheet management supporting our growth. So overall, we're pleased with how the business has performed so far this year. We're seeing good momentum across our core units and the turnaround initiatives we've put in place are starting to show results. As we move into the final quarter, our focus remains on sustaining this momentum, addressing underperforming areas and continuing to drive cost and process efficiency across the group. We're confident that this momentum, we can close the year on a strong note. Thank you.

Thank you so much, Ebbie. Fernand -- May I call on Rafael Fernandez, please?

Good afternoon, everyone. Thank you for joining us this afternoon. For the first 9 months of 2025, consolidated revenues reached PHP 3.2 billion, representing a 2% growth, primarily driven by PHP 1.7 billion from noncore asset monetization. The core residential business contributed PHP 1.4 billion, while our rental operations, Point Blue added PHP 81 million. EBITDA rose 30% year-on-year to PHP 1.3 billion, bringing net income to PHP 888 million, up 44% from last year, reflecting stronger profitability and disciplined portfolio management. In terms of reservation sales, they moderated during the period, consistent with our deliberate focus on quality sales and controlled inventory in the mid- and high-end segments. This reflects the natural tapering of projects nearing completion as we strategically reposition our portfolio for the next phase of growth. Revenue growth was supported by the PHP 1.7 billion gain from noncore asset monetization in Cebu. Conversely, core residential revenues were impacted by the necessary cleanup of nonperforming accounts, resulting in higher forfeitures and reduced construction base recognition as our projects matured. These actions are consistent with our ongoing portfolio rationalization toward more sustainable and integrated growth. The strong increase in EBITDA and net income were mainly due to these asset monetization gains, which were nonrecurring. This underscores the effectiveness of our capital recycling strategy while reinforcing the need to sustain profitability through core operational growth moving forward. As inventory matures and projects taper off, we're pivoting to new residential launches anchored directly within our economic estates. This is our core competitive advantage, combining immediate access to secure land bank, resilient infrastructure and established employment centers, a strategy that deepens the synergy between our residential and economic estate development businesses across Southern Luzon, Central Luzon and VisMin. At Lima Estate, we're demonstrating how integrated residential growth within industrial ecosystem enhances overall estate value. Today, the industrial component of the state spans over 680 hectares, hosting 186 locators and providing 75,000 jobs. As we expand beyond 1,000 hectares of industrial land, we expect our locator base and employment figures to more than double, while also extending our footprint into cities and municipalities with a combined population of over 1 million people. We've allocated around 130 hectares for horizontal residential projects and another 50 hectares within the business districts for mixed-use vertical developments. Lima's success and its vast potential serve as our blueprint for replicable mixed-use growth, effectively balancing nonrecurring residential revenues with more sustainable recurring income from the economic estate ecosystem. With the villages at Lima Estate now 74% sold, we're preparing to launch the next phase of horizontal residential development within the state to capture continued demand. Concurrently, the 70-hectare Central Business District is advancing rapidly, setting the stage for our first vertical residential development, a major step in realizing the CBD's vision as a fully integrated live, work, drive community. Together, these initiatives mark the next wave of residential growth anchored on resilient markets, proven execution and the strength of our economic estates platform. We look forward to sharing more as these plans take shape. Thank you, and good afternoon.

Thank you so much, Rafael. For Aboitiz InfraCapital, we turn you over to Cosette.

Hi. Good afternoon, everyone. So we'll begin with our results for the first 9 months of 2025. I am pleased to share that the third quarter of this year marked a period of turnaround and growth for AIC. In the first 9 months, AIC's consolidated revenue grew by 115%, more than doubling year-on-year to PHP 9.4 billion, while EBITDA increased 163% to PHP 4.6 billion. Airports accounted for a significant 45% of our beneficial EBITDA for the period. This includes contribution from Laguindingan International Airport and Bohol-Panglao International Airport. NIAT for the first 9 months reached PHP 137 million, a major turnaround from the net loss we recorded in the same period last year. Our growth was primarily driven by 2 factors: the performance of the Mactan-Cebu International Airport following the transfer of full ownership in October 2024 and higher lot sales from TARI Estate. Overall, our year-to-date performance demonstrates the momentum across our growing portfolio. From January to September, all business sectors delivered growth. Revenue more than doubled year-on-year, led by the airport operations, as mentioned earlier, higher lot sales in economic estates and steady growth in water and digital infrastructure. Airports continued to lead the way with revenue increasing 271 year-on-year -- 271% year-on-year to PHP 3.8 billion, mainly from the full recognition of earnings from MCIA, and this was complemented by contributions from the 2 regional airports, Laguindingan and Bohol-Panglao, which we officially took over in April and June of this year. At MCIA, passenger traffic is up 4% to PHP 8.6 million for the first 9 months. For economic estates, the recognition of 24 hectares of lot sales boosted revenue by 90% to PHP 3.9 billion. This reflects the continued competitiveness of our industrial anchor developments, especially in Tarlac, which anchors the north end of the Luzon economic corridor. In Water, Apo Agua reached a peak distribution of 305 MLD after only starting full operations in February of last year. This reflects the operational efficiencies achieved by Apo Agua and its partner, the Double City Water District. These improvements help raise water biz by 27% to PHP 885 million. Finally, in digital infrastructure, Unity Digital continues to benefit from the full turnover of SLB towers from Globe in quarter 1 this year. Unity is also posting growth from increased tenancies, which now stand at approximately 2,400 as of September, which is 22% higher year-on-year. Our EBITDA growth continues to align with our revenue momentum. Consolidated beneficial EBITDA grew 163% year-on-year to PHP 4.6 billion. Airports contributed the largest share at PHP 2.1 billion. We -- On NIAT, we continue to take on debt to fund new investments. Despite the additional financing costs, we posted PHP 137 million in NIAT, a turnaround from last year's loss. On the other hand, core NIAT totaled PHP 525 million, reversing last year's PHP 452 million core NIAT loss. Sector-wise, Airport NIAT reflects the amortization from revaluation of MCIA's service concession asset. Excluding this, Airport NIAT would have been PHP 270 million. In just a few weeks, we will be closing out 2025, a truly transformative year for Aboitiz InfraCapital as we mark our 10th anniversary. We look forward to sharing our full year results at our next briefing. Thank you, and good afternoon.

Thank you very much, Cosette. And finally, for Coke and AEV, could we call on Toto Hilato.

Thank you, Jacqui. Good afternoon. Thank you for joining us this afternoon for our quarterly briefing. By now, you have seen the first 9 months performance of our SBUs. So let me now summarize by presenting the consolidated results of AEV. AEB's beneficial EBITDA grew by 11% year-on-year to PHP 51.1 billion, primarily driven by our infrastructure, food and beverage and real estate segments. Net income, however, declined by 8% to PHP 17.3 billion due to the following: the full impact of depreciation and interest expenses from AEP's GNPD plant, lower WESM prices and plant outages, the amortization of the concession asset related to the transfer of ownership of MCIA starting October 2024 and higher interest expenses arising from the continued expansion of Aboitiz Infra. As for our balance sheet, our financial metrics remained stable, both at the consolidated and parent levels with net debt to equity at sub-1. The 11% growth on our beneficial EBITDA was primarily driven by our Infrastructure segment, which more than quadrupled in the first 9 months of 2025 compared to the same period last year and by our food and beverage businesses, which grew by 48% year-on-year. Power, which was flat year-on-year, continues to be AEB's largest contributor, accounted for 59% of total beneficial EBITDA, while the bank, which was down by 24%, accounted for 6%. This slide shows how our net income has evolved in the first 9 months of 2025. The sustained consolidated EBITDA was offset by the increase in interest, depreciation and amortization expense, mainly arising from the GNPD under our Power segment and the amortization of the concession asset in Mactan AirporT. This translated to a net income of PHP 17.3 billion for the first 9 months of 2025 or 8% lower year-on-year. To summarize the performance of our SBUs, the group delivered higher EBITDA in the first 9 months of the year as most of our subsidiaries, Aboitiz Foods, Coke, AIC and Aboitiz Land showed good growth year-on-year. AboitizPower was flat, but the third quarter results showed strong growth versus the first 2 quarters. Union Bank was down year-on-year as it continued to take in higher loss provisions and one-off expenses. Net income as a group was down 8% due to lower NIAT contribution from AP and UBP, down 13% and 24%, respectively. But we did see continued solid growth from our food business as Aboitiz Foods and Coke together grew by 25%. Aboitiz Foods is on a second year of good performance, supported by lower cost of raw materials and robust volumes in its flour, agribusiness and trading segments. Coke likewise benefited from lower raw material costs like sugar. AIC's NIAT contribution reached PHP 137 million, marking a turnaround from the PHP 148 million in loss last year, primarily due to stronger performance from its economic estates and airport businesses. Aboitiz Land also reported higher income driven by the recognition of gains from asset monetization. RCBM or Republic Cement continued to post higher losses due to lower demand and increased imports from Vietnam. As for Coke, CCEAP's strong growth momentum in 2024 continues to be evident in the first 9 months of 2025 with revenue rising by 3% year-on-year. Despite the high base in the same period last year, Coke still recorded a 1.4% year-on-year growth in the first 9 months of 2025 despite 6 typhoons entering the country in the third quarter with modern trade channels continuing to outpace general trade. Coke also launched new products in the third quarter to boost sales. As for market share, we are pleased to report that Coke continues to be dominant in the sparkling soft drinks category with a runaway market share of 75% as of September. Our balance sheet remains well positioned for opportunities that may arise. Total assets grew from PHP 893 billion to PHP 971 billion due to additional investments in power, that's Chromite, 40% stake in Chromite and the full consolidation of Mactan Airport under AIC. Total debt was higher at PHP 466 billion as of September 2025 from PHP 404 billion as of December 2024 due to higher debt availments to fund ongoing expansions. Consolidated net debt to equity and debt-to-equity ratios remained manageable at 0.93 and 1.15, respectively. In closing, we had the highest quarterly net income for the year in the third quarter, which improves our ability to grow net income year-on-year. However, we are still assessing how the fourth quarter will play out. Historically, the fourth quarter is the strongest quarter. However, this year's economic prospects could be influenced by a combination of natural parametritis and uncertainties from geopolitics and local politics. Nonetheless, with our strong balance sheet, we will continue to pursue our long-term growth strategies. Hopefully, the challenges we face are sleeping and more constructive for the long term. Thank you for joining us today, and we look forward to seeing you next year when we present our annual results. Thank you.

Thank you so much, Toto. Now on to our Q&A. So as mentioned earlier, we will start off with the questions received in advance. [Operator Instructions] So maybe to start off, this question is for Ebbie on Aboitiz Foods. What are the risks that you're seeing in terms of operations? What is your outlook on margins? And do you believe that this year's margins is going to be sustainable for 2026?

On operational risks and margins. So the main risks continue to be coming from our input cost volatility and logistics cost. So while our supply chains have generally stabilized, we still see some sensitivity to currency movements and global commodity trends. On productivity side, we're putting a lot of focus on sustaining the utilization and yield improvements that we have achieved this year so keeping our plants efficient and running at optimal levels. From margin perspective, performance this year has been mixed across divisions, some benefited from stronger pricing and cost efficiencies, while others saw some softening as raw material costs normalized. But as we move into next year, we do expect margin to level a bit -- off a bit compared to this year's strong base. So that said, margins should remain healthy overall, supported by tighter cost control, ongoing efficiency initiatives and disciplined pricing. While we don't expect margins to expand at the same pace we saw this year, we're confident the gains we've made are sustainable. So the focus now is really on maintaining cost discipline, driving productivity and managing margins proactively, staying ahead of any headwinds that might come our way.

Thank you very much. That's very clear. The next question is for Rafael on Aboitiz Land. Reservation sales appear to be tempered in the third quarter of this year. Do you expect this trend to persist? Or does the group have a better outlook for 2026?