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

Good afternoon. Welcome to Aboitiz Equity Ventures earnings results briefing for the full year of 2025. My name is Jacqui De Jesus, and I will be your moderator for today's call. Some reminders before we begin. Number one, we have put microphones on mute to minimize background noise during the presentation. Second, questions have been requested from the audience in advance, which we will go through during the Q&A portion. In case there are more questions from the floor, please feel free to click on the Raise Hand button or submit your questions via the Q&A box, and those will be taken up during the Q&A via email. Number three, this briefing will be recorded. By joining this session, you consent your name, voice, image and chat comments being recorded for use and dissemination. For today's call, the CFO of Aboitiz Foods, Po Beng Ng, will kick us off. He will be followed by Rafa Fernandez de Mesa, President and CEO of AboitizLand. After him, Cosette Canilao, the President of Aboitiz InfraCapital, will update us with their performance. And then finally, Toto Hilado, the CFO of Aboitiz Equity Ventures, will close us out with 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 off-line after this briefing. With that, let me turn over the floor to Po Beng.

Hi. Good afternoon, everyone, and thank you for joining us today. So Aboitiz closed the year 2025 with a strong result, achieving a net income after tax of PHP 5.2 billion, 50% higher than the prior year. EBITDA for the full year reached PHP 9.9 billion, up 27%, supported by sustained volume growth, improved margin and disciplined cost management across the division. Revenue grew 6% year-on-year, reflecting the combined effort of higher sales volume and price normalization. This results confirm that the momentum we saw in the first 9 months continued through the fourth quarter with notable contribution from Farms, Trading, Meats, Flour and the livestock segment of Agribusiness. So let's now take a closer look at the top line. So looking at the consolidated volume and revenue. Volume increased 10% year-on-year, reflecting broad-based growth across the group. Revenue grew 6%, supported by higher sales volume in Farm, Meats, Trading and the Agribusiness' livestock segment, which helped to offset the effect of price normalization in Flour and other divisions. Farm revenue increased 14% year-on-year, driven by higher market hub output and disciplined operational execution. This delivered 27% revenue growth, supported by stronger pricing across key channels and a 50% increase in the volume to sales. Trading volume rose 41% year-on-year, translating to a 27% increase in revenue, driven by higher feed mill sales to new customers, which offset the impact of lower commodity price earlier in the year. Flour and the other divisions maintained steady performance, demonstrating the group's ability to sustain growth even in a challenging market environment. Let's now move to EBITDA and our operating performance. The full year EBITDA reached PHP 9.9 billion, up 27% year-on-year, reflecting disciplined operational execution and improved margin across all divisions. Farms delivered a 150% increase in EBITDA, supported by higher live hog prices, stronger volume and a continued shift towards live sales that optimize return. Trading EBITDA grew sixfold driven by stronger spot and cost plus margin and higher feed mill volume in the second half. Meats continued its turnaround, moving from a PHP 333 million loss to a positive EBITDA of PHP 47 million, thanks to improved pricing, cost efficiency measures and channel optimization. Flour posted a 29% increase in EBITDA despite competitive pricing and lower contribution, while regional Agribusiness strengthened earnings by 9%, led by the livestock segment. Aqua remained under turnaround with initiatives underway to improve the performance in 2026. Overall, the combination of volume growth, margin improvement and disciplined cost management translated into a materially stronger earnings before interest, tax, depreciation and amortization. Now that we have covered EBITDA, let's see how this translates to net income. Net income after tax for the full year came in at PHP 5.2 billion, up 15% from last year. This improvement was primarily driven by stronger EBITDA and continued financial efficiency. Farms delivered a sustainable increase from a low base, and Trading showed meaningful improvement from near breakeven level last year. Meats further narrowed in losses, while lower working capital borrowing and stronger cash inflow led to a 13% reduction in interest expenses. Overall, these results highlight disciplined management of both operations and finance, sustaining momentum across the year and positions the group well for 2026. That concludes our full year update for Aboitiz Foods. Thank you.

Thank you so much. And now we turn over the floor to Rafa for AboitizLand and Aboitiz Economic Estates.

Good afternoon, and thank you for joining us. What you will see here today is one fully integrated platform, Aboitiz Economic Estates and AboitizLand operating under a single unified strategy and a long-term vision. 2025 marked the completion of this structural integration, and we're now no longer two adjacent businesses. We're a single end-to-end real estate platform designed to deliver industry-led townships at scale. This was a strategic choice, one that strengthens our competitive edge, sharpens our capital allocation and positions us for sustained value creation. Integration is not an end in itself. It's a mean to a competitive advantage. Aboitiz Economic Estates brings scale, operational discipline and a proven ability to attract industrial investment. AboitizLand contributes deep community building expertise. Together, we now deliver a comprehensive township ecosystem, industrial, commercial and residential, anchored in the trust associated with the Aboitiz brand. Our strategy moving forward is grounded in four pillars: industry-led townships, which are industrial anchors that generate organic demand for everything else; recurring income, leasing assets that stabilize cash flows and reduce cyclicality; comprehensive solutions, the ability to serve locators, workers and communities across every need; and transformation, operational excellence and market leadership. 2025 completed the foundation, 2026 begins that acceleration. Our platform is now fully diversified across industrial and commercial lot sales, industrial and commercial leasing and residential units for sale and lease. This spans our core estates, LIMA, TARI, West Cebu and MEZ2, and the broader ecosystem within, including our AboitizLand residential communities. This is not diversification for its own sake. It's strategic resilience. When residential moderates, industrial and commercial provide support. When lot sales taper, leasing revenue and dormitory income stabilize the portfolio. When one geography slows, others absorb the variance. We are no longer a single product developer exposed to single cycle risk. That is now a structural strength. Now looking at the numbers. We closed 2025 with consolidated revenues of PHP 10.2 billion, down 7% year-on-year. EBITDA ended at PHP 3.5 billion, down 3%, and net income at PHP 2.2 billion, down 10%. Those are the headlines but here is the context. First, Economic Estates grew. In a year when global industrial investments slowed and peer developers reported sharper declines, our industrial platform expanded revenues 4% year-on-year. That is the result of estate quality, locator relationships and disciplined execution. Second, the margin story is stronger than the revenue story suggests. A 7% revenue decline produced only a 3% EBITDA decline with EBITDA margin improving from 33% to 35%. That reflects cost discipline, operating leverage and a deliberate choice to protect profitability rather than just chase volume. We entered 2025 knowing it would be a transition year, and we managed it accordingly. In terms of revenue mix, the divergence is clear on this slide. Residential revenues declined 23% to PHP 3.45 billion. Three factors drove this: first, the natural tapering of mature project inventory; second, a deliberate cleanup of nonperforming accounts; and third, lower construction-based revenue as projects near completion. This reflects a conscious strategic realignment, emphasizing portfolio quality and long-term value over short-term volume. Economic Estates meanwhile grew 4% to PHP 6.7 billion. Industrial lot revenue increased from PHP 4 billion to PHP 4.4 billion. Commercial lot revenue rose from PHP 683 million to PHP 790 million, while commercial leasing expanded from PHP 518 million to PHP 666 million. Industrial leasing softened due to timing effects from the upfront recognition of a full term lease payment in 2024 rather than any change in underlying demand. The takeaway, the consolidated decline was residential driven, deliberate and temporary. The Economic Estates core continued to perform. The quarterly charts here highlight the shifting market conditions and our deliberate recalibration. For Economic Estates, 2024 benefited from a strong investment environment with large transactions in the third and fourth quarter, namely Coca-Cola and Ajinomoto at TARI Estate. Entering 2025, industrial and commercial investors lengthened decision timelines amid global and local uncertainty, creating a more challenging market backdrop. Nonetheless, momentum remained intact. Demand held steady through the first 3 quarters, with the fourth quarter delivering the highest quarterly figure of the year for industrial. Versus the previous year, transaction sizes moderated, but deal activity remained healthy and the pipeline continues to be active. For residential, 2025 was a recalibration year. We prioritized portfolio health over volume, cleaning up delinquent accounts and refining inventory sequencing. But this is not a retreat, it's a repositioning. In 2026, new integrated residential offerings within our estates will reactivate this segment with a strategic estate-linked approach. The structural shift in our earnings profile is now fully visible. Residential EBITDA declined 23% to PHP 1.13 billion, consistent with the revenue reset and the deliberate focus on portfolio cleanup and quality over volume. Economic Estates EBITDA meanwhile grew 11% to PHP 2.41 billion, reflecting margin expansion at scale driven by operating leverage and improving estate level economics. On net income, residential declined to PHP 639 million while Economic Estates increased 7% to PHP 1.6 billion. Consolidated NIAT reached PHP 2.24 billion, representing a 21% margin. The strategic implication is clear. Economic Estates is now the primary earnings engine. It generates stable, growing, high-quality cash flows. It provides the foundation for recurring income expansion as leasing assets mature as well. Residential will be rebuilt around that engine not as a separate business, but as an integrated component of a estate level creation. Let me close by showing here the progress we've made over the years. Currently, we have developed over 2,000 hectares of land over 4 distinct estates. We now have nearly 260 locators. And on an annual basis, export value of USD 2.3 billion comes out of our estates, where we generate 100,000 jobs. Thank you, and happy to answer questions during the Q&A.

Thank you so much, Rafa. And then now for Aboitiz InfraCapital, I will turn it over to Cosette.

Okay. There we go. Hi, good afternoon, everyone. Let me begin with AIC's full year 2025 results, and then I'll provide you a brief review of the performance across our business units. So in 2025, AIC significantly expanded its operating footprint. We recognize the full year contribution of Mactan-Cebu International Airport following our acquisition of full ownership in late 2024. We also took over operations of Laguindingan and Bohol-Panglao International Airports, continued the ramp-up of Apo Agua's bulk water operations and expanded Unity Digital's tower portfolio. As a result, consolidated revenues grew 97% year-on-year to PHP 7.7 billion while EBITDA increased 135% to PHP 4.2 billion. Airports accounted for 68% of beneficial EBITDA, including around PHP 40 million from Laguindingan and Bohol-Panglao, which we began operating in late April and June 2025. At the bottom line, we recorded a net loss of PHP 1.03 billion compared with PHP 0.9 billion in 2024. This largely reflects the full year amortization of the fair value adjustment of MCIA service concession asset compared to only 3 months of amortization in 2024. If we exclude the MCIA fair value adjustment and other noncash items, our core net loss improved significantly, only recording a PHP 471 million loss from PHP 756 million in 2024. Overall, the results reflect strong operating momentum and improving underlying profitability across the portfolio. Revenue growth in 2025 was driven by both portfolio expansion and stronger operating performance. Consolidated revenue nearly doubled from PHP 3.9 billion to PHP 7.7 billion year-on-year, led primarily by the Airports platform. Airport revenues increased 152% from PHP 2.1 billion to PHP 5.3 billion. And at MCIA, passenger traffic grew 3% to 11.6 million passengers, while Laguindingan and Bohol-Panglao together contributed more than 4.5 million passengers during the year. In the Water segment, revenue increased 23% to PHP 1.2 billion. Apo Agua delivered an average distribution of 299 million liters per day, up from 271 MLD in 2024, reflecting continued ramp-up following the start of full operations in February 2024. Meanwhile, Unity Digital infrastructure continued to scale steadily. Revenues grew 45% to PHP 1.2 billion, supported by the continued expansion of our tower portfolio. Total tenancies reached approximately 2,500, up 25% year-on-year, with more than 400 colocations, bringing the tower tenancy ratio to approximately 1.6x. Overall, revenue growth in 2025 was broad-based across AIC's operating platforms. Our EBITDA performance reflects strong operating leverage across the portfolio. Consolidated EBITDA increased PHP 135% year-on-year from PHP 1.8 billion to PHP 4.2 billion, significantly outpacing revenue growth. The largest contribution came from the Airports platform, where EBITDA increased from PHP 1.2 billion to PHP 2.8 billion. Water and Digital Infrastructure also delivered solid improvements as their operations scaled. As a result, EBITDA margins improved by about 10 percent points from 46% to 55%. This improvement reflects stronger operating leverage, tight cost management and continued efforts across the group to optimize expenses, improve asset utilization and maintain discipline in overhead spending. These measures ensure that a larger portion of the revenue growth translated directly into EBITDA. Despite the strong improvement in revenues and EBITDA, AIC recorded a net loss of PHP 1.03 billion for the year. This was largely driven by higher financing costs related to our capital structure optimization, together with the full year amortization of MCIA service concession fair value adjustment. At MCIA, while passenger traffic continued to recover, it was not yet sufficient to fully offset the combined impact of concession amortization and higher interest expenses. Traffic growth was also affected by lower flights and softer load factors in key markets such as Korea and China. In addition, operational disruptions in the fourth quarter, including earthquakes and typhoons in Cebu, affected passenger ramp-up during the period. For Water and Digital Infrastructure, net losses remained broadly stable as cost efficiency measures helped offset higher financing costs. Overall, while reported net income remains affected by financing and accounting adjustments, the underlying operating performance of the portfolio continues to strengthen. Overall, 2025 was a year of significant expansion and operational strengthening for AIC. We now have a fully established Airports platform, alongside steadily growing Water and Digital Infrastructure operations. Across the portfolio, we are seeing stronger operating momentum and improving margins as our assets continue to scale. While reported earnings continue to reflect certain accounting and financing adjustments associated with the build-out of our businesses, the operating performance of AIC continues to strengthen. As these assets mature and utilization increases, we expect the underlying strength of the business to be reflected more clearly in our results. With a more diversified infrastructure portfolio and the anticipated GIP investment reinforcing our capital base, AIC is well positioned to pursue the next phase of growth. Thank you again, and good afternoon.

Thank you very much, Cosette. And then finally, for Aboitiz Equity Ventures, let me call on Toto Hilado.

Thank you, Jacqui. Good afternoon, everyone. Thank you for joining us this afternoon. By this time, you have heard from all our business units, so let me now present our 2025 results on a consolidated basis. 2025 has been a year of transformative progress for the Aboitiz Group. Despite a volatile operating landscape, we have successfully fortified our market position, sustained a solid financial performance and accelerated key strategic initiatives across our portfolio. This year also saw the operational integration of several strategic assets acquired in 2024. We inaugurated the year by completing AboitizPower's acquisition of a 40% stake in Chromite Gas Holdings, a milestone marking our official entry into the LNG sector. By the second quarter, Aboitiz InfraCapital expanded its regional aviation footprint by assuming operations of the Laguindingan and Bohol airports. Strategic momentum continued into the second half of the year. In the third quarter, for example, we announced a prospective partnership with Global Infrastructure Partners, or GIP, for a 40% stake in Aboitiz InfraCapital. Most recently, in the fourth quarter, AboitizPower was formally awarded the CBK hydro power complex. As a large-scale pump storage facility, CBK provides critical grid stability, positioning it among Luzon's most vital energy assets. Collectively, these milestones reflect our disciplined commitment to diversifying and strengthening our portfolio in alignment with our long-term growth strategy. In 2020, we set a target to increase the contribution of our non-Power businesses to 50% of the group's beneficial EBITDA by 2030. While we continue to leverage our core strengths in Power, this shift toward a more diversified portfolio has guided our M&A activity and capital allocation strategy over the past several years, and we are seeing tangible progress toward this goal. Driven by our investments in Union Bank, CCEAP or Coke Philippines and Aboitiz Infra, alongside the sustained strong performance of Aboitiz Foods, the share of beneficial EBITDA from our non-Power subsidiaries has increased to 42% in 2025, up from 30% in 2020. Looking ahead, the expected recovery and growth trajectory of Union Bank, combined with the continued expansion of Coke Philippines and AIC, reinforces our confidence that we remain on track to achieve our 2030 diversification target, even as AboitizPower continues to pursue capacity expansions. Against this strategic backdrop, I will now discuss the group's 2025 financial performance, highlighting the key factors that drove our results across the portfolio. In 2025, AEV's group beneficial EBITDA increased by 13% year-on-year to PHP 72.7 billion. The 13% year-on-year growth in our beneficial EBITDA was primarily driven by our Power segment, which grew by 9% year-on-year and by our Food and Beverage businesses, which grew by 23% year-on-year. The growth in our Food and Beverage segment was mainly driven by Coke, whose EBITDA contribution grew by 39% year-on-year on the back of sustained volume growth and margin expansion amidst a high 2024 base. In 2025, CCEAP delivered another strong year despite challenging weather conditions and softer domestic consumption sentiment. Revenue grew 3% year-on-year driven by a 2% increase in volumes off a high 2024 base and supported by continued commercial execution. During the year, we added over 40 new consumer accounts, helping drive further market penetration and resulting in a record market share of 77% by the end of 2025. At the same time, profitability continued to improve. Strong top line performance, combined with ongoing operational efficiency initiatives, drove a 150 basis point expansion in EBIT margins, keeping the business well on track to achieve its 10% margin target. As a result, CCEAP contributed PHP 2.6 billion to AEV's net income in 2025, representing a 47% increase year-on-year and accounting for 9% of the group's core net income base. Looking ahead, we remain optimistic about CCEAP's long-term growth prospects. In addition to strong commercial plans for Coke Original Taste and the broader portfolio, we also broke ground in 2025 on a new production facility within one of our economic estates in Tarlac. Once operational in 2027, the facility will further strengthen our ability to serve growing demand and support the next phase of expansion. Coke's strong performance, together with the contributions from our other subsidiaries, resulted in core earnings for the group in 2025. While consolidated EBITDA grew at double-digit rates, this was largely offset by higher interest, depreciation and amortization expenses primarily arising from AboitizPower and Aboitiz Infra as well as higher provisions at Union Bank. In the fourth quarter of 2025, AboitizPower also recognized a PHP 13.5 billion partial impairment of goodwill related to its 2016 acquisition of GNPower Mariveles. Including the impairment charges, foreign exchange losses and other one-off costs, AEV's reported net income after tax amounted to PHP 18.3 billion, broadly flat year-on-year. For 2026, the AEV Board approved total cash dividends of PHP 8.5 billion or PHP 1.53 per share. This is equivalent to 40% of our 2025 reported net income of PHP 19.4 billion, which is higher than our policy of 1/3 of previous year's net income. On a per share basis, PHP 1.10 was declared as regular dividends, while PHP 0.43 was declared as special dividends to normalize the payout to reflect our core earnings. These dividends reflect our continued commitment to delivering value to our shareholders while maintaining a disciplined and balanced capital allocation approach. Let me now turn to the group's balance sheet and capital position as of end 2025. Consolidated cash levels increased to PHP 90.8 billion from PHP 81.8 billion in the previous year. Meanwhile, total investments grew by 25% to PHP 318 billion, largely driven by our investments in Chromite Gas and the CBK hydropower complex. To finance these acquisitions, the group utilized bridge financing, which increased total debt to PHP 494 billion as of December 2025 compared to PHP 404 billion in the same period last year. Despite this increase, our leverage remains manageable with consolidated net debt to equity and debt-to-equity ratios at 0.98 and 1.23, respectively, providing the group with ample capacity to pursue future growth opportunities. In 2025, the group deployed a total of PHP 132 billion in capital expenditures. Of this amount, AboitizPower accounted for PHP 118 billion, primarily supporting its investments in Chromite Gas and CBK and its expanding renewable energy pipeline. The Infra segment represented the next largest share, mainly funding the continued expansion of its Economic Estates and telecommunications tower businesses. Looking ahead, the Aboitiz Group, together with our partners, has earmarked PHP 88.5 billion in CapEx for 2026. Of this amount, PHP 62 billion is allocated to AboitizPower as it continues to expand its power generation portfolio. The next largest allocation is for the Infra segment with PHP 8.8 billion budgeted for projects across towers, water and airports. The remainder of the CapEx budget will support the expansion of feed mill assets, Economic Estates development, enhancements to Union Bank's digital infrastructure and routine business maintenance requirements. Despite global geopolitical headwinds, we remain optimistic about our near-term growth. Our diversified portfolio provides a resilient platform for sustained earnings, while our robust balance sheet allows us to pursue both organic and opportunistic M&A. With that, we conclude the presentation. Thank you for joining us, and we are now happy to take your questions. Thank you, Jacqui.

Thank you very much, Toto. So for our Q&A portion, we will start off with the questions we received in advance, but you may also click on the Raise Hand button or submit your questions via the Q&A box on the webinar controls. To kick us off, I have a few questions for Aboitiz Foods. This is really related to the recent developments in Iran. So the first question is, how do you expect the current developments in Iran to impact Aboitiz Foods operations? Do you expect the blockage of the Strait of Hormuz to impact commodity supply and, ultimately, raw material pricing?

Okay. Thank you, Jacqui. So I think at this stage, we are closely monitoring the development in the Middle East, particularly the situation around the Strait given its implication for global freight, energy and commodity market. From a supply perspective, our primary sourcing for grains is not from that region, so we do not expect any direct supply disruption at this point. However, as these are globally traded commodities, any shift in the global market and freight market could still impact our procurement costs. Fundamentally, there's nothing structurally bullish in the freight market at this moment. But we remain mindful of potential volatility coming from freight costs, logistics, both internationally and domestic, and also on the foreign exchange impact, which are the key variable as we continue to manage the cost of our production.

Thank you so much. The next question is somehow related but this is more on the balance sheet side. How is Aboitiz Foods' position debt-wise, particularly since interest rates and FX could also be affected by ongoing developments in Iran?

So if the geopolitical situation results in a broader inflationary environment, right, the impact will mainly come through on the higher energy costs, the freight and the currency volatility, which would place pressure on the input costs across the region that we operate. Many countries in the region are net importer of oil. And so any sustained increase in energy prices could translate into higher inflation, which, in turn, may soften the commercial demand eventually. So from a financial standpoint, right, we have remained disciplined in managing our balance sheet, our liquidity and working capital requirement. And we continue to focus on operational efficiency and cost management to navigate the potential macroeconomic volatility at this point. Thank you.

Thank you very much, Po Beng. Moving forward to AboitizLand, for Rafa, please talk more about the new integrated residential offerings. How much of an impact can be expected from this? And when will this start to reflect in the company's net income?