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

Good afternoon. Welcome to Aboitiz Equity Ventures Earnings Results Briefing for the first quarter of 2026. My name is Jacqui De Jesus, and I will be the moderator for today's call. Some reminders before we begin. First, we have put microphones on mute to minimize background noise during the presentations. 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 [Operator Instructions] Those not taken up during the Q&A session will be answered via e-mail. And lastly, this briefing will be recorded. By joining this session, you consent to 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 Kenn Baston, the Head of Strategy and Investments for Aboitiz Real Estate Group. 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 presentation, we will open the floor for Q&A. For questions on the earnings results of Union Bank and Aboitiz Power, which were already discussed in separate sessions, we will be addressing those offline after this briefing. With that, let me turn you over to Po Beng. Hi, Po Beng, I think you're on mute.

Hi. Good afternoon, everyone. Thank you for joining us today. And let me begin with the overview of Aboitiz Foods in the first quarter of 2026. The group [indiscernible] of PHP 4.3 billion, representing a 34% increase year-on-year. This reflects a solid start to the year, supported by strong performance in the Agribusiness segment, Flour and Trading divisions. EBITDA reached PHP 2.5 billion, up 20% year-on-year with EBITDA margin improved by 11 basis points. This growth was driven by steady margin expansion across Agribusiness, Trading and Flour with continued volume growth, particularly within the Agribusiness segment and the Trading division. Overall, earnings were supported by broad-based top line growth across most divisions except for Flour, which continued to face softer market pricing condition. I will now walk you through the details of our revenue, EBITDA and NIAT performance for the quarter. Next page. Aboitiz Foods delivered PHP 35.1 billion in consolidated revenue for the first quarter of 2026. This represents a 19% increase year-on-year. This growth reflects the continued resilience of our core business amid a dynamic operating environment. The Agribusiness segment remained the primary growth driver for us, with revenue increasing 21% year-on-year to PHP 20 billion. Performance was supported by stronger sales volume across all major sectors, including livestock, aqua, pet food and specialty nutrition and with moderate improvement in the average selling price of all these segments. Meanwhile, the Food & Nutrition segment, which includes Flour, Farm, meat and trading in the Philippines generated $4.4 billion in revenue, up 7% year-on-year. Growth across most divisions was partly tempered by continued softness in the Farms. Within this segment, Farm revenue declined 6% year-on-year, primly due to the weaker livestock market price in the quarter 1. Trading posted a significant stronger quarter with volumes up 43%, driven by [ seaweed and soya ] as well as incremental contribution from the corn and other products. Meat revenue grew 5% year-on-year, supported by 7% higher volume, although softer selling price continued to weigh down on the performance. Flour delivered steady growth with revenue up 2% year-on-year, supported by modest volume expansion despite pricing adjustments to remain [indiscernible] So let me move on to the EBITDA of the group. Aboitiz Food reached PHP 2.5 billion in EBITDA for the first quarter, delivered a 20% year-on-year increase. The growth was driven by strong contribution from the Agribusiness segment, Flour and Trading division. These are supported by the improvement in both margin and volume in this segment itself. Agribusiness segment recorded a 34% increase in EBITDA, driven by continued strong livestock performance across key markets, particularly in Philippines and Malaysia. Additional contribution from Aqua, Pet Food and Specialty Nutrition further strengthened the overall segment performance. The Flour division posted a 40% year-on-year increase in EBITDA, driven by stronger gross profit from the improved product margin supported by higher product selling price in the quarter. Trading delivered significant year-on-year improvement with EBITDA increased 2.6x versus the same period last year. This was supported by higher volume, healthier margin and continued operational efficiency in the warehouse management. Meanwhile, the Farms division experienced a 50% decline in EBITDA, reflecting the ongoing pressure from weaker selling price in the competitive supply condition and import competition. So all these factors translate into a net income after tax of PHP 1.3 billion for Q1, which marked a 34% year-on-year improvement. In addition to a stronger EBITDA performance, the bottom line also benefited from a 6% reduction in the interest expenses. This reflects the improved financing efficiency across the group through disciplined working capital management and stronger collections. Overall, the group has started the year on a solid footing. We are managing focus on improving underperforming segments and sustaining momentum across its core business. That concludes our update for Aboitiz Foods. Thank you.

Thank you so much, Po Beng. And now to present for the Real Estate Group, I would like to call on Kenn.

Thank you, Jacqui. Good afternoon, everyone. Thank you for joining this afternoon's analyst briefing. Let me start with the highlights for the first quarter. At the consolidated level, the Real Estate Group posted revenues of PHP 934 million in the first quarter of 2026, down 7% year-on-year with EBITDA of PHP 140 million and a net loss of PHP 48 million. The year-on-year variance is largely driven by the timing of revenue recognition for economic estates. First quarter 2025 carried significant milestone-based revenue recognition across LIMA Industrial, BizHub and TARI Industrial. Events tied to construction progress and located regulatory compliance that were specific to that period and are not replicated in the first quarter of 2026. What is worth noting is that EE delivered strong reservation sales in the quarter and the revenue recognition effect of those bookings is expected to build through the succeeding quarters. Residential meanwhile posted improved results with higher recognition for both prior year and current year sales and a continued decline in forfeitures as the shift toward higher-quality buyer accounts takes hold. Next slide, please. Breaking down revenues per segment. Economic Estates revenue declined 37% year-on-year, reflecting the base effect just discussed. Residential revenues grew 48%, supported by both leasing and sales recognition. Overall, leasing across both segments continued its steady upward trajectory. The composition of the first quarter 2026 revenue base is increasingly weighted towards recurring leasing income and higher quality residential recognition, both of which point to a more durable top line over time. Turning to reservation sales, which is the leading indicator for future revenue recognition. Economic Estates industrial reservation sales reached PHP 492 million in the first quarter of 2026, up 64% year-on-year, covering 7 hectares of industrial land sold. This is against a backdrop of macroeconomic volatility and a seasonally slower first quarter. Commercial reservation sales meanwhile were nil in the period, bringing total EE reservation sales to PHP 492 million, up 19% from first quarter 2025's PHP 415 million. On the residential side, reservation sales totaled PHP 257 million across 49 units. Volume is lower relative to prior periods, and this reflects the deliberate removal of nonperforming accounts and tighter buyer qualification standards implemented over the past several quarters. For EBITDA, it declined 51% year-on-year to PHP 140 million. Within that, residential EBITDA grew 106% to PHP 101 million, while Economic Estates EBITDA fell 83% to PHP 40 million, consistent with the lower sales revenue recognition in the period. The NIAT decline of 35% was narrower than the EBITDA decline as lower interest expenses partially offset the earnings impact. The residential segment swung to a positive NIAT of PHP 50 million from a loss of PHP 59 million in 2025. Economic Estates NIAT came in at a negative PHP 98 million, reflecting the timing effects discussed. The Aboitiz Real Estate Group is anchored on a simple but powerful basis, integrated platforms where business activity and community development reinforce each other. Nowhere is this more visible than our largest estate, LIMA. LIMA Industrial Hub currently has 31 active locators across the build cycle; 5 in the planning phase, 21 in active construction and 5 in the preoperational phase preparing to begin operations. Locator advancement is continuing across all stages. This is precisely why BizHub at LIMA Estate stands out as a compelling investment proposition. Powered by the industrial base already operating within the estate, BizHub is emerging as Batangas' first CBD, where growing locator activity translates directly into employment, foot traffic and sustained demand for commercial spaces. The industrial and commercial components of LIMA are reinforcing each other. LIMA Estate today spans 1,100 hectares, hosts 197 locators, has attracted PHP 121 billion in investments and supports USD 2.6 billion in export value. This is the established platform. TARI Estate at 384 hectares in Central Luzon and counting, is the next frontier of this platform. Phase 1 is at 100% sold and anchor locators such as Coca-Cola and Ajinomoto are in active construction. TARI, with its strategic position along the Luzon economic corridor is able to capture demand from both established manufacturers in the South and the emerging industrial activity being drawn to the north. More on TARI, underground activity is accelerating on multiple fronts. Anchor locators, as mentioned, Coca-Cola and Ajinomoto are both well into their construction activities with operations expected to commence within the next few years. We have also signed a definitive agreement for our joint venture with the Yuchengco Group's House of Investments, meaningfully expanding TARI's long-term development footprint. And the main spine road is now under active development, laying the infrastructure backbone that will serve both current locators and those that are yet to come. For residential business -- next please. For residential business, the near-term focus remains on delivery and completion of existing project portfolio. Execution and handover quality are the immediate priorities. The next chapter is one that is anchored on the opportunities within our economic estates. As industrial and commercial activity grows, so does the demand for quality housing in and around these estates. This positions the Aboitiz Real Estate Group uniquely, bringing AboitizLand's community building experience alongside Aboitiz Economic Estate's scale and execution strength to complete a genuinely end-to-end industry anchored township value chain. Thank you, and happy to answer your questions later. Thank you.

Thank you so much, Kenn. For Aboitiz InfraCapital, may we turn over the floor to Cosette, please.

Thanks, Jac. Hi, good afternoon, everyone. I will walk through AIC's first quarter results. This update focuses on AIC's continuing platforms, namely airports, water and Unity Digital infrastructure. So for the first quarter, AIC generated PHP 2.4 billion in revenue, up 36% from PHP 1.8 billion in first quarter of last year. This flowed through to EBITDA of PHP 1.4 billion, a 31% year-on-year improvement. The main driver was airports with MCIA benefiting from sustained traffic recovery. Airports contributed 67% of beneficial EBITDA, underscoring its role as AIC's primary earnings engine. Laguindingan International Airport and Bohol-Panglao International Airport also added positively, contributing a combined PHP 15 million in EBITDA for the quarter. At the bottom line, AIC recorded PHP 30 million in net income, reversing the PHP 230 million net loss in first quarter of last year. This reflects stronger operating performance across the portfolio, even as reported earnings continue to absorb noncash amortization charges related to MCIA's service concession asset. Revenue improved across the portfolio with airports, as mentioned, providing the largest uplift. Airports revenue increased 45% year-on-year to PHP 1.8 billion, supported by a 13% rise in total passenger traffic. MCIA remained a key contributor with passenger volume up 17% to PHP 3.55 million. Domestic passengers in MCIA grew from 2.25 million to 2.56 million, while international passengers rose from 780,000 to 990,000. This indicates a more balanced recovery across both market segments. Water revenue was broadly stable at PHP 290 million. Apo Agua reached a peak distribution of 306 MLD in first quarter of this year, higher than the 296 MLD recorded in the same period last year. Unity delivered a stronger top line performance with revenue up 30% to PHP 322 million. As of March 2026, it had around 2,600 total tenancies, approximately 400 co-locations and a tower tenancy ratio of 1.26x. AIC delivered PHP 1.4 billion in EBITDA for the first quarter compared with PHP 1.1 billion in the same period last year. Revenue growth translated well into operating earnings with EBITDA margin maintained at 57%. This reflects both stronger activity levels and continued cost discipline. Airports EBITDA reached PHP 930 million, underpinned by the 17% increase in MCIA traffic. Water EBITDA rose to PHP 234 million, helped by effective cost controls. Unit EBITDA improved to PHP 241 million, reflecting the continuing expansion of its tower portfolio and tenancy base and corporate expenses were reduced from PHP 39 million to PHP 18 million, showing the benefit of ongoing cost optimization initiatives. At the NIAT level, AIC recorded PHP 30 million in net income compared with a PHP 230 million net loss in first quarter of last year. The turnaround was led by airports, which moved from PHP 49 million loss last year to PHP 128 million in net income this quarter. MCIA's underlying performance was even stronger after excluding noncash charges related to its service concession asset. On this basis, MCIA's core NIAT reached PHP 290 million in the first quarter compared with PHP 89 million last year. Water and Unity still posted losses at the NIAT level, but both showed year-on-year improvement. Water's loss narrowed from PHP 75 million to PHP 32 million, while Unity's loss reduced from PHP 49 million to PHP 28 million. Corporate expenses also declined from PHP 57 million to PHP 37 million. For AIC as a whole, reported NIAT still carries the effect of MCIA's noncash charges at the consolidated level. And after excluding those charges and one-off expenses, AIC's first quarter core NIAT was $192 million compared with $92 million net loss last year. So in closing, the first quarter this year was a strong start for AIC. We delivered solid revenue and EBITDA growth, preserved margins and returned to profitability. Airports remain the main driver and MCIA -- with MCIA continuing to benefit from recovery in both domestic and international traffic. Water provided a stable base supported by Apo Agua's operating performance and effective cost containment. Unity continued to scale with higher tenancies, more co-locations and an improved tenancy ratio. For the rest of the year, the focus is to sustain this momentum with discipline. We need to keep building airport traffic and improve commercial yield, push water towards stronger earnings contribution and ensure Unity expansion translates into better returns. So the quarter gives us a good base, but execution will remain critical, especially around the key profitability drivers of each business. Again, thank you, and good afternoon.

Thank you so much, Cosette. And finally, for AEV, let me call on Toto Hilado.

Thank you, Jacqui. Good afternoon, everyone. Thank you for joining our quarterly analyst briefing. By this time, you have already heard from our subsidiaries on how they fared in the first quarter of 2026, so please allow me to summarize the results for AEV. AEV delivered strong performance in the first quarter of 2026 with beneficial EBITDA rising 33% year-on-year to PHP 18 billion. The overall results were driven by robust year-on-year improvements across most major strategic business units, which cumulatively offset the losses in the cement and real estate sectors. AboitizPower remains the primary driver for the group, contributing 59% of total beneficial EBITDA. This was fueled by higher generated margins, increased contracted capacity, better availability and contributions from new solar plants and Chromite Gas. Union Bank also showed very strong performance, driven by sustained loan growth in institutional, credit card and salary segments alongside lower funding costs and expanded net interest margins. Our food and beverage businesses continued to show strong performance with EBITDA growing 23% year-on-year. Growth was supported by strong volumes and margins in the agribusiness, trading and flour segments of Aboitiz Foods and Coca-Cola Philippines likewise showed strong growth in volume, resulting from higher selling days and effective marketing promotions. For Coke Philippines, revenues grew 12% year-on-year in the first quarter, driven by a strong 10% increase in volumes. Volume growth was supported by higher selling days and effective marketing initiatives, including new product launches and regional activation programs. During the first quarter, the company launched Coke Zero Mismo, Sprite and Royal in 1-liter PET bottles as well as A&W and Lift. Coke also rolled out several commercial initiatives, including value pack promotions in Visayas Mindanao area, bundled offers and various state deals nationwide. The sustained volume momentum enabled the company to further strengthen its leadership position in the nonalcoholic sparkling beverage segment with market share improving to 78% as of March, from 77% in December. At the same time, management continues to remain vigilant in managing the potential impact of the Middle East crisis on consumer behavior and raw materials prices, while proactively implementing mitigation measures, including tighter controls on discretionary spending and disciplined cost management initiatives, which all supported the improvement in overall performance. The strong EBITDA translated to a consolidated net income after tax of PHP 6.3 billion, nearly doubling the PHP 3.2 billion reported in the same period last year. As presented by the SBUs earlier, the strong performance came from AboitizPower contributing PHP 4.4 billion to NIAT, a 72% increase year-on-year, Union Bank at PHP 1.9 billion, which is more than double the previous year and Aboitiz Foods & Coke contributing another PHP 2 billion. Let me now turn to the group's balance sheet and capital position as of end March. Consolidated cash levels increased by 16% to PHP 102 billion from PHP 87.8 billion in end 2025. Gross interest-bearing debt rose to PHP 514 billion as of March from PHP 493 billion as of December 2025, mainly driven by AP's working capital requirements and capital expenditures. This brought our net debt-to-equity ratio to 1.02, slightly above the 0.99 recorded in December 2025, primarily reflecting dividends paid out in March and only partial earnings for the year captured in the equity base to date. Despite this increase, our leverage remains manageable and provides the group with ample capacity to pursue future growth opportunities. Let me end my presentation by saying that while AEV enters the remainder of 2026 with strong momentum, we maintain a cautious and disciplined posture for the rest of the year. Our base case assumes improved performance relative to 2025, supported by sustained core earnings even as we reinforce our portfolio to withstand periods of heightened market volatility. Our strategy will prioritize balance sheet strength and operational efficiency to navigate a global landscape defined by energy vulnerability and shifting monetary policies. This ends my presentation, and we now open the floor to Q&A. Thank you.

Thank you so much, Toto. So we will start off with the questions we received in advance. [Operator Instructions] The first question is for Aboitiz Foods. So may I ask Po Beng to answer the next few questions. So the first question reads, how much of your business is exposed to the USD-peso fluctuation? And what has been the impact so far? What measures are in place to hedge against the risk of further peso depreciation?

Yes. Thank you for the question. Foreign exchange remains a meaningful consideration for the group as we operate in the region. Approximately about 55% of our total costs are being exposed to some degree of FX movement. Half of these are mainly tied to the Philippine operation from the importation of the grains from overseas. So as a result, the USD-PHP fluctuation can impact the raw material and the input cost typically. To date, the currency, although volatile has created periodic cost pressure. This has been managed through a disciplined pricing action, operational control and also with our regional footprint, we are able to [ nullify ] some of the risk. From a risk management perspective, we continue to maintain a very disciplined treasury framework, which includes forward contracts, staggered ForEx purchases and active liquidity management to help mitigate the volatility in the market. So we believe we are able to protect the margin to a certain extent and to provide greater cost visibility. So overall, these measures position the group to manage further peso depreciation in a measured and prudent manner.

Thank you so much for that, Po Beng. The next question is still for you. Which specific business do you expect to drive growth for 2026? How much CapEx are you spending in 2026 and what segments are you expanding into?

Yes. Our first quarter result has highlighted the strong contribution from a few core business, particularly in the Agribusiness segment, the Flour and the Trading. Agribusiness remains a very key growth driver as it operate across the region and the livestock market in Philippines, Malaysia and Vietnam are still delivering the results as expected. The flour and trading continues to perform well, and all these are supported by a disciplined pricing, operational efficiency and product mix optimization. On the CapEx question, the group has allocated approximate PHP 5.2 billion in the CapEx with 66% focused on strategic growth initiatives and the remaining 24% on maintenance and operational efficiency. Investments are primarily directed towards strengthening existing core business, particularly in the feed mill infrastructure expansion in the Philippines itself and along with investment in digitalization, R&D and operational capability development. So overall, our capital deployment remains focused on [ refollowing ] our core portfolio, improving competitiveness and support sustainability and long-term growth.

Thank you. And then the last question for Aboitiz Foods is, how do you see the Middle East crisis impacting your operations?

The Middle East development has impacted the growth through higher logistics and freight costs and particularly in the Philippine operation itself, where delivery expenses has risen significantly. And in most of the markets, the direct impact has been more limited due to the way the [indiscernible] has been, the range, which customers manage their own pickup and transportation. So while this has introduced incremental cost pressure, particularly on the outbound logistics, we are actively implementing pricing actions and operational adjustments to help mitigate the impact. However, in the competitive market itself, right, full cost pass-through may not be immediately achievable, which can result in certain level of margin pressure on the near term. So overall, our focus remains on our disciplined cost management, selective pricing actions and operational flexibility to preserve resilience while navigating the ongoing geopolitical and supply chain uncertainty.