PHINMA Corporation (PHN) Earnings Call Transcript & Summary

So good morning, stockholders, Board of Directors, officers and guests. I am Peter Perfecto, the Vice President for Public Affairs. I will be your moderator this morning. This is just an initial announcement just to get us all ready for the Annual Stockholders Meeting. So welcome, and we would like to remind everyone that our 2024 annual report and our 2024 information statement have been made available for viewing and downloading at the website of the company. To access the report and statement, you may also scan the QR codes flashed on the screen or download on your mobile devices by typing the URLs beneath the QR codes. Please be advised that today's Annual Shareholders' Meeting is being recorded as required by the Securities and Exchange Commission. Our program will commence at exactly 11:00 a.m. Till then, the Chairman has suggested and requested that we keep everyone's cameras and mics open so you can continue to have some casual discussion. See you again at 11:00 a.m.

Okay. Maybe we can review, if you don't mind, so that we can see who's here. There you go. Welcome, everybody. I still see the same people.

So you will have to move your screen because...

Yes. Okay.

It's also good to sign in early so that we can check the audio.

There should be left and right arrows on your screen, Mr. Chairman.

Okay. I see my sister Pinky is already in. Hello, Pinky. there's a lot of people. Hi, Niki. All right. Okay. We have a lot of people, but I can't -- anyway, okay. Hi, Chito, nice to see you. In, I think, within 2 minutes...

There are still some people signing in and coming into the waiting room, and we will let them in.

Has Dato Timothy been able to join us? Not yet.

Not yet, sir.

Okay. Other than Dato Timothy, everybody is here already of the Board members.

Yes, sir.

Yes, sir. We're not sure, they are able to join.

Yes, yes, because they were unable to reach him.

We will now begin PHINMA Corporation's Annual Stockholders Meeting. Ladies and gentlemen, please rise for the invocation followed by the Philippine National Anthem. [Presentation]

Ladies and gentlemen, our Chairman and Chief Executive Officer, Mr. Ramon del Rosario, Jr.

Good morning, ladies and gentlemen, stockholders. The Annual Meeting of Stockholders will please come to order. Your corporation has decided to proceed with the conduct of this meeting remotely or via live streaming in accordance with the rules of the Securities and Exchange Commission. Let me first introduce the members of the Board of Directors who are with us today: our Chairman Emeritus, Mr. Oscar Hilado; our Vice Chairman, Dr. Magdaleno Albarracin; our President and Chief Operating Officer, Dr. Chito Salazar; Mr. Victor del Rosario, Mr. Eduardo Sahagun, Ambassador Jose Cuisia Jr.; Mr. Guillermo Luchangco; Mr. Juan Santos, Attorney Lilia de Lima, Ms. Rizalina Mantaring, Mr. Edgar Chua, Dato Timothy Ong, Dr. Edilberto de Jesus, Dr. Cielito Habito. Also attending are officers of PHINMA Corporation. We acknowledge the presence also of our corporation's external auditor for 2024, Isla Lipana & Company, led by Mr. Roderick Danao. Also present is [ Ms. Judaline Obrigue ] representing Stock Transfer Service, Inc., the independent third-party stock transfer agent appointed by the corporation to count and validate the attendance of stockholders and votes cast, if necessary. May we know from the Secretary if -- whether notices of the annual meeting were sent to the stockholders.

Yes, Mr. Chairman. The notice with the agenda of this meeting was posted on the website of the corporation, was published in the Philippine Daily Inquirer and the Philippine Star for 2 consecutive days on May 13 and May 14, 2025, and was disclosed to the Securities and Exchange Commission and the Philippines Stock Exchange in accordance with the rules of the SEC.

Mr. Secretary, could you please inform our stockholders of the procedures for attendance, voting on each item of our agenda and participation in today's meeting.

Mr. Chairman, the following are the rules for attendance and participation at this meeting. As stated in the notice of meeting, stockholders may participate and attend this meeting only by remote communication in accordance with the procedures set forth in the information statement posted on the company's website. Stockholders who have informed the company of their attendance through a dedicated e-mail provided by the company in the said notice on or before May 30, 2025, shall be considered present at this meeting. The rules of conduct and procedure for this meeting are contained in the explanation on each item of the agenda posted on the website of the corporation and earlier disclosed. Owners of shares constituting at least majority of the issued and outstanding capital stock of the corporation present remotely or by proxy with a proxy attending shall constitute a quorum for the transaction of business at this meeting. All the items in the agenda for approval by the stockholders, except the election of directors, will need the affirmative vote of stockholders owning at least a majority of the shares of stock present or represented at the meeting. Election of directors is based on the number of votes cast by each stockholder present at the meeting in favor of nominees of his/her choice with each stockholder being entitled to such number of votes equivalent to the number of shares owned by him or her multiplied by the number of seats to be filled up. Those are the rules for attendance and participation at this meeting, Mr. Chairman.

Thank you, Mr. Secretary. Mr. Secretary, do we have a quorum for this meeting?

Yes, Mr. Chairman. Based on the tabulation of attendance, they are present or duly represented at this meeting, more than 82.79% of the outstanding capital stock of the corporation, consisting of 336,325,265 shares. There is a quorum for purposes of this meeting, Mr. Chairman.

Legal notices having been given and a quorum being present, we are now ready to proceed with the meeting. The next item on the agenda is the reading and approval of the minutes of the previous meeting of stockholders held on April 23, 2024. Copies of the minutes were furnished to the stockholders as Annex E of the information statement. May I request the Secretary to discuss the resolution for approval by stockholders and the votes received thereon.

Mr. Chairman, copies of the minutes were distributed to the stockholders as Annex E of the information statement. The proposed resolution to dispense with the reading of the minutes and for the approval thereof is shown on the screen. And Mr. Chairman, based on the tabulation of votes, stockholders owning a total of 278,453,779 shares or 82.79% of the total issued and outstanding shares of the corporation voted in favor of the proposed resolution.

Having received the affirmative vote of stockholders owning a majority of the shares present at this meeting, the resolution is approved. The next item is the annual report of management for the year ended December 31, 2024. And if I may, I would like to deliver now my own message, the Chairman's message. Let me begin by greeting my fellow PHINMA directors, officers, stockholders, the media and all our guests, a pleasant morning. Thank you for joining us in our shareholders' meeting today. 2024 was filled with opportunities and risks, both at the domestic and international fronts. Geopolitical tensions intensified further, particularly with the results of the United States presidential elections, the consequences of which continue to be felt to this day. Amid persisting challenges, the Philippine economy grew moderately during the year even with the government's efforts to boost economic activity. The Philippines looks to sustain economic gains from last year while remaining cognizant of lingering risks from overseas. Still, the country aims to capitalize on avenues for economic and business growth, which hopefully will benefit all Filipinos. PHINMA's strategic approach centers on being responsive to the ever-evolving needs of underserved Filipinos through our businesses. Our products and services cater to the urgent daily needs of families and communities, allowing them access to the essentials of dignified lives. Our investments made in previous years and our business performance in 2024 position the PHINMA Group to maximize these opportunities towards our long-standing commitment to making lives better. As we have in the past, PHINMA will continue to demonstrate that business should be a force for good as we look forward to more and more members of the private sector heeding this call. Our education unit is a strong testament to this mission. On its 20th year in 2024, PHINMA Education grew its network in the Philippines and Indonesia to over 163,000 students, many of whom are the first in their families to go to college, getting access to opportunities for improving their and their families' lives. And though we hope to improve this further, we are pleased that nearly 80% of our graduates are employed within the first year of graduation. PHINMA's business achievements and inspiring mission have reinforced the business community's confidence in us and enabled us to expand our partnerships. Last year, PHINMA Education welcomed global private equity firm, KKR. The PHP 4.5 billion investment led by KKR has placed PHINMA Education in a better position to reach more underserved youth in the region. PHINMA Corporation also successfully completed our PHP 1 billion stock rights offering in 2024, marking our return to the stock market after nearly 3 decades. PHINMA Properties partnered with JEPP Real Estate of the Jacinto, Echaus, and Puentevella families to develop Saludad, PHINMA Group's first mixed-use master plan township in Bacolod. The Floirendo Group's ANFLOCOR signed agreements with PHINMA Construction Materials Group for a major cement manufacturing facility in Davao del Norte and with PHINMA Hospitality for a TRYP by Wyndham Hotel in Samal. PHINMA Construction Material Group's Philcement also entered into partnerships with Petra Cement and Henry Sy Jr.'s Big Boss Cement to operate factories in Zamboanga del Norte and Pampanga. These partnerships, we believe, are founded on the solid reputation of PHINMA for its integrity, professionalism and trustworthiness and the solid experience and expertise of our management teams. Looking to the future, we now turn our attention to affordable housing. This is a fundamental need with an estimated backlog of over 6.5 million homes, and we want to address this by doing in housing what we have accomplished in education in serving the low-income market. Our new business unit, PHINMA Community Housing or COHO, is our strategic vehicle for providing dignified affordable homes for those that need it the most by building not just residential structures, but workers, villages and communities. I cannot emphasize enough the importance of making a difference beyond our usual business operations, particularly through the power of collaboration. PHINMA and the De La Salle University have launched the PHINMA-DLSU Center for Business and Society that promotes the idea that business must be a force for good. As we enter our 70th year in 2026, our group shall continue finding more ways to uplift the lives of the underserved and serve the nation on a much larger scale. None of these would be possible without your unwavering support and belief in our mission. We thank you, our dear shareholders, directors, officers and friends for your constant support. With your support and all of us working as one, PHINMA will indeed continue being a force for good. Thank you all. [Presentation]

How are we as a business force for good in 2024? Let's watch this recap of our business operations. [Presentation]

To discuss more about our financial results, may I request our Chief Financial Officer, Mr. EJ Qua Hiansen, to take the spotlight.

Thank you, Peter. To our shareholders, our Board of Directors, honored guests and my PHINMA colleagues, good morning. As our Chairman, Mr. Del Rosario mentioned, the PHINMA Group has been on a growth trajectory as we continued investing in our strategic business units and their expansion projects to positively impact more lives. Developing our markets is key to PHINMA's strategy to widen our reach and serve more Filipinos with our focus on finding business solutions to address the underserved daily needs. With this, your company's expanded partnerships and built up stronger capital basis to put us on track for our growth initiatives, which will begin commercial operations in the coming years. Our strategic approach has driven our top line growth with revenues reaching a record PHP 23.76 billion in 2024, growing at a CAGR of 14% over the last 3 years. Year-on-year, gross profit likewise increased by 17%, largely attributable to the performance of PHINMA Education. The company's consolidated net income and net income attributable to equity holders of the parent this year were lower than the 2023 figures of PHP 1.5 billion and PHP 831 million, respectively. The increase in revenues and gross profit was offset by higher operating expenses related to those expansion efforts that we talked about. Interest expenses also rose as the company took on additional loans to fund our growth projects, along with the impact of higher interest rates as our loans were repriced. Still, we sustained revenue growth in the first quarter of 2025 with our top line climbing to PHP 6.6 billion, resulting in higher net income also year-on-year. Your company's balance sheet remains strong with total assets increasing to almost PHP 54 billion as of December 31, 2024. This asset growth was funded by additional equity of PHP 6.2 billion, thanks to our successful stock rights offering and the investment of KKR in PHINMA Education. These improved our debt-to-equity ratio to 1.7, and PHINMA Corporation has intentionally refinanced our short-term debt in anticipation of lower interest rates this year, which resulted in the current ratio declining to 0.85. However, as you can see, our cash generation remains strong as evidenced by the DSCR of 1.33. As a result of all of those efforts, we are well positioned to continue investing in our SBUs, and we thank you, our valued partners and our shareholders for your continued support for the group's plans ahead. Thank you.

Thank you, EJ. Let me now call on our President and Chief Operating Officer, Dr. Chito Salazar for the group's business outlook.

This morning, we showed what PHINMA Corporation achieved last year. These accomplishments and performance will fuel our ambitions towards growth and making a bigger difference in our society and country. That is making PHINMA as a genuine force for good. PHINMA Education uplifts underserved youth in the Philippines and Southeast Asia by providing accessible quality education to those who need it the most. Many of our students who successfully passed their licensure exams and find good jobs are first in their families to attend college or university. With the entrance of global investment firm, KKR, PHINMA Education seeks to grow its network to 192,000 students this year through both organic and strategic expansions. PHINMA Construction Materials Group development will only further support the country's infrastructure drive. Union Galvasteel continues innovating its light steel frames, special products and services to its customers, while Union Insulated Panel Corporation through cold storage infrastructure solutions seeks to address the nation's food crisis. Philcement, on the other hand, is widening its reach by operating new plants in Zamboanga del Norte and Pampanga and building a cement manufacturing facility in Davao del Norte. PHINMA Properties continues to develop urban communities through housing projects, mainly for the mid-income first-time homeowners. The first phase of Saludad, PHINMA Properties foray into townships will go live by the end of the year. Saludad will offer the Bacolod community not only housing but the best of PHINMA in education, hospitality and construction materials. The group recently also organized PHINMA Community Housing to help address the country's huge unmet need for dignified affordable shelter for underserved markets. PHINMA CoHo will break ground on its first housing project in Davao by the fourth quarter of this year. PHINMA Hospitality is poised to maximizing growth demand for domestic leisure and business travel. The company will break ground on its second Tryp by Wyndham Hotel in Saludad Bacolod, while construction is presently ongoing for another Tryp hotel in Samal, making our entry into the Condotel market. PHINMA Hospitality is also expanding Microtel Mall of Asia to serve even more local and foreign travelers. With all of these, PHINMA will create an even larger impact and making lives better as we look to our 70th year in 2026. through our products and services, our own people, to our respect of our planet and to the policies we support. The group seeks to make the lives of even more Filipino families and communities better this year and in the future. Thank you, and good morning.

Thank you, Dr. Salazar. The Chair -- that completes the management report. So the Chair will now entertain questions from the stockholders regarding the report. Please send your questions through the chat box to our moderator, Peter Perfecto. May I also ask our moderator to read any questions received in advance from the stockholders, which are relevant to today's meeting.

Mr. Chairman, 2 questions were received from the stockholders. And the first question is on community housing, which we have been talking about or CoHo for short. The question goes, what would differentiate PHINMA CoHo from other socialized housing projects?

May I request Mr. Luis Oquinena, President and CEO of PHINMA Community Housing Corporation to kindly answer this question.

Thank you for that question. Well, first off, PHINMA Community Housing is an integral part of PHINMA Property Group's vision of providing affordable homes, really specifically for the low-income families. Secondly, PHINMA Community Housing, as the name suggests, builds the foundation on community, community life, being able to support each other. And instead of amenities, we plan to build support features like day care for the families, home-based enterprises for the [indiscernible] and really looking at what will support the lifestyle and needs of low-income Filipino families. And lastly, PHINMA Community Housing is really the PHINMA Group's commitment to nation building to really reach the least amongst us, the Filipino worker families to really build decent homes for them and build a workers' village that can be passed on from generations to generations. [ Comboda ] no Filipino worker left behind without a home address.

Thank you, Mr. Oquinena. Let's move on to the second question. Are there any projects or investments this year to improve the country's food security?

May I call on someone very familiar, Ms. Danielle del Rosario, Chief Operating Officer of Union Insulated Panel Corporation, to kindly respond.

Thank you, Mr. Chairman, and good morning, PHINMA shareholders. I'm Danielle del Rosario, Chief Operating Officer of Union Insulated Panel Corporation. This is a wholly owned subsidiary of Union Galvasteel Corporation and our newest subsidiary in the group. We are very pleased to share with you that your company's investment through UGC for our brand-new state-of-the-art insulated panel factory is already underway and on track to operate by the first half of next year. Our new facility in Porac Pampanga will be able to produce up to 1 million square meters per annum of premium quality, cost competitive, low-carbon building materials that improve energy efficiency while reducing construction time and maintenance costs. Our panels are designed to ensure temperature regulation through superior insulation technology, which is a timely response to a rising climate change and food security concerns. So our team has likewise been ramping up our presence in the market, and we are very proud to share that we have been awarded to design and supply several key cold storage and logistics projects across the country from top-tier conglomerates, including at least 4 cold storage projects for the Ayala Group, another cold storage project for San Miguel and a significant project for Manila Water, among others. As we jointly endeavor to support our country's food security and self-reliance goals, Union Insulated Panels will also become an integral part of iconic brands such as Uniqlo and Rebisco as we are implementing energy-efficient projects and bringing forth solutions and services to complement and promote optimal use of our construction materials. So together with our President and CEO, Mr. Eduardo Sahagun and all of us at the PHINMA Construction Materials Group, we look forward to growing the smart building solutions space as we keep our homes, businesses and country cooler using insulated roofing and insulated wall panels. This is our contribution to making lives better by building better and to being a force for good. Thank you for the question, Mr. Chairman.

Thank you, Ms. Del Rosario. Mr. Chairman, I'm looking at the chat box, and I still have not received or I still do not see any other questions. So I guess we can continue with the rest of our Annual Stockholders' Meeting. Thank you, everyone.

All right. Then thank you very much. Can the Corporate Secretary please present the resolution proposed for approval by the stockholders and the votes received for the approval thereof.

Yes, Mr. Chairman. The resolution for the approval by the stockholders of the annual report, together with the audited financial statements and the notes thereto of the corporation for the year ended December 31, 2024, is shown on the screen. And Mr. Chairman, based on the tabulation of votes, stockholders owning a total of 278,453,779 shares or 82.79% of the total issued and outstanding shares voted in favor of the proposed resolution.

Having received the affirmative votes of stockholders owning a majority of shares present at this meeting, the resolution is approved. The next item is the ratification and approval of all the acts of the Board of Directors, committees and management since the last Annual Shareholders' Meeting. May I again request the Corporate Secretary to please present the resolution proposed for approval.

Yes, Mr. Chairman. The resolution proposed for approval and ratification by the stockholders of all acts of the Board of Directors, Executive Committee and other committees of the Board, officers and management is shown on the screen. And based on the tabulation of votes, stockholders owning a total of 278,453,612 shares or still 82.79% of the total issued and outstanding shares voted in favor of the said proposed resolution, while 167 shares abstained from voting.

Thank you. Having received the affirmative votes of stockholders owning majority of shares present at this meeting, the resolution is approved. The next item is the election of directors for the next fiscal year. May I request the Corporate Secretary to inform the stockholders of the nominees for election as directors.

Yes, Mr. Chairman.

The votes received by the 7 nominees, sorry.

Yes, Mr. Chairman. The Nominations Committee has prescreened and shortlisted the nominees qualified to be elected as directors of the corporation for fiscal year 2024-2025. These are now 15 nominees to fill 15 seats on the Board with 7 independent directors as follows: one, Mr. Oscar J. Hilado; two, Mr. Ramon R. del Rosario, Jr.; three, Dr. Magdaleno B. Albarracin, Jr.; four, Dr. Meliton B. Salazar, Jr.; five, Mr. Victor J. del Rosario; six, Mr. Eduardo A. Sahagun; seven, Ambassador Jose L. Cuisia, Jr.; eight, Mr. Guillermo D. Luchangco. And as independent directors; number nine, Mr. Juan B. Santos; ten, Attorney Lilia B. de Lima, 11, Ms. Rizalina G. Mantaring; 12, Mr. Edgar O. Chua, 13, Dato Timothy Ong Teck Mong, 14 Dr. Edilberto C. de Jesus and 15 Dr. Cielito F. Habito. Mr. Chairman, considering that only 15 were nominated to fill 15 seats in the Board and there being no objection to the distribution of the said votes, 278,453,779 votes were cast for each of the nominee, equivalent to 82.79% of the total issued and outstanding shares of the corporation. The said nominees are, therefore, duly elected as members of the Board for the ensuing year and until their successors are duly elected and qualified.

May I congratulate my co-nominees, all of whom are current members of your company's Board. And allow me again to thank our Board of Directors for your consistent encouragement and support. Many, many thanks. We now proceed to the next item on the agenda, the appointment of the corporation's external auditor for the ensuing fiscal year. The Audit Committee and Board have selected and recommended the appointment of Isle Lipana & Company, PwC Philippines as external auditor of the corporation. May I request the Corporate Secretary to present the resolution for approval and the votes received.

Yes, Mr. Chairman, the resolution for the appointment of Isle Lipana & Company, PwC as external auditor of the company is shown on the screen. And based on the tabulation of votes, stockholders owning a total of 278,453,612 shares or 82.79% of the total issued and outstanding shares voted in favor of the proposed resolution, while 167 shares abstained from voting.

Having received the affirmative votes of stockholders owning a majority of shares present at this meeting, the resolution is approved and Isla Lipana & Company, PwC Philippines is appointed as external auditor of the company for 2025. Those are the matters for today's meeting. Before we adjourn, I would like to inform the stockholders that you may still e-mail your questions or comments within 1 week from today. The company will answer all questions relevant to today's meeting and the matters taken up. Let me once again thank our directors, officers and management team for your unwavering guidance and support in our mission of making lives better. Your leadership continues driving our company towards stronger growth, allowing us to uplift more families and communities in need. I would also like to thank our shareholders, bankers, investors, employees, customers and our other stakeholders. You are our valued partners in our mission. May we continue working together towards a better society and country. There being no further business to discuss, I hereby declare the meeting adjourned. Thank you once again for your participation and attendance at this meeting. Thank you.

Once again, thank you for joining PHINMA Corporation's Annual Stockholders Meeting. For more updates on the PHINMA Group and its business units, follow our official social media channels through the QR codes flashed on the screen now. Have a pleasant day ahead, everyone.

Thank you all.