PHINMA Corporation ($PHN)

[Presentation] Hi, everyone. Thank you for joining us this afternoon for PHINMA Corp's First Quarter 2026 Investor Briefing. So I'm Kara Albert, the Investor Relations Officer and today's moderator. Joining me today, we have a fresh face, [indiscernible] [indiscernible] VP and Treasurer; and of course, Mr. EJ Qua Hiansen, our CFO. And the part of that will be the speakers in today's session. Before we get into the presentation proper, allow me to just go over a few reminders to ensure that we have a smooth session. [Operator Instructions] Please also note that we will be recording this briefing for our uploading on our website. So with that, I'd like to turn over the floor to [indiscernible].

Okay. Thank you, Kara, and good afternoon, everyone. Thanks for joining us today for the first quarterly analyst briefing of 2026. I guess before we go on to 2026, so I do want to touch on 2025 once again. For 2025 [indiscernible], it was a challenging year, not just for the Philippines, but for PHINMA, in particular. But we remain anchored on our longer-term strategy. We do apologize for the results of last year we own those results. But we are moving forward. And we do think that the businesses we're in are the businesses that provide the essentials for [indiscernible]. So when we talk about growth on a pine perspective, it also needs the impact that we want to see. The more we can grow our businesses, the more where we can help filipinos get the essentials of dignified lives. We have that, of course, in education, the medication in our Construction Materials group, which includes our steel roofing and cladding business, our cement business our solar business and our new Insulated Panels business. In properties, we have [indiscernible] PHINMAL properties and our newer segment PHINMA Community Housing, which [indiscernible] focus on socialize housing solutions for minimum lead workers and of course, in hospitality through the management, franchising and ownership of hotels. So my colleagues and I will walk you through the first quarter for our businesses. But more than just the first quarter, we also want to show you what these businesses will look like moving forward. Next slide, please. So I mentioned our strategy was to focus on under search markets. These are the markets that we think other businesses are not really focusing on. And these are the business segments. These are the customers who we really need to reach for the Philippines to become the country that we envision it becoming. So how can we do this? We start, of course, with our people. Beyond our leaders, it's also going across the organization, and that's why I'm very happy to have with me today by the 3 ladies that are here. It's the talented individuals, the mission driven that we have in in [indiscernible] but work together to make these results possible. Without that, we wouldn't have the success that we do. And without that, we wouldn't be able to make the impact that we do. It helps [indiscernible] the results that we have do their hard work costs. Second, it's really making sure that we're as close to the market as we can be that we know our customers as well as we can. And again, across our distances, how can we [indiscernible] synergy. And synergy for us isn't just the traditional synergy of one business buying from another. Synergy is also in terms of sharing knowledge. For example, community housing, which we set up last year, it's the same market segment as time education. So we're able to share insights, not just from PHINMA education, but community housing, but from community housing back the education so that both businesses can evolve the metal market dynamics. So as I said, we do this by understanding our customers. We do make sure that in the business segments that we're operating in, we have experts with extensive industry knowledge. I'm very happy to see that in April, [indiscernible] our leadership bench through the appointment of 3 new Vice Presidents are [indiscernible], who is concurrently the President and CEO of Union GloveSteel Corporation; Danielle del Rosario concurrently the CEO of Union Insulated analyst; and [indiscernible] VP for Corporate Services and planning as well as our Chief Risk Officer. So having this wider leadership bench along with the strong people that I mentioned and the strategic partnership able to bring in are really what's going to drive this forward in the future. Next slide, please. So the last point that I didn't mention in the last slide was really the diversified geographic region. You can see this in this chart here. For the past few years, the Finland group has spent talking about being on growth footing. What that's meant for us has been about PHP 8 billion in CapEx with an anticipation of about another PHP 6 billion coming in this year. And you'll see these projects nationwide. Starting within education, they continue to put up new campuses as well as acquire new schools. In fact, the most recent acquisition they had was in the -- just in the first quarter, which was Southeastern College in Pasay. When you combine it with Southwestern University, I think that means we have a good work on the south, but we really do intend to be nationwide. In terms of our Construction Materials segment, we've been expanding also largely [indiscernible] for cement. You'll see here that [indiscernible] is putting up their [indiscernible] terminal, which will begin commercial operations this year. It also has its the [indiscernible] terminal and in [indiscernible]. We also have put up and will also begin commercial operations this year, the insulated panel plant in Para, where [indiscernible] still were really looking at different asset-light strategies that we can employ. Per property, they've driven our expansion into the Bacolod market with their salad option, where we're also putting up the first branch of Southwestern University outside of the group. We're also putting a better hotel to support the development of that township and as well as the community housing development in Bacolod. Our first [indiscernible] where we're also putting up the first full franchise condotel in the group, trip in Samal Island. So I didn't say that our results were a bit challenged in 2025. I'm happy to say that the first quarter of this year represented a strong turnaround despite the market volatility that's happening. This was led by [indiscernible] education, which continues to have record enrollment, a 12% year-end [Audio Gap] yes in the period. Our construction materials to you noticed that there was a reduction in revenues, but the net income loss was actually a bit lower than the previous year. Let me go a little bit further into this number. I think with the events happening in the water as well as the lingering effects of the flat control project, it really get hampered in the first quarter and the growth of the Construction Materials segment. there was still continues to be a slowdown in government projects even if funds are available, I think we do need to push the government to [indiscernible] to implement good projects. to stay off the potential impacts of speculation in this country. This is infrastructure that is vital to our nation, and this will also generate employment. But we were able to manage our margins well. And despite what was happening globally, actually in March, both our cement and steel roofing businesses for [indiscernible] increased prices which strengthened their margins. On a consolidated basis, our margins moved up from about 32% to 37% year-on-year. Now in the property and hospitality segment, yes, that continues to be a challenge. Our property segment in particular, continues to suffer from, I guess, the overhang of demand in Metro Manila but I'm happy to note that we did start our transition to the profits, as I mentioned with Bacolod that provides a very strong and positive base moving forward, while we also see strengthened cash generation from that business. [indiscernible] hospitality, they take to recover, and I think [indiscernible] will tell us a little bit more about that later on.

So that over to you. I'll turn it over to [indiscernible] for a deeper discussion on our financial performance.

Thank you so much,[indiscernible] . So building on the business unit performance as discussed by PC, let me now walk you through how these translate to our consolidated results for the first quarter. PHINMA Corporation had a good start to the year. Our net income attributable to [indiscernible] more than doubled up to PHP 407 million year-on-year. And if you look at our operating income, it has also improved by 9%. This despite the lower revenues registered in the first quarter amidst a really challenging market environmental[indiscernible] the results were primarily driven by the solid formats of PHINMA education. And it was also ported by earnings made by [indiscernible] as well as our hospitality segment. it is over further reinforced with the ongoing group's cost management initiatives. You can move on to the next slide. We can also see that our financial position has improved. We ended quarter 1 with cash and cash equivalent of about PHP 4.3 billion. and this was largely attributable to the reset of the equity infusion by [indiscernible] cement to [indiscernible] cement. Now if you look at our assets, it has rose to PHP 61 billion, coming from PHP 59 billion as of year-end 2025. A and this is largely attributable to the Southeastern acquisition, which is the newest addition to our education network. In additon, there are also ongoing investments of [indiscernible] in our Panabo terminal as well as the acquisition of land and equipment for our union insulated [indiscernible] Our leverage remains well managed with our DE ratio at 1.67, and our debt cover is actually strong at 7 -- more than 7x for the first quarter. So even though here also, the total equity increased to $18.6 billion. That's roughly about PHP 2 billion increase from last year. And this is largely due to the issue on shares to Sumitomo combined with the net income during the quarter as well as acquisition of Southeastern College. Overall, we are well position to continue supporting the growth initiatives of our SBUs, supported by our expanded capital base in our [indiscernible] partnership. Let me now move on to our first SBU, PHINMA education, which continues to demonstrate consistent and scalable growth. For over 2 decades now, we have sustained enrollment growth for -- impact for our school year 2025 to '26, we were able to serve about 178,000 students and this is really a record enrollment across Philippines and Indonesia. Importantly, this is not just scale but outcomes. Our students have delivered a 93% overall [indiscernible] license programs in the Philippines reinforcing the quality and relevance of our education model. In the next slide. So we continue to expand our footprint. In March, we added another school in our network with the acquisition of Southeastern College. This becomes our wealth [indiscernible], including Indonesia. And this will be integrated into the [indiscernible] college network within the national capital region alongside our existing campuses in Manila and [indiscernible]. Strategically, this strengthens our presence in Southern Metro Manila and nearby growth areas, allowing us to serve a significantly larger student base of about 18,000 students across this auditor, including parts of Laguna and Cavite. Next slide. The strong enrollment resulted in educations consolidated revenues of PHP 2.34 billion and net income attributable to [indiscernible] PHP 633 million during the quarter. Overall, education [indiscernible] to be acquired earnings pillar of the group, providing both growth and stability in our portfolio. I shall turn over the floor now to EJ to give us our construction real segment.

Thank you, [indiscernible]. As [indiscernible] mentioned, our education business does give us a good stable basis of growth, particularly net income from a portfolio level. Our Construction Materials segment, on the other hand, is the largest driver of revenue growth. But of course, it's been hit by, as I mentioned earlier, the flood control controversy. We do expect government spending to recover in the second half of this year, really to jump-start the economy as it's needed. But we also saw the impacts of the Iran or in terms of our logistics costs in terms of our supply chain, we've been able to manage these pretty well. and to a large extent, as I mentioned earlier, protect our margins while also increasing volume, particularly in the month of March. So we're entering the highest demand season. for construction materials. So we do expect that to be a strength. Moving for the stock, we continue to navigate these various headwinds. I did mention that we're expanding our presence largely in the middle market. This is a market that we think one has more demand, but to also less supply. And we continue to retain some brand name our recognition in that market that we think makes us very competitive. We have the right local partner [indiscernible] and a rental family versus one of the largest business groups in [indiscernible] in that market well. So between the 2 of us were able to be navigated and supply our high-quality construction material equipment. Now in terms of our sales mix, particularly in the [indiscernible] steel. We've been shifting towards higher margin product segments. One example of this has been [indiscernible] panels, which really was a business that developed out of GEC. Once we were able to see the market opportunity insulated panels, especially as other conglomerates are going hard into the cold storage piece. We thought it made sense to expand it and spin it off as its own business put up a state-of-the-art manufacturing facility and really grow that. It's a business that did well last year, and we continue to see positive sites this year. [indiscernible] has done a great job of incubating other businesses within the Finland Group. We continue to manage its costs well. We have more than 25 sites in the Eastern wide, which allow us to be close to our customers. And that closes the customer in UGC's demand has also benefited us in the recent basis. customers have been looking and moving towards suppliers who are close to them. So in terms of the overall sales strategies that we're doing, we've really defined it and refine it. As I mentioned earlier, we have appointed 2 new CEOs to this business because, again, the growth opportunities in the Construction Materials segment areas, and we want to be able to take advantage of that. So we thought that focused management teams would be able to take advantage. Of course, as [indiscernible] mentioned, we are very grateful to receive the investment of [indiscernible] in January, that really will help strengthen the balance sheet of the cement. But more than that, this provides us access to a valued strategic partner, a partner that we've worked with in our initial quarter into [indiscernible] a few decades ago as well as, of course, a sign of support that the industry does need more investment. If you look at cement consumption nationwide, on a per capita basis, it's really half of our competitor countries. And when you put this in the context of an archipelago that needs ports in every island, we think there should really be a lot more spending in the cement space. Of course, what we've seen over the past few years is that while there was spending in terms of the budget, that wasn't with the actual construction. So again, we're urging more real spending in construction. Thanks, Karl. Okay. So I largely talked about all the piece in the last set. Let me focus now on Finnasolar on the bottom. Of course, with energy prices going up and we continue to see the strains of our energy infrastructure, there has been growing demand for solar solutions. In fine solar, what we're really focused on is leveraging the synergy with UGC on commercial size, rooftop [indiscernible]. Of course, we're also developing our rooftop solar segment in the governance Jaya project, and we expect those to continue to drive us moving forward. The demand in the first quarter were probably going to start recognizing revenue from that in the third quarter of this year. As mentioned, they're insulated by a nor will be located soon and commercial operations will begin in the second half, and we're very happy to see it. Our engineer in [indiscernible] come in and are helping us put the finishing purchase on that. Of course, in terms of cement and GC have talked about those extensively in the previous slides at Next. So I did also mention earlier how -- our revenues are down year-on-year, but I think March gives us a lot of confidence. But what's really driving March was the continuation of ongoing projects. The fully transparent, we will see if companies continue to launch new projects in the future, but we expect that to [indiscernible] replaced with government. So with that, I'll turn it over to Grace to talk about our property development.

Thank you, EJ. For our property business, we continue to strategically focus outside Metro Manila in response to the oversupply situation. [Audio Gap]

Sorry, we're just keeping everyone suspect.

So we have limited our developments to high-growth regional markets such as [indiscernible] as you may know, a key milestone for us is the continued rollout of [indiscernible], our first down chip development. So [indiscernible] located in what we anticipate will come from the emerging safety center of Bacolod with a project driving the narrative of Bacolod North as the next growth corridor. And this Bacolod North branding was officialy adopted by the LGU permission -- with LGU permossion to differentiate the district, our commitment by establishing a branch of Southwest University, as mentioned by EJ earlier and our third chip hotel as the down chips activators, which has, in fact, given us a boost in sales, especially in the MRB space. We've also achieved important milestones, including the groundbreaking of [indiscernible] last March, and the start of construction for the [indiscernible], our first midrise residential development within the township. Next slide, please. For the first quarter of 2026, PHINMA Properties recorded revenues of PHP 338 million and a net loss of PHP 230 million. Lower revenue is primarily driven by a lower percentage of completion, or POC, as we continue to adopt a cash generation strategy which further improved collections while balancing revenue recognition along the resumption of construction activities. Looking ahead, while we look towards regional developments will take time to be fully reflected in our business results. We expect improved revenue recognition as construction activities commence for [indiscernible] residential development. With that, let me now turn you over to Kara.

So just to build on the last [indiscernible] pace. I think we mentioned it in previous investor briefings last year, that we did start to see the Metro Manila market to be oversupply. As a result, we shifted our focus from further developing existing projects in Metro Manila towards developing this project in Bacolod. We expect the revenue that replaces that foregone revenue to start kicking in latter this year but really more next year and moving forward. So that once that revenue starts coming in, that's when we'll start to see a restoration of the profitability of PHINMA Properties.[indiscernible]

So I'll talk about PHINMA community housing, which is the youngest SBU among the portfolio because it just started last year, it really aims to [indiscernible] the significant housing backlog in the socialized causing segment. Now you see on the left-hand side are actual photos of the exterior and interior of the model units, which is in the [indiscernible] side. Speaking of the site, the [indiscernible] program in [indiscernible] last November 2025. And we are targeting to start the bulk of the construction works by the second half of this year. And hopefully, once we get the ball rolling in Dave, we can also start on the Bacolod project. As mentioned in previous briefings, we want to really under [indiscernible] of what makes -- what makes PHINMA community housing different [indiscernible] really be focused in making a community. And to do so we want to ensure that the [indiscernible] fit the needs of the residents there. So for example, we want to put a daycare and skills operating facility or community-based enterprise facility so that the people who live there can upscale and basically uplift themselves. And given the strong alignment of this venture with the overall mission of [indiscernible] is putting in PHP 250 million to this project. I'll now move on to PHINMA Hospitality. So let EJ [indiscernible] in the first part -- PHINMA hospitality also has several expansion projects in the works. Basically, [indiscernible] into most of nationwide presence. In NCR, we are expanding the existing Microtel North Asia branch by adding 100 rooms to the existing 150, and this is a property that's really been performing well over the past years, given its close proximity to the mall into the events because in that area. And increasing the room capacity will allow us to better leverage on the location. And will better position us to serve the growing demand in the area, especially once the 360 project is completed. Then in [indiscernible] mentioned by Grace earlier, we are putting off shipped by Vietnam in [indiscernible] township. The groundbreaking for that was held just last March, as you can see in the photo in the upper right. We expect that this will be a great addition to the chip project and underscores the drive towards regional development, given that we're not just putting up the township, we're also putting up a hotel that will be there. Then lastly, we have Dream with our long-time partner, [indiscernible], This is the -- the third franchise with [indiscernible], the first two being Migration and [indiscernible]. So we're looking forward to the success of the per project. Now as of the quarter of this year, we saw stronger with revenue generation across multiple properties, which effectively offset an anticipated revenue decline in micro [indiscernible] of Asia, which as mentioned earlier, is still undergoing construction works. [indiscernible], in particular, has really seen stronger online bookings, and that's been able to leverage on a lot of driven demand from various weekend activities in the [indiscernible]. These activities are like the [indiscernible], the various concerts we can throughout the year. And so that's why you'll see an improvement [indiscernible] big first 3 months of 2026 versus the financial performance in the same period last year. Now I'll give the floor back to [indiscernible] to give me full preview.

Thank you. Thank you, Lenis. I guess rather than going through everything that we wanted to discuss. Let me talk a little bit about some of our focus areas for the rest of the year. As mentioned, we do remain accurate to our long-term strategy of growing our businesses, but I think specifically, what we're focusing on this year is really driving the execution of those clients. As you could see in the earlier slide, we have expansion projects nationwide. These expansion projects really require very, very focused and determined execution to make sure that they come on stream come on stream, on budget, and the third provides the products and services that we intend to again to the communities that we intend to provide to. Secondly, looking at increased volatility. We're looking at how we can handle our debt reducing in areas that we can. We're bringing in equity like we did in [indiscernible] cement to bolster those balance sheets. We want to see these projects also, again, generating cash flow to repay the capital to the companies that we're investing in it. But also beyond that, we're monitoring risk on a group by basis. With the incident of the war in Iran began. We did an exercise to stress test the impact of the water over prolonged and severe scenarios, the the impact that they would have on our group in terms of our cash flow, in terms of our operations, in terms of our balance sheet. And we must quickly the strength in areas that we think need strengthening to address the vulnerabilities we think need addressing as well. And at the same time, when there are areas of opportunity, we're willing to move fast to make sure that we can take advantage of those opportunities. So that's really how we're doing things as a group. We're optimistic about the future. The [indiscernible] list to their present and we continue to build our business together with the right people and the right leadership in place. And thank you again. And I think we have the Q&A next [indiscernible].

[Operator Instructions] So we'll start off with a question here. So first, as the U.S. era [indiscernible] any of the group's growth expansion plans. [indiscernible]

I was going to ask the -- it, of course, it happened with us. When these scenarios happen, you have to relook at the business case and make sure that they still make sense. For example, your cost inputs go up, our interest rates have gone up very quickly. So even our cost of funding these projects has come up quite significantly in a very short time span. So we've relooked at the -- we're continuing to push the projects that we think makes sense in this environment. But we've also tightened up operations. We've cut back on necessary spending. Even just small things like for exactly our offices. We closed them on Friday to save a little bit on overhead. We've encouraged our employees to work from home more to also save them the [indiscernible] of increased transportation costs. And so these are the kinds of small things, but also the larger strategics that we've done in light of the work. We continue to keep a cost of up our treasury on a weekly basis will look at the [indiscernible] outlooks, the impact, some of them not not just interest rates, the foreign exchange, where we can, we've hedged our exposures. And I think we have random of this trend as well. And then at, I don't know if you want to add.

Yes. And so answer that the [indiscernible] on business risk teams of our have been really closely coordinating and collaborating to ensuring that automotive measures are really in place and are really ready and available anytime.

Another question, 36% reduction. Okay, there's some question.

[indiscernible] on the reduction of cost of sales from John. John, if we go back to one of the earlier slides, there was also a corresponding reduction in revenue, namely in our Construction Materials group. As our sales did go down a little bit year-on-year. But on the other hand, stronger pricing and cost management has actually improved our gross market cans on a consolidated basis by about 5% year-on-year. And that's why we actually have stronger profitability this year versus last year.

There is a second part of the question on hospitality, how [indiscernible] in first quarter 2026? Are you seeing effects already from the VCC travels from Chinese stores this year? Well, as of the first quarter, actually, most of the sometime have really been on domestic. I think more than half [indiscernible], so 3D really still domestically different demand, either from the domestic leisure segment or from corporate accounts in the domestic, please.

That's another segment where, again, the long-term fundamentals make us bullish. If you look at our terms, we're just getting back to 2019 levels, which are still far below our Asian peers. So it's an area of opportunity for the Philippines. And I think the fact that, for example, our airports are base improved now versus a year ago. Those are the elements that would make tourism more attractive. And as we continue to build that tourist infrastructure, that will drive more toward [indiscernible]

I hope that answered your question, [indiscernible]. I'll move on to another question that was sent. Do you see IPC becoming a strong growth driver for the group and why? Do you want to take that [indiscernible]

Yes, I do think it's a strong growth driver. There a couple of reasons, right? UPC's main target segment is cold storage. And this is really a direct response to the full security prices and the [indiscernible]. It's a setback that we won, don't generate enough food on our own. But secondly, within our supply chain, we lose a significant portion to it because of climate, because of storage. And so cold storage is an opportunity for us to reduce wastage. UA PC's insulated panels can improve energy efficiency by more than 20%, depending on the sites. And so this will extend the lag again and reduce the wastage, but secondly, it will also result in savings for our buyers. Now why go into coy go in the cold storage this way versus going to cold storage on its own. Colorants a very capital-intensive business. The logistics are a significant driver of the profitability of the business. These are not our competencies of FINMA. With is our core competency is proofing. So when we started with the roof of Union Golf steel going in an insulated panels, we can do that on the roof, but we can also move downwards from that route. And to go back to an earlier action. When there's a [indiscernible] is taking for gold, you can make a lot of money by supplying the shovels. And that's what we're doing. We're providing the shovels. We're working with other conglomerates that we have good business relations with who were able to get repeat base from these customers. And once we bring in and compete, we insulated panel factory, we should be improving our margins by more than 10% and immediately, while still providing the same quality as imported in a [indiscernible] brand. It will also give us more control of our supply chain in that space.

Thanks, EJ. We received the question for education. [indiscernible] take this one. What were the primary drivers behind the acquisition of Southeastern [indiscernible].

Well, one of the major considerations when we acquired this cool is that we believe that this will provide us more access in Southern Metro Manila as well as in areas of [indiscernible] and [indiscernible] where we intend to serve approximately about 80,000 studies.

Thank you. [indiscernible] we have went for properties if you're okay to take the biggest line. So quite a lot of developers are also extending into the [indiscernible] space. What would differentiate see from township development. Currently, we got ongoing in the area.

So [indiscernible] cash leverage some of the synergies among the PHINMA companies. which is why we're able to bring in a school, our Southwestern University and a hotel as mentioned by [indiscernible]

Thank you, [indiscernible]. So last call for any additional questions. So if there's not, we'd like to thank again everyone for taking time to join us this after. We hope you pleasant rest of the day. If you have any other questions, feel free to send an e-mail to investor relations at phinma.com. As you see on the screen. So thank you, everyone.

Thank you, everyone. See you next quarter.