JG Summit first-half core profit falls 37%, Cebu Pacific faces fuel pressure

JG Summit Holdings’ first-half core net income fell 37 percent to P13 billion as higher fuel costs weighed on Cebu Pacific, offsetting stronger earnings from property, food and key investments.

The Gokongwei family’s conglomerate still grew revenue 7 percent to P200 billion, helped by Robinsons Land, Universal Robina Corp. and higher passenger volumes at Cebu Pacific.

Reported net income from continuing operations fell 47 percent to P11.4 billion after the weaker peso generated unrealized foreign exchange losses, while higher interest expense at the parent company added pressure.

Management’s view 

“Our businesses sustain their efforts to proactively mitigate the impact of higher costs and softening consumer demand,” JG Summit president and CEO Lance Gokongwei said on Wednesday. 

“For the balance of the year, we anticipate profitability challenges to persist, particularly for our airline, considering fuel prices that remain elevated and the leaner travel season this third quarter,” he added. 

“Nonetheless, we remain committed to protecting long-term value for our shareholders while being realistic and proactive in improving our performance amidst the challenging economic backdrop,” Gokongwei said. 

Lance Gokongwei 

JG Summit president, CEO 

Cebu Pacific faces higher costs

Cebu Pacific flew 14.5 million passengers, up 4 percent, and grew revenue 8 percent to P68.6 billion, but average fuel prices jumped more than 60 percent and pushed ebitda down 40 percent to P10.5 billion.

Fleet financing costs and foreign exchange losses on dollar-denominated debt added to the pressure, leaving the airline with a P5.9 billion first-half net loss despite higher passenger volumes and fares.

Property, food provide cover

Other major businesses remained profitable and helped cushion the airline weakness:

• Robinsons Land grew core profit 5 percent to P7.2 billion as revenue increased 10 percent to P25.4 billion on stronger malls, offices, hotels and residential sales.
• Universal Robina grew revenue 4 percent to P89.3 billion, while net income increased 10 percent to P6.9 billion as pricing and a better sales mix helped offset higher oil-related costs and weaker sugar.
• JG Summit’s share of Meralco earnings jumped 15 percent to P7.1 billion, while income from Singapore Land Group surged 61 percent to P2.3 billion.

More pressure ahead

The parent company received P13.6 billion in dividends during the first half, up 17 percent, providing additional cash from its subsidiaries and investments even as borrowing costs increased after JG Summit absorbed debt from its former petrochemical business.

JG Summit ended June with a net debt-to-equity ratio of 0.58 times, but management expects elevated fuel costs, weaker third-quarter travel demand and uncertainty over consumer spending to keep pressure on earnings in the second half.

—Edited by Miguel R. Camus