Alsons Consolidated Resources Stead Fast For Mindanao

Result of Operations

ACR and Subsidiaries posted consolidated revenues of Php3.446 billion in 2013, higher than the Php2.142 billion reported in 2012. The 61% growth was mainly contributed by the Company's Energy and Power businesses, generating revenues of Php3.418 billion in 2013, 63% up from the Php2.100 billion generated in 2012 with the full operation of MPC in September 2013. MPC was re-acquired on February 2013, with rehabilitation starting in March 2013, and operations commencing in May.

Revenues from the Property Development business decreased 35% from Php41.75 million to Php27.3 million. Revenues from sales of Campo Verde project were higher in 2012 at 29 units to only 9 units in 2013 due to lower available inventories.

Similarly, cost of services and real estate sold was reported at Php1.998 billion, 1.17x higher than the Php921.64 million in 2012, with MPC incurring the bulk as operations started in May.

Consequently, gross profit improved by 18.6% in 2013 to Php1.45 billion from Php1.22 billion in 2012.

With the 3% decrease in general and administrative expenses, from Php373.44 million to Php362.88 million, operating profit improved by 28% to Php1.085 billion from the Php847.38 million reported in previous year. The management fees paid to other associates in 2012 as well as the provision for impairment in trade and other receivables contributed to the higher general administrative expenses in the previous year.

Furthermore, earnings before interest, taxes, depreciation and amortization (EBITDA), which represented 65% of total revenues reached Php1.993 billion, slightly higher than the Php1.980 billion realized in 2012. Meanwhile, interest income was 45.8% lower in 2013 at Php25.18 million from Php46.44 million in 2012 due mainly to the lower placements in 2013. In contrast, interest expense was 41.6% higher at Php119.38 million in 2013 from Php84.29 million in 2012, as a result of additional loan availment during the year.

The company incurred other losses amounting to Php48.97 million in 2013, vis---vis the reported Php423.54 million other income in 2012. The current year's other losses stemmed principally from the Php100.9 million provision for impairment for its Indophil investment. In addition the company incurred foreign exchange losses of Php46 million as a result of the revaluation of its dollar-denominated liabilities. Conversely, the company reported a Php236 million other income in 2012, which pertained to the compensation of the Parent Company as the sole project proponent for the risk, time and resources in developing Sarangani Energy that was paid by a new partner in the project.

As a result, income before tax of Php941.79 million, decreased by 24% from last year's level of Php1.234 billion. Nevertheless, provision for income tax was 25% higher at Php300.9 million versus the previous year's Php240.7 million, as the drop in income before tax was essentially due to provisions booked to revalue carrying costs of both investments and liabilities.

In the meantime, in line with the corporate decision to focus on power generation in Mindanao and other key areas of the Philippines, the company through its subsidiary, ALC, sold its investment in Lima Land, Inc. in October 2013. Income realized by LLI in 2013, shown as discontinued operations, amounted to Php196.3 million, 127% higher than last year's income of Php86.5 million.

With the recognition of losses due to peso depreciation, ACR's net income decreased by 22%. As such, the income attributable to equity holders of the Company was likewise lower by 8% at Php466.87 million from last year's Php509.12 million. Correspondingly, basic earnings of Php0.74 per share decreased from Php0.081 per share in 2012.

Financial Position

As of December 31, 2013, total resources of ACR and Subsidiaries stood at Php17.958 billion, 28% higher than the Php14.024 billion reported in 2012. Current assets grew by 25%, from Php5.482 billion to Php6.841 billion. The increment came largely from the increase in trade and other receivables, cash and cash equivalents as well as build-up of spare parts and supplies inventory. The expenditures incurred for the on-going construction of the SEC plant, on the other hand, caused the 30% growth in noncurrent assets.

The maturing portion of the loan availed by the Parent Company from its major shareholder and the unpaid trade payables and interest by MPC increased current liabilities by 1.16x, from Php1.049 billion in 2012 to Php2.27 billion in 2013. On other hand, additional drawdowns from the project loan of SEC accounted for the 1.67x rise in the Company's non-current liabilities.

Accordingly, ACR's balance sheet remained robust with a current ratio at 3.013:1 in 2013 versus the 5.22:1 level in 2012, and continued to be underleveraged despite an increase in its debt-to-equity ratio, from 0.67:1 from 0.21:1.

Meanwhile, net cash inflows from operating activities increased by 19%, from Php1.740 billion in 2012 to Php2.078 billion in 2013. Together with its net cash inflows from financing activities amounting to Php2.856 billion, largely from loan availment, total funds available reached Php4.934 billion. On the other hand, net cash outflows used in investing activities, mainly for the construction of the SEC power plant, amounted to Php3.790 billion. Including the effect of foreign exchange rate changes, ACR's consolidated cash reached Php1.422 billion, significantly higher than the 2012 balance of Php0.277 billion.

Energy and Power

The Power Group gross revenues increased by 45% from US$ 50.7 million in 2012 to US$ 73.7 million in 2013. The net income improved by 3% from US$ 19.6 million in the previous year to US$ 20.1 million in 2013.

Western Mindanao Power Corporation (WMPC)

Shareholders: Alsing Power Holdings, Inc. / Tomen Power Singapore Pte. Ltd. / Aboitiz Power Corporation

The total energy delivered to the Mindanao grid in 2013 reached 553,078 MWh or 2% lower than 564,165 MWh energy delivered in 2012, representing a decrease in plant average load of 64.8 MW from 66.0 MW in 2012. In the same way, plant capacity utilization declined to 64.8% from previous year's utilization of 66%. WMPC gross revenues slightly increased from US$32.2 Million in 2012 to US$32.3 Million in 2013, net income earned for 2013 reached US$13.3 million.

Southern Philippines Power Corporation (SPPC)

Shareholders: Alsing Power Holdings, Inc. / Tomen Power Singapore Pte. Ltd. / Aboitiz Power Corporation

The total energy generated for 2013 reached 308,472 MWh, 1% lower than last year's delivery of 310,496 MWh. This resulted to a decrease in plant capacity utilization of 65.6% from 66% in 2012. SPPC posted gross revenues of US$16.6 million in 2013, almost at par with the US$16.7 million in 2012. Net income decreased by 15% to US$5.0 million, compared to US$5.84 million of the previous year.

Mapalad Power Corporation (MPC) Shareholders: Conal Holdings Corporation

Conal Holdings Corporation (CHC) acquired the 98MW bunker-fired Iligan Diesel Power Plants from the Iligan City Government on 27 February 2013 and MPC, having the right to rehabilitate and operate the plant, commenced rehabilitation of the engines immediately on 11 March 2013. Ceremonial switch-on marking the start of the ramp-up operation of the plants was held on 19 April 2013, wherein 11 MW was made available to MPC customers.

Rehabilitation was 100% completed on September 4, 2013 and commercial operation was declared on 06 September 2013 with the full 98 MW available.

For the period April to December 2013, MPC was able to deliver 140.6 GHW of energy to its customers, generating Php1.31 billion in total revenues. Net income was at Php98.7 million for the 8-month period of operation.

Alto Power Management Corporation (APMC) Shareholders: Conal Holdings Corporation / Tomen Power Singapore Pte. Ltd.

APMC will carry on in managing WMPC and SPPC locally, while it maintains O&M contracts with P.T. Makassar Power in Indonesia. APMC's gross revenues in 2013 reached US$1.38 million, 3% less than the US$ 1.41 million registered in 2012. It posted a net income of US$32 thousand this year compared to US$1.14 million loss in the previous year.

The Energy and Power group will remain a dynamic player in the energy and power generation industry and be a keen participant in every opportunity where we can capitalize on our expertise.

Land and Property

The gross revenue of Alsons Land Corporation and its subsidiary, LiMA Land Inc., for the first three quarters improved by 17% from Php 650 million in 2012 to Php 760 million in 2013. The growth in revenue was due to the upsurge in manufacturing output of existing industrial locators inside Lima Technology Center. The entry of new industrial locators, likewise, contributed to the improvement in power sales, water revenues, and management fees. However, in October 2013, ACR through ALC disposed its 60% share in Lima Land Inc. in order to refocus its resources in power related businesses in Mindanao.

Alsons Land Corporation (ALC) Shareholder: Alsons Consolidated Resources Inc.

Land development and construction of amenities for its 11.5-hectare Campo Verde residential project, joint venture with Sunfields Realty Development Inc. located in Malvar, Batangas, was already 99% complete as of 31 December 2013. Cumulative sales and available inventory for sale amounted to 580 units and 81 units respectively. The 3.5-hectare expansion area of Campo Verde was acquired in the second half of 2013 with the scheduled project launch in June 2014. The Campo Verde expansion solve the market need for middle-income level housing units in the Malvar-Lipa City area

Kamanga Agro-Industrial Economic Development Corporation Shareholder: Alsons Consolidated Resources Inc The development of Kamanga Agro-Industrial Economic Zone (Kamanga Ecozone) commenced in 2013 with Sarangani Energy Corporation as its anchor locator. Kamanga Ecozone is accredited with the Philippine Economic Zone Authority (PEZA) as an agricultural and light-industry zone. By locating inside this ecozone, the locators can enjoy the benefits of a reliable power source as well as the incentives prescribed by law through the PEZA.