Alsons Consolidated Resources Stead Fast For Mindanao

Result of Operations

Revenue and Profitability

ACR and Subsidiaries posted a modest increase in core revenues at Php6.52 billion from last year's Php6.38 billion. The 2016 total revenues included a one-time gain related to the development of SEC Section 1 amounting to Php719.1 million. When this gain is considered, consolidated revenues for 2017 is 8% lower from the Php7.11 billion reported in 2016.

The full year operations of SEC 1 resulted in an increase in its cost of services from Php1.93 billion in 2016 to Php2.90 billion this year. However, due to the lower energy dispatch of your company's 3 diesel plants SPPC, WMPC and MPC for the year, total cost of services went down 2% to Php4.61 billion from Php4.68 billion in 2016. Due to these factors, gross profit declined 20% from Php2.42 billion in 2016 to Php1.94 billion this year.

General and administrative expenses increased by 6% at Php562 million in 2017 from Php531 million in 2016. This increase is attributable to higher SEC expenses now that its first section is in commercial operations for a full year. Operating profit also declined 27% this year to Php1.37 billion compared to last year's Php1.89 billion.

Earnings before interest, taxes, depreciation and amortization (EBITDA) slightly decreased from Php2.70 billion to Php2.33 billion this year, still due to the inclusion of a one-time gain recognized by SEC. The EBITDA margin is also slightly lower at 35% this year versus the 38% earned in 2016.

Finance charges increased by 39% from Php865 million last year to Php1.20 billion this year. The interest expense incurred on the project loan to complete the first phase of the SEC plant is now fully recognized as an expense after the project was completed and commenced operations. Interest was capitalized until April 2016 as part of project cost.

Meanwhile, the Company realized a net other income of Php70 million for this year, compared to a net other charges of Php155 million in 2016. The Company realized a gain when its investment in Duta, Inc. was divested this year. The net other charges in 2016 were due to the recognized impairment loss of Php245 million on goodwill, negated partly by the income from insurance claim of SPPC during that year amounting to Php70 million.

As a result of the foregoing, your company's consolidated net income declined 84% from last year's Php636 million to Php103 million in 2017. The income attributable to Parent posted a loss of Php21 million this year compared to the income of Php317 million in 2016 posting earnings per share of (Php0.004) from Php0.050 last year.

Financial Position

As of December 31, 2017, total resources of ACR and Subsidiaries remained strong at Php38.24 billion, increasing by 24% versus the Php30.81 billion level reported in 2016.

Current assets increased 52%, from Php6.08 billion to Php9.26 billion. The increase came largely from the cash and cash equivalents representing proceeds of the partial divestment of investment in ATEC and a deposit in interest revenue account on the Fixed Rate Corporate Note (FXCN) of the Parent Company. Noncurrent assets also rose by 17%, representing capital expenditures incurred for the construction of the second phase of SEC's power plant and the additional deferred project cost incurred for SRPI during the year.

Current liabilities increased significantly by 92% from Php2.91 billion to Php5.59 billion, largely on account of higher current portion of long-term debt and accounts payable and accrued expenses and half of the advances of related party advances of ATEC assigned to Global Power Business Corp. Noncurrent liabilities increased by 8%, due to the additional drawdown of project loan for the second phase of SEC's power plant.

ACR's balance sheet remained strong with a current ratio at 1.65:1 in 2017 versus the 2.09:1 level in 2016, while its debt-to-equity ratio increased at 2.21:1 from 2.03:1, due to availment of additional debts.

Net cash inflows from operating activities remain stable at Php3.96 billion, 66% up from last year's Php2.38 billion. The increase in accounts payable and accrued expenses resulted to the increase in cash from operations this year. Net cash used for investing activities was also up by 80%, from Php2.81 billion to Php5.05 billion this year due mainly to the ongoing construction of SEC Section 2. Together with net cash inflows from financing activities amounting to Php3.43 billion, largely from loan availments, available funds totaled Php7.38 billion in 2017, from which Php4.64 billion were used for power plant project construction during the year. The net cash balance after accounting for the above changes reached Php4.38 billion, 114% higher than the Php2.05 billion in the previous year.

Energy and Power

The Power Group gross revenues decreased by 4% from Php7.20 billion in 2016 to Php6.91 billion million in 2017. The net income dropped by 43% from Php1.11 billion in the previous year to Php632.2 million in 2017.

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 2017 reached 219,327 MWh or 38% lower than 354,877 MWh energy delivered in 2016, representing a decrease in plant average load of 25.5 MW from 41.9 MW in 2016. In the same way, plant capacity utilization dropped to 25.5% from previous year's utilization of 41.9%. WMPC gross revenues decreased from Php1.64 billion in 2016 to Php1.44 billion in 2017, net income earned for 2017 reached Php70.7 million.

Southern Philippines Power Corporation (SPPC) Shareholders: Alsing Power Holdings, Inc. / Tomen Power Singapore Pte. Ltd. / Aboitiz Power Corporation

The total energy generated for 2017 reached 50,384 MWh, 67% lower than last year's generation of 154,996 MWh. This resulted to a decrease in plant capacity utilization of 11% from 33% in 2016. SPPC posted gross revenues of Php523.8 million in 2017, 14% lower from the Php611.8 million in 2016. Net income decreased to Php96.3 million, compared to Php212.6 million of the previous year.

Mapalad Power Corporation (MPC) Shareholders: Conal Holdings Corporation

The total energy generated for 2017 reached 57,101 MWh, 77% lower than the 246,879 MWh of energy delivered in 2016. MPC generated revenues of Php731.0 million in 2017, 59% lower from the Php1.77 billion of revenues generated in 2016. Net income for 2017 reached Php15.1 million. Alto Power Management Corporation (APMC) Shareholders: Conal Holdings Corporation / Tomen Power Singapore Pte. Ltd.

APMC will carry on in managing WMPC, SPPC and MPC locally. In addition, APMC executed an Executive Management Services Agreement with Sarangani Energy Corporation which took effect 01 January 2017. The O&M contracts with P.T. Makassar Power in Indonesia expired last 30 April 2016 and was no longer renewed. APMC's gross revenues in 2017 reached Php57.7 million, higher than the Php27.6 million registered in 2016. It posted a net income of Php17.1 million this year.

Sarangani Energy Corporation (SEC) Shareholders: Alsons Thermal

The total energy generated for 2017 reached 523,519 MWh, 26% higher than previous year's generation of 415,664 MWh. Commercial operation of SEC Phase 1 circulating fluidized bed power plant was declared on 29 April 2016, hence, year 2016 operations covered eight months only. Year 2017 was the first full year operation of the power plant. The company posted gross revenues of Php4.17 billion in 2017, 19% higher compared to 2016 revenues of Php3.50 billion. However, net income decreased to Php390 million, compared to previous year's figure Php893 million because 2016 revenues included compensation from revenue loss received from Daelim in the amount of Php719.1M. Without this one-off transaction, net income for year 2017 was higher by 85% compared to that of year 2016.

Land and Property

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

The gross revenue of Alsons Land Corporation increased to Php25 million in 2017 from Php22 million in 2016. Income from leasing activities remain the same at Php12 million while Campo Verde, a joint venture project with Sunfields Realty Development Inc.(SRDI) located in Malvar, Batangas contributed 32% improvement in revenues during the year. The Company is currently in development for the expansion of its Campo Verde project in 2018. There are also other plans in the pipeline that will add value to the remaining Eagle Ridge inventories as well as its Pasong Tamo property.

Kamanga Agro-Industrial Economic Development Corporation (KAIEDC) 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.