By Revin Mikhael D. Ochave, Reporter
PHILIPPINE CONGLOMERATES are projected to maintain stable earnings or achieve modest growth this year, as certain business segments face challenges from economic headwinds, according to analysts.
The real estate businesses of conglomerates could weigh on overall profitability, AP Securities, Inc. Research Head Alfred Benjamin R. Garcia said in a Viber message.
“Most of the conglomerates have property development units, and this could drag on profits this year. Persistently high interest rates would also keep interest expenses elevated, further impacting the bottom line of conglomerates and possibly limiting their fund-raising,” he said.
“Overall, our conglomerates have proven to be resilient, so even if it’s unlikely that we’ll see remarkable growth this year, their earnings should at least be stable,” he added.
Luna Securities, Inc. Research Officer and Market Strategist Annika Gabrielle S. Angeles said conglomerates are expected to post moderate growth as they could benefit from possible interest rate cuts.
“While we expect these conglomerates to plod along with moderate growth, a half-percentage-point rate cut and improved consumer sentiment could provide a boost,” she said in a Viber message.
“Profit growth will continue to be difficult because of property, debt, interest rate effects, and shifting consumer habits,” she added.
The Philippine central bank unexpectedly kept rates steady last month after cutting rates for three consecutive meetings last year. Its next rate-setting meeting is on April 3.
Ms. Angeles said the ongoing surplus in the property market could dampen demand, hampering the performance of conglomerates’ real estate units.
“The property market is currently facing a significant surplus, particularly in Metro Manila, where most portfolios are concentrated. Property developers may see a decline in demand and price pressure as a result of this excess,” she said.
Sy-led conglomerate SM Investments Corp. recorded a 7% increase in its 2024 net income to P82.6 billion, as consolidated revenue rose by 6% to P654.8 billion, driven by stronger banking and property segments.
Lucio C. Tan-led LT Group, Inc. likewise grew its attributable net income by 14% to P28.92 billion in 2024, as revenue climbed by 11.9% to P129 billion, led by its banking and tobacco businesses.
On the other hand, Aboitiz Equity Ventures, Inc. reported a 23% decline in its 2024 net income to P18.1 billion after an asset impairment and a weak fourth quarter.
“In general, it should be better, especially for those conglomerates focused on banking and consumer businesses, because the outlook for economic growth is better this year due to lower inflation and interest rates,” COL Financial Group, Inc. Chief Equity Strategist April Lynn Lee-Tan said in a Viber message.
Other conglomerates, such as Ayala Corp., Ang-led San Miguel Corp., Gokongwei-led JG Summit Holdings, Inc., Andrew L. Tan-led Alliance Global Group, Inc., Gotianun-led Filinvest Development Corp., and Ty-led GT Capital Holdings, Inc., have yet to disclose their 2024 financial reports.
“The country’s biggest conglomerates recently posted new record-high earnings, with growth rates outpacing gross domestic product (GDP) growth, which could fundamentally support market valuations, especially if market conditions improve,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“Continued benign inflation amid faster Philippine GDP growth — among the fastest in ASEAN and Asia — would lead to further growth in sales and earnings, fundamentally supported by the country’s favorable demographics,” he added.
