Managing Director and CEO's Letter
The engine, as they say, is firing on all cylinders. Indofood, PLDT, MPIC, Philex, and PLP all improved their contribution to First Pacific in 2021. Marking our 40th anniversary, turnover and recurring profit reached record highs – peaks that we expect to be surpassed in the years ahead.
The contribution leader in 2021 was Indofood, with a 22% rise in contribution on the strength of the first full-year contribution from its Pinehill businesses acquired in 2020 and continuing steady demand growth in its domestic markets. Net sales and profit reached record highs last year and we expect this to be a continuing trend going forward as Indofood increases the volume, variety, and quality of the consumer food products it provides to more than 1 billion consumers around the world.
PLDT delivered record service revenues last year as it continued to extend its domination in customer experience across both wireless and fixed-line businesses. Its three engines of earnings growth – Individual, Home, and Enterprise – continue to perform strongly, taking turns leading the way. In 2020 earnings growth was led by the Individual business as mobile phone users ramped up their consumption of data services and in the following year it was the turn of Home to take the lead, installing a record of 1.13 million residential broadband kits in 2021. After more than half a decade of robust capital expenditures, the gap in quality of customer experience between PLDT and its competitors now seems unsurmountable. PLDT’s fintech investment, Voyager, saw its PayMaya digital payments business become the first and only telecommunications company to receive a Philippine digital banking license. This suggests strong potential growth in valuations of its parent PLDT on the promise of strong earnings from an economy where more than two thirds of people lack a formal bank account. Continuing earnings growth is seen in the years ahead.
MPIC saw its two biggest businesses – electricity and toll roads – deliver double-digit earnings growth while its water business Maynilad saw flat earnings on lower volumes of water consumption. Overall, MPIC saw its core profit nearly double from the low set in 2020 as the Philippines began climbing out of pandemic-inspired movement restrictions. Looking ahead, we expect continuing demand growth for all three main businesses even as new investments add potential catalysts to MPIC’s earnings.
Philex benefited from sharply higher copper prices as its core profit more than doubled even as the volume of gold and copper produced declined slightly from a year earlier. Philex is looking ahead with optimism for the development of its new mining project in Mindanao, Silangan. This represents the future for Philex and we will be keeping a close eye on development of this copper and gold project.
PacificLight Power, or PLP, delivered a very large and very pleasant surprise, as it swung from several years of losses operating in a high-supply market to a positive contribution to First Pacific bigger even than that of Philex owing to sharp growth in demand for electricity in Singapore. Continuing demand growth will underpin PLP’s earnings going forward but we are hopeful of new revenue sources resulting from projects between PLP, Meralco, First Pacific, and other businesses in the Salim Group to build solar power facilities in nearby Indonesian island for export to Singapore, where the growing data center industry has a voracious appetite for clean electricity. Renewable electricity generation sits alongside fintech as areas of keen interest for our Group going forward.
Our 40th year has ended on as positive a note as one can expect. Our record high earnings come with a commitment to pay 25% of recurring profit to our shareholders and a three-year US$100 million share repurchase program announced in March 2021. These strong earnings come amid great confidence as we begin to envisage a post-COVID world. I have not been more optimistic for our prospects at any time in the past four decades than I am now. My heartfelt gratitude goes out to all my colleagues throughout the First Pacific Group for making this possible, and to our customers, shareholders, communities and other stakeholders. We couldn’t have reached this peak without you.
Manuel V Pangilinan
Managing Director and Chief Executive Officer
31 March 2022