Managing Director and CEO's Letter

DEAR SHAREHOLDERS

I am pleased once again to report an abundance of record high numbers in the financial and operating results of First Pacific and our Group companies. First Pacific has again managed to deliver record highs in turnover, contribution from operations, and recurring profitability, building on record highs in these areas reported in 2022.

Contribution was led by Indofood with its own record highs in turnover and core profit with its largest business, Consumer Branded Products, supplying record high margins. We expect continuing growth at Indofood going forward as it continues building on its inherent operational strengths, particularly in quality, variety, and distribution.

PLDT reasserted its position as the number one telco in the Philippines in size and customer experience as it delivered record highs in service revenues and EBITDA and its three main businesses all delivered growth. This is an engine firing on all cylinders. PLDT’s fintech unit Maya is in growing danger of being less overlooked by those considering the value within PLDT. In a country where more than two-thirds of the population are unbanked, Maya Bank is leading the way in meeting the unmet needs of millions of consumers, with more depositors, a bigger deposit base, and the leading merchant acquirer in the country. This may be the most exciting company within the First Pacific Group.

In 2023, however, this title is broadly agreed to belong to PLP, a leading electricity provider in Singapore. PLP delivered record highs in revenue and core profit while substantially reducing its net debt by 70% whilst also delivering US$117 million in dividends to First Pacific. Such accomplishments cannot of course be expected year after year, so I am gratified to see PLP moving to diversify into solar power generation with its potential participation in a project to import solar power from Indonesia to Singapore. PLP is also exploring further investments in domestic power generation.

For all these accomplishments, the standout performer in 2023 has to be MPIC with its record highs operating revenues and core profit. This has led to MPIC’s highest-ever cash dividend payout, which reminds me that First Pacific also saw its highest-ever dividend income in 2023.

But these are not the main reasons for drawing particular attention to the Philippines’ leading infrastructure holding company. First Pacific led the privatization of MPIC in the second half of 2023, introducing a significant new shareholder in the person of a joint venture between Mitsui and the Japanese Government. As a private company, MPIC will be nimbler and stronger than as a listed entity and also – particularly important to First Pacific shareholders – an increasingly valuable unlisted component of your Company’s strong and diversified portfolio. MPIC will be a leader in corporate development within the Group even as it strengthens the infrastructure of the countries it operates in.

And now a word about Meralco, one of the biggest companies in our Group and the biggest electricity distributor in the Philippines. Meralco is accelerating its journey to becoming the largest power producer as well, with recent investments in 3,500 megawatts of new solar capacity and 2,500 megawatts of LNG capacity – together about one-fifth of the country’s entire functional generation capacity as of now – as well as the Philippines’ first LNG import and regasification facility. Meralco’s record high revenues and profit in 2023 ensure that it has the balance sheet for such paradigm-setting investments.

The profit-and-loss accomplishments of our Group companies are reflected in your Company’s treasury as well. Our interest coverage ratio rose to a strong 4.4 times, meaning that our interest bill – in an environment of high borrowing rates – was well under a quarter of dividend income minus head office costs.

It is not hyperbole to suggest that First Pacific is as strong as it has ever been. While financial markets began to wake up to this during the course of a year in which our share price rose by more than one-third, I am hopeful of gaining wider recognition of our accomplishments going forward, particularly against the backdrop of firmly based expectations of continuing earnings growth by our core holdings over the short to medium term. It’s a great time to be alive, and better yet – to be a shareholder in 142.HK.

Yours sincerely
Manuel V Pangilinan
Managing Director and Chief Executive Officer
27 March 2024