Ayala Group targets P50-B earnings; enters motorcycle business via KTM

MANILA, Philippines - Ayala Corp., the country’s oldest conglomerate, is embarking on a new blueprint that seeks to double the company’s net income to P50 billion in five years.

AC chairman and chief executive officer Jaime Zobel de Ayala unveiled during the company’s annual stockholders’ meeting yesterday the group has earmarked P174 billion in total capital expenditures this year in line with its plan to increase net earnings, which stood at P22.3 billion in 2014.

The plan seeks to improve shareholder return on common equity to 15 percent, expand equity earnings contribution of businesses outside its four largest business units to 20 percent, and increase the group’s presence in Southeast Asia to 10 percent of equity earnings.

At present, AC’s international ventures account for four  percent of the group’s total business.

“Amidst the upcoming political changes, we remain optimistic about the overall environment in the Philippines. Overall, our current businesses have a clear and sustainable growth path in the coming years that we envision will perform above nominal GDP growth,” Zobel de Ayala said.

“As part of our 2020 plan, we are upbeat about our investments in new platforms, specifically along three clusters: power and transport infrastructure, healthcare and education, and automotive and manufacturing,” he added.

Over the last five years, the Ayala group has invested over half a trillion pesos in businesses that are critical to the country’s economic growth.

In addition, the company said it had paid P170 billion in aggregate corporate taxes and given direct and indirect employment to 90,000 Filipinos.

AC has aggressively invested in the power generation space, with the aim of building 1,000 megawatts of attributable capacity.

The company has likewise invested in the transport infrastructure sector with tollroads, railroads, and rail payment PPPs.

The group recently ventured into healthcare and education, acquiring Generika and the University of Nueva Caceres, to build a presence in social infrastructure.

For this year, AC has highlighted manufacturing as the new growth pillar for the group.

With its existing investment in Integrated Micro-electronics Inc., one of the largest automotive electronics manufacturing services in the world, the group is seeking to expand its manufacturing portfolio through acquisitions and partnerships.

Meanwhile, the Ayala conglomerate is making its foray into motorcycle assembly through a partnership through Europe’s largest motorbike manufacturer.

AC announced yesterday a joint venture it entered with Austria-based KTM AG for the distribution and manufacturing of KTM motorcycles in the Philippines.

Company officials said the deal involves an initial investment of at least P500 million to kick off production of about 20,000 units by the third quarter of the year.

The motorcycles will be assembled and manufactured in IMI facility in Laguna and about 70 percent of the output will be exported to China while the rest will be sold in the country.

“This venture will enhance our existing offerings under our automotive group and allow us to serve more of the country’s growing mobility needs. Ayala’s capabilities in manufacturing, distributorship and dealership, as well as its regional expertise and excellent reputation, make them the ideal strategic partner for our ready to race aspirations. We look forward to a long and fruitful relationship and plan to rapidly grow KTM and its brands across Asia,” AC president and COO Fernando Zobel de Ayala said.

The new business will be housed under the Ayala Automotive unit, with production being subcontracted to IMI—Ayala’s electronics manufacturing arm.

“This partnership is the first of many investments as we ramp up our manufacturing portfolio. Over the years, we have built a long track record of excellence in manufacturing and engineering. We believe that manufacturing should be a critical component for the country’s growth moving forward, providing thousands of jobs, creating numerous ancillary business opportunities, and helping drive inclusive growth for the Philippines,” Zobel said.

The AC official said the locally-made motorcycles would be priced competitively to suit the middle to high-end segment of the market.

KTM AG is currently the world’s fourth biggest motorcycle producer and Europe’s largest with an annual production volume of 180,000 units.