LT Group, Inc.’s (LTG) attributable net income for the first nine months of 2020 amounted to Php16.10 billion, Php1.38 billion or 9% more than the Php14.72 billion reported for the same period in 2019. 

The tobacco business accounted for Php12.12 billion or 75% of total attributable income. Philippine National Bank (PNB) contributed Php2.24 billion or 14%. Tanduay Distillers, Inc. (TDI) added Php1.09 billion or 7%. Eton Properties Philippines, Inc. (Eton) accounted for Php630 million. Asia Brewery, Inc. (ABI) contributed Php4 million or less than 1%. The 30.9% stake in Victorias Milling Company, Inc. (VMC) accounted for Php148 million, also less than 1%. 

In September, LTG paid a special cash dividend of Php0.23 per share or a total of Php2.49 billion. Including the dividends paid in June of Php0.43 per share or a total of Php4.65 billion, the Company has paid out Php0.66 per share or a total of Php7.14 billion, or 30.9% of 2019’s attributable net income of Php23.12 billion, higher than the dividend policy of 20%. 

LTG’s balance sheet remains strong. Debt-to-Equity Ratio was at 3.58:1 with the Bank, and at 0.17:1 without the Bank. 

LTG redeemed in September the remaining Php1.439 billion preferred shares issued in 2013 and 2014 for the acquisition of PNB. This brings to Php8.539 billion the preferred shares redeemed in 2020.

As of the end of September 2020, the cash balance of the parent company stood at Php215 million. 

Tobacco

The tobacco business had a net income of Php12.17 billion for 9M20, Php2.56 billion or 27% more than the Php9.61 billion reported in 9M19. 

Equity in net earnings from LTG’s 49.6% stake in PMFTC was Php12.24 billion, Php2.87 billion or 31% more than 9M19’s Php9.37 billion.

In 9M20, PMFTC’s shipment volume was 32.2 billion sticks, 13.7% lower than 9M19’s 37.2 billion sticks. The drop in volume is attributed to the price increase in end-August 2019, coupled with the impact of the enhanced community quarantine (ECQ) implemented in Luzon starting March 2 17 and in other select cities thereafter up to end-May 2020, as well as the reinstatement of the Modified ECQ in NCR and select provinces for two weeks in August 2020.

Marlboro accounted for 60% of volume in 9M20 reflecting up-trading resulting from a narrowed price gap with Fortune, compared to 55% of total volume in 9M19. Based on Nielsen estimates, PMFTC’s market share was at 68.4% for 9M20, lower than the 70.7% in 9M19.

The industry’s volume was estimated at 47.0 billion sticks in 9M20, 10.8% lower than 9M19’s 52.7 billion sticks.

The Government continued its efforts against the illicit trade which included smuggled and locally produced products. In 9M20, there were 112 enforcements, compared to 9M19’s 97 enforcements. A total of 150 machines were seized from illegal factories, 70 more than the 80 machines seized in 9M19. The 150 machines can form 24 lines, with each line estimated to produce as much as 3 million sticks per day. 

On July 25, 2019, President Duterte signed Republic Act (RA) 11346 which increased further the excise tax on tobacco starting January 2020. From Php35 per pack in 2019, it increased to Php45 per pack in 2020, and will increase by Php5 per pack annually from 2021 to 2023, then increasing by 5% annually thereafter. 

In early October 2020, PMFTC implemented price increases across all brands at Php1 per stick. Currently, the recommended retail price per stick of premium Marlboro is at Php7 (from Php6), mid-priced Fortune at Php6 (from Php5) and low-end Jackpot at Php5 (from Php4). Prior to this increase, the previous one was in late August 2019. Subsequently in early November, PMFTC’s main competitor raised prices and the recommended retail price of their brands are at par with PMFTC’s products. 

Philippine National Bank (PNB)

PNB’s net income under the pooling method was Php4.00 billion for the first nine months of 2020, Php2.52 billion or 39% lower than the same period in 2019. The lower net income was primarily due to the Php9.03 billion provision for credit losses that the bank booked in 9M20, significantly higher compared to Php1.43 billion in 9M19, largely due to the ongoing COVID-19 pandemic that has resulted in a downturn in the economy. 

Net Interest Income was 12% higher at Php26.16 billion from Php23.45 billion as Net Interest Margin improved to 3.5% from 3.1%. Loans and receivables were 11% lower year-on-year (y-oy) to Php577 billion. 

Net Service Fees and Commission Income were lower by 11% at Php2.55 billion. Trading and Foreign Exchange Gains were 123% higher at Php4.17 billion. 

Operating Expenses were Php7.55 billion or 34% higher at Php29.48 billion from Php21.93 billion, largely due to the increase in provisioning.

Net Non-Performing Loans (NPL) ratio was at 3.6% as of September 2020, higher than the 0.5% as of September 2019. NPL cover stood at 60%, from 134% as of September 2019. 

Tanduay Distillers, Inc. (TDI)

TDI’s net income for the first nine months of 2020 was Php1.09 billion, Php572 million or 110% higher than 9M19’s Php518 million.

The higher income is due to the higher volume of liquor sales and a 36% decrease in selling and marketing expenses from PHP1.14 billion to Php725 million. 

Total revenues were Php17.35 billion, Php3.53 billion or 26% higher than the Php13.83 billion in the same period last year. Liquor volume was 12% higher y-o-y, and selling prices were also higher as an average Php160 per case price increase was implemented in January to pass on the higher excise taxes. Revenues from liquor were Php14.68 billion, 29% higher than 9M19’s Php11.37 billion. Revenues from bioethanol were 28% lower at Php1.35 billion from Php1.88 billion as higher prices were able to partially offset the 34% drop in volume. Rectified alcohol contributed the balance of revenues at Php1.32 billion, from Php577 million in 9M19.

As of end-September 2020, TDI’s nationwide market share for distilled spirits was at 25.8%, compared to September 2019’s 29.0%. In the Visayas and Mindanao regions where most of TDI’s sales are generated, market share was at 62.2% and 77.6%, respectively, as of September 2020, compared to 64.7% and 72.6%, respectively, as of September 2019.  

Gross Profit Margin (GPM) was slightly lower at 16% from 17%, due to higher alcohol costs. Operating expenses were 24% lower at Php1.25 billion due to lower selling and marketing expenses. 

Eton Properties Philippines, Inc. (Eton)

Eton’s net income for 9M20 was at Php633 million, 1% or Php4 million higher than the Php629 million reported for the same period in 2019. The higher net income is attributed to the increase in rental income. 

Total revenues were at Php1.88 billion, 20% lower than the Php2.34 billion of 9M19. Real estate sales amounted to Php520 million, 53% lower than 9M19’s Php1.10 billion. Leasing revenues were 10% higher at Php1.36 billion due to the escalation rates of existing leases as well as additional space that came on stream.

Additions to the leasing portfolio came from Eton WestEnd Square in Makati City during 2Q19. Its retail component, eWestMall, has two floors of retail spaces with a total leasable area of 4 approximately 3,600 square meters. The office component, eWestPod, has over 13,000 square meters of office space. Five Cyberpod Centris in Quezon City with close to 43,000 square meters came on stream starting 3Q19. 

At the end of September 2020, Eton Properties had a leasing portfolio of approximately 181,000 square meters of office space and over 43,000 square meters of retail space. 

Projects in the pipeline include the 36-storey Blakes Tower in Makati City which will have 10,500 square meters of office space and 14,000 square meters of residential space. Others are the 4.3- hectare Eton City Square in Sta. Rosa, Laguna, with the first phase having 6,900 square meters of commercial space and NXTower I, an office building along Emerald Avenue and Ruby Road in Ortigas with 21,000 square meters of gross leasable area. 

Asia Brewery, Inc. (ABI)

ABI’s net income for 9M20 was Php4 million, 98% or Php250 million lower than 9M19’s Php254 million. The lower net income was primarily due to lower volumes across all products as the ECQ from mid-March to end-May, and the reinstatement of MECQ for two weeks in August in Metro Manila and other provinces affected sales in sari-sari and convenience stores as well as in supermarkets.

Revenues were at Php9.96 billion, 17% lower than 9M19’s Php12.01 billion. Overall GPM was lower at 26% from 27% due to sales mix. Operating expenses were 9% lower at Php1.73 billion as the Company spent less on advertising and promotions.

Cobra energy drink continues to account for the largest share of revenues at 41% of total. It remains the market leader with a share of 71% for 9M20. 

Our bottled water brands, Absolute and Summit, continue to have the second largest share in this segment at 25%. Bottled water accounted for 24% of revenues. 

Soymilk Vitamilk’s market share was at 75% for 9M20. However, like our other beverages, its volume was affected by the ECQ and MECQ. 

The packaging business’ revenues were 17% lower due to lower demand from third parties. ABI supplies the glass bottle and other packaging requirements of TDI and ABI and also sells to third parties. Packaging accounted for 16% of revenues in 9M20.