METRO Pacific Investments Corp. (MPIC) posted a 272.06 percent growth in first-quarter attributable net income due to the selling of its stakes in a power producer and a toll road company in Thailand, as well as the newly signed tax benefits bill, on Wednesday.
MPIC’s attributable net profits for the first quarter was P7.03 billion, up from P1.89 billion in the same time last year, according to a stock exchange filing.
According to the group, it gained from the selling of Global Business Power Corp. and Thailand’s Don Muang Tollway Public Co. Ltd.
“These latest asset sales highlight MPIC’s dedication to transforming its portfolio and realizing value for its stakeholders,” the company said.
The company’s first-quarter core net profits, however, plummeted 26% to P2.5 billion, blaming the fall on the economic downturn triggered by the public health crisis.
The pandemic has culminated in “reduced toll road traffic, light rail systems, and commercial and industrial demand for water and power,” according to MPIC.
The newly signed Republic Act No. 11534, also known as the Corporate Recovery and Tax Incentives (CREATE) bill, which reduced income tax rates from 30% to 25%, also helped the company’s success in the first quarter, according to MPIC.
“This provision reduces the company’s potential tax liability and, as a result, provides for capital reallocation to further increase operating efficiencies,” it said.
“In the first quarter, we really recognized some good effects, with the tax rates lowered from 30 percent to 25 percent, and that’s around P500 million for the group,” MPIC Chief Financial Officer and Chief Sustainability Officer June Cheryl A. Cabal-Revilla said during an online briefing.
The company’s operating sales fell 7.16 percent to P10.63 billion in the first year, down from P11.45 billion the previous year.
MPIC’s power sector, which includes contributions from Manila Electric Co. (Meralco) and Global Business Power, accounted for P2.5 billion, or 66% of overall operational contribution.
Meralco’s core net profits dropped 11% in the first quarter to P5.1 billion. According to MPIC, the drop was caused by “lower oil sales, lower interest income on cash deposits, and higher operational expenses.”
According to Global Business Power, the CREATE legislation raised its core net profits by 19% to P522 million.
The core net profits of MPIC’s toll road company fell 15% to P788 million. The drop was caused by “a fall in traffic rates, higher debt cost and amortization from increased capital spending projects in the building of modern highways, and a reduction in contribution from foreign toll roads due to the divestment of Don Muang Tollways in Thailand in February 2021.”
“This was partially compensated by the CREATE law’s positive impact,” MPIC said.
According to MPIC, toll roads contributed P800 million, or 21% of the overall contribution from activities.
The water section contributed P500 million, or 14 percent of the sum, with contributions from Maynilad Water Services, Inc. and Metropac Water Investments Corp.
Maynilad’s first-quarter core net income fell by 24% to P1.2 billion.
“Amortization and depreciation expenditures rose due to significant developments in the Putatan Water Treatment Plant 2, in the Pasay and Paraaque sewage treatment plants, and ongoing facility improvements, compensated in part by lower income tax arising from the CREATE law,” MPIC said.
The company’s light rail business, operated by the Light Rail Manila Corp., posted a core net loss of P104 million, owing primarily to power and average daily ridership declines.
MPIC’s hospitals under Metro Pacific Hospital Holdings, Inc. increased their combined core net profits by 6% to P285 million.
According to MPIC, the improvement was “driven by revenue increases, which was further supplemented by the beneficial effect of the CREATE law’s tax reduction.”
According to Ms. Cabal-Revilla, MPIC is “on track to reach P12 billion in core income” by the end of the year.
REIT AS A FINANCIAL Choice
MPIC also announced on Wednesday that it is researching the feasibility of creating a real estate investment trust (REIT) for infrastructure.
“Several banks have approached us about considering REITs, especially in the hospital sector. But since we are now a minority shareholder in the hospitals, the decision is really up to the majority shareholders,” MPIC President and Chief Executive Officer Jose Ma. K. Lim said.
Metro Pacific Hospital Holdings President and CEO Augusto P. Palisoc, Jr. defined the situation as a “possibility.”
“I believe the REIT is a viable option for the hospital community, although we would need to do extensive research on it. We are really concerned right now with the COVID boom and the vaccine services that are going our way,” he added.
Ms. Cabal-Revilla, for her part, said, “I believe our toll roads party has already been approached to do REITs, but I believe they are looking at this from a timing viewpoint.”
“We have been contacted… One of our long-term goals is to provide a public listing. However, our portfolio is not yet balanced,” Metro Pacific Tollways Corp. President and CEO Rodrigo E. Franco said.
REITs enable a business to have a recurring income portfolio into which investors may bring their capital by purchasing public securities. The Securities and Exchange Commission’s latest regulations mandate REITs to have a minimum public float of 33% and a paid-up capital of P300 million.