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Friday, September 03, 2004
 

PHILIPPINES IN DEBT: Fiscal Plight Dire, But Not Crisis


Thursday September 2, 8:02 AM
PHILIPPINES IN DEBT: Fiscal Plight Dire, But Not Crisis
(This item was first published at 1124 GMT Wednesday.)
(This is the first in a four-part series examining the Philippines'
fiscal plight.)
By Ditas Lopez
Of DOW JONES NEWSWIRES

MANILA (Dow Jones)--The dust may be settling after President Gloria
Macapagal Arroyo declared the Philippines in a "fiscal crisis," but her
dramatic remark has focused attention on debt problems that will bedevil the
country for years.
If the Philippines - Asia's biggest debt issuer outside Japan - isn't set to
go the way of Argentina's 2002 default, it nonetheless is a ticking fiscal
time bomb.
"The Philippines is not yet in a fiscal crisis but it may soon find itself
in that situation," said Jose Emmanuel Hilado, treasurer at BDO Private
Bank. "The government has to do something and it has to do it now."
While no one seriously doubts the Philippine government's ability to repay
its debts or to finance its fiscal deficit at the moment, the government is
struggling to try to tame the deficit and its reliance on foreign funding
puts it in a precarious position as global interest rates start to rise and
the peso grinds lower over time.
Economists and the government agree the debt burden is the biggest threat to
an economy hobbled by tepid growth, widespread poverty and bouts of
political instability. Congress drags its feet on pending tax measures;
government corruption and a culture of tax evasion mean the authorities
collect barely half what they are owed in taxes, by one estimate; and such
money-bleeding state firms as National Power Corp. keep the Philippines
sinking in red ink.
Arroyo, a U.S.-trained economist who won a six-year mandate in a May 10
election, has set as her top priority tackling the nation's budget deficit,
which the government hopes to pare from last year's 4.6% of gross domestic
product on the way to a balanced budget by 2009.
Raising the stakes Aug. 23, she stunned financial markets by saying, "We are
already in the midst of a fiscal crisis and we have to face it squarely,"
while urging national solidarity to resolve the problem.
Debt Drag

Her statement was a political attack on a reluctant Congress to rally
support for belt-tightening measures and higher taxes. A formal declaration
of fiscal crisis would have allowed Manila to freeze the release of funds to
local government units.
Arroyo's economic team swiftly rejected a fiscal state-of-emergency
declaration - indeed within hours top finance and central officials were
flatly contradicting the president, saying the Philippines wasn't in a
"fiscal crisis" as this would mean impending default.
The damage on investors' nerves, however, was done. The peso has tumbled to
a two-month low, while stock prices fell 2.7% over two days but have since
recouped their losses. The quoted yield on the five-year treasury bond rose
as much as 33 basis points to 12.554% by Friday, although it has edged back
this week.
Although the markets shuddered to be reminded of it, the Philippine debt
mess is nothing new. Analysts have warned of fiscal peril for years.
In January, Standard Chartered Bank was warning that while a crisis wasn't
imminent, Manila needed to act quickly to shore up its finances or face the
outside chance of defaulting. University of the Philippines economists - the
day before Arroyo bemoaned the "crisis" - said the country faces economic
collapse in two to three years unless the government reins in the widening
deficit and ballooning debt by adopting a package of revenue and cost-saving
measures.
The government has only ever been in the black from 1994 to 1997, thanks to
surpluses largely from the sale of state assets. The deficit swelled to 5.3%
of GDP in 2002. The government, more optimistic than some analysts, hopes to
bring this year's deficit down to 197.8 billion pesos ($1=PHP56.250), or
4.2% of GDP and to 3.6% in 2005.
And while the government has foreign reserves worth four months of imports,
making a currency crisis unlikely, the debt mountain is huge.
The Philippines had outstanding central government debt, excluding that of
state firms and financial institutions, of over PHP3.36 trillion at the end
of 2003, or 77% of GDP, roughly half domestic and half foreign. The
proportion of non-peso borrowing has increased in recent years, meaning the
government has to pay more in peso terms as the currency declines. Total
external obligations, public and private, at 71% of GDP, is among the
highest in Asia.
While those high debt levels are worrying enough, another problem is that
the Philippines "has accumulated a large amount of debt without creating
income-producing assets to help repay them," said Romeo Bernardo, an
economist and former finance undersecretary.
If this continues, he said, the country will be burdened with higher
borrowing costs, which means a growing portion of government revenues will
go toward servicing the national debt. Already, one-third of government
spending goes just to pay the interest on the burgeoning debt. With salaries
and other operating expenses taking up half of all spending, that leaves
little for revenue-churning government programs.
100-Year Bond, Anyone?

"Interest payments ranking number one as budgetary priority, we believe, is
a headline manifestation of an evolving fiscal crisis," said Congressman
Joey Salceda, head of House of Representatives' economic affairs committee.
Failure to find the revenues for needed spending would require the
government "to accumulate more debt, falling deeper into a debt trap,"
economist Bernardo said. And indeed, the government overshot its deficit
target again last month as spending continued to outstrip improving
revenues.
At the least, having that much of the budget already spoken for crimps the
government's ability to goose the economy.
Debt servicing costs are up 12% to PHP310.69 billion in the record 2005
budget of PHP907.59 billion the government submitted to Congress last week.
That may make it hard for Arroyo's government to meet its goal of boosting
growth to 5.3%-6.3% next year. Those would be among the fastest rates of
growth since the late 1980s, following this year's target 4.8%-5.9% rise.
The government has funded needed spending by tapping local and overseas
borrowers, but that borrowing threatens to snowball as the beleaguered
national power utility's debts come due. The government raised the full $1.8
billion it aimed to borrow this year from foreign commercial sources, mostly
to support budget spending. Still, it finds it has fallen short as it needs
another $1 billion later this year for Napocor, whose debts it guarantees
and for whom it is sometimes required to issue sovereign debt.
And yet, despite all these risks, investment bankers still sweet-talk Manila
policymakers.
They continue to pitch a variety of bond ideas to the government on the idea
that if the price is right, there will be a buyer. The ideas include
short-dated debt where bankers say the government can get cheap funding now
and longer-term bonds to fit the government's aim of lengthening the
maturity profile of its outstanding debt.
Credit markets have been willing to continue financing the government - but
at increasing cost. Pakistan and Indonesia, lower-rated than the
Philippines - itself two notches below investment grade - were able to
borrow at spreads below the Philippines' in April.
Still, bond buyers may not remain generous forever, and Manila's options may
be shrinking: talk surfaced last week that one idea is for a 100-year
sovereign bond.
-By Ditas Lopez, Dow Jones Newswires; 632-885-0288;
ditas.lopez@dowjones.com
(Karen Lane in Singapore contributed to this article.)
-Edited by Lim Mui Khi and William Mallard
http://sg.biz.yahoo.com/040901/15/3mu98.html



 

PHILIPPINES IN DEBT: Fiscal Plight Dire, But Not Crisis


Thursday September 2, 8:02 AM

PHILIPPINES IN DEBT: Fiscal Plight Dire, But Not Crisis

   (This item was first published at 1124 GMT Wednesday.)    (This is the first in a four-part series examining the Philippines' fiscal plight.)    By Ditas Lopez    Of DOW JONES NEWSWIRES 

MANILA (Dow Jones)--The dust may be settling after President Gloria Macapagal Arroyo declared the Philippines in a "fiscal crisis," but her dramatic remark has focused attention on debt problems that will bedevil the country for years.

If the Philippines - Asia's biggest debt issuer outside Japan - isn't set to go the way of Argentina's 2002 default, it nonetheless is a ticking fiscal time bomb.

"The Philippines is not yet in a fiscal crisis but it may soon find itself in that situation," said Jose Emmanuel Hilado, treasurer at BDO Private Bank. "The government has to do something and it has to do it now."

While no one seriously doubts the Philippine government's ability to repay its debts or to finance its fiscal deficit at the moment, the government is struggling to try to tame the deficit and its reliance on foreign funding puts it in a precarious position as global interest rates start to rise and the peso grinds lower over time.

Economists and the government agree the debt burden is the biggest threat to an economy hobbled by tepid growth, widespread poverty and bouts of political instability. Congress drags its feet on pending tax measures; government corruption and a culture of tax evasion mean the authorities collect barely half what they are owed in taxes, by one estimate; and such money-bleeding state firms as National Power Corp. keep the Philippines sinking in red ink.

Arroyo, a U.S.-trained economist who won a six-year mandate in a May 10 election, has set as her top priority tackling the nation's budget deficit, which the government hopes to pare from last year's 4.6% of gross domestic product on the way to a balanced budget by 2009.

Raising the stakes Aug. 23, she stunned financial markets by saying, "We are already in the midst of a fiscal crisis and we have to face it squarely," while urging national solidarity to resolve the problem.

                     Debt Drag 

Her statement was a political attack on a reluctant Congress to rally support for belt-tightening measures and higher taxes. A formal declaration of fiscal crisis would have allowed Manila to freeze the release of funds to local government units.

Arroyo's economic team swiftly rejected a fiscal state-of-emergency declaration - indeed within hours top finance and central officials were flatly contradicting the president, saying the Philippines wasn't in a "fiscal crisis" as this would mean impending default.

The damage on investors' nerves, however, was done. The peso has tumbled to a two-month low, while stock prices fell 2.7% over two days but have since recouped their losses. The quoted yield on the five-year treasury bond rose as much as 33 basis points to 12.554% by Friday, although it has edged back this week.

Although the markets shuddered to be reminded of it, the Philippine debt mess is nothing new. Analysts have warned of fiscal peril for years.

In January, Standard Chartered Bank was warning that while a crisis wasn't imminent, Manila needed to act quickly to shore up its finances or face the outside chance of defaulting. University of the Philippines economists - the day before Arroyo bemoaned the "crisis" - said the country faces economic collapse in two to three years unless the government reins in the widening deficit and ballooning debt by adopting a package of revenue and cost-saving measures.

The government has only ever been in the black from 1994 to 1997, thanks to surpluses largely from the sale of state assets. The deficit swelled to 5.3% of GDP in 2002. The government, more optimistic than some analysts, hopes to bring this year's deficit down to 197.8 billion pesos ($1=PHP56.250), or 4.2% of GDP and to 3.6% in 2005.

And while the government has foreign reserves worth four months of imports, making a currency crisis unlikely, the debt mountain is huge.

The Philippines had outstanding central government debt, excluding that of state firms and financial institutions, of over PHP3.36 trillion at the end of 2003, or 77% of GDP, roughly half domestic and half foreign. The proportion of non-peso borrowing has increased in recent years, meaning the government has to pay more in peso terms as the currency declines. Total external obligations, public and private, at 71% of GDP, is among the highest in Asia.

While those high debt levels are worrying enough, another problem is that the Philippines "has accumulated a large amount of debt without creating income-producing assets to help repay them," said Romeo Bernardo, an economist and former finance undersecretary.

If this continues, he said, the country will be burdened with higher borrowing costs, which means a growing portion of government revenues will go toward servicing the national debt. Already, one-third of government spending goes just to pay the interest on the burgeoning debt. With salaries and other operating expenses taking up half of all spending, that leaves little for revenue-churning government programs.

             100-Year Bond, Anyone? 

"Interest payments ranking number one as budgetary priority, we believe, is a headline manifestation of an evolving fiscal crisis," said Congressman Joey Salceda, head of House of Representatives' economic affairs committee.

Failure to find the revenues for needed spending would require the government "to accumulate more debt, falling deeper into a debt trap," economist Bernardo said. And indeed, the government overshot its deficit target again last month as spending continued to outstrip improving revenues.

At the least, having that much of the budget already spoken for crimps the government's ability to goose the economy.

Debt servicing costs are up 12% to PHP310.69 billion in the record 2005 budget of PHP907.59 billion the government submitted to Congress last week. That may make it hard for Arroyo's government to meet its goal of boosting growth to 5.3%-6.3% next year. Those would be among the fastest rates of growth since the late 1980s, following this year's target 4.8%-5.9% rise.

The government has funded needed spending by tapping local and overseas borrowers, but that borrowing threatens to snowball as the beleaguered national power utility's debts come due. The government raised the full $1.8 billion it aimed to borrow this year from foreign commercial sources, mostly to support budget spending. Still, it finds it has fallen short as it needs another $1 billion later this year for Napocor, whose debts it guarantees and for whom it is sometimes required to issue sovereign debt.

And yet, despite all these risks, investment bankers still sweet-talk Manila policymakers.

They continue to pitch a variety of bond ideas to the government on the idea that if the price is right, there will be a buyer. The ideas include short-dated debt where bankers say the government can get cheap funding now and longer-term bonds to fit the government's aim of lengthening the maturity profile of its outstanding debt.

Credit markets have been willing to continue financing the government - but at increasing cost. Pakistan and Indonesia, lower-rated than the Philippines - itself two notches below investment grade - were able to borrow at spreads below the Philippines' in April.

Still, bond buyers may not remain generous forever, and Manila's options may be shrinking: talk surfaced last week that one idea is for a 100-year sovereign bond.

   -By Ditas Lopez, Dow Jones Newswires; 632-885-0288; ditas.lopez@dowjones.com    (Karen Lane in Singapore contributed to this article.)    -Edited by Lim Mui Khi and William Mallard
 http://sg.biz.yahoo.com/040901/15/3mu98.html
 


Monday, August 09, 2004
 

01-06-2004: Manila's Smart still eyeing Piltel debt deal


Philippine mobile phone firm Smart Communications Inc said on June 1 it had
failed to convince creditors of affiliate Pilipino Telephone Corp (Piltel)
to approve a 20.5 billion peso (RM1.39 billion) debt swap.

But the company, a wholly owned unit of Philippine Long Distance Telephone
Co, said it was confident of pushing through the swap that analysts said
would eventually lead to Smart taking over PLDT's 45.3% holding in Piltel.

Smart has proposed to pay 40 cents for every US$1 of Piltel debt and has set
aside US$20 million for the swap.

Piltel, Philippine's third-largest mobile firm, had defaulted on its debt
payments in 1999 and declared a moratorium on 41.1 billion pesos worth of
obligations. After an overhaul in 2001, it was left with unrestructured debt
of 20.5 billion pesos.

Creditors needed to agree to swap at least 75% of Piltel's debt for Smart
debt for the deal to go through. At the May 31 offer deadline, Smart had
received offers for 68.4% of Piltel's debts.

"Given the high acceptance level from Piltel's creditors, Smart would still
be able to proceed with the transaction. Smart has a period of 90 days from
the end of the offer period in which to determine if it will proceed with
and then close the transaction," Smart said in a statement.

"I think there's still a good chance for the deal to push through. There
could be some negotiations on some areas," said RCBC Securities research
head Chelsea Dipasupil.

"Given the fact that Smart is in better financial position, that is a good
indication that debts would be paid." Piltel shares were four centavos up at
1.72 pesos by 0345 GMT, after Smart said the debt swap still hanging in the
balance.

PLDT, which is a quarter owned by Hong Kong's First Pacific Co Ltd and is
the Philippines' largest phone firm, was up 10 pesos at 1,080 pesos.

"If Smart does elect to proceed with the debt exchange, it would hope to
close the transaction by the end of July 2004," Smart said.

Since the 75% threshold was not met, the proposed transaction will be
reviewed by both the board of PLDT and Smart. PLDT's next board meeting is
on June 8.

"Until then, Smart is prepared to entertain any further offers for Piltel's
debt on the same economic terms."

Analysts said the offer could be a prelude to a merger, which would help
PLDT consolidate its mobile business and give Smart access to Piltel's
improving subscriber base and revenues.

Piltel, whose heavy losses since 1997 hurt its ability to pay maturing debts
on time, returned to profitability in the first quarter with a net income of
eight million pesos as it topped three million mobile subscribers by the end
of March.

But Smart has said it does not intend to merge with Piltel or use Piltel as
a vehicle for a backdoor listing on the stock exchange.

Smart is legally required to list its shares by August. Smart and Piltel
together hold 58% of the lucrative but only partially penetrated Philippine
mobile market with a combined 14 million subscribers. PLDT's chief rival
Globe Telecom Inc has 40%. - Reuters





 

Betting on cockfights to go online?


Francisco Alcuaz Jr. and Ian Sayson Bloomberg News
Thursday, June 3, 2004

MANILA A Philippine Internet service provider said it is proposing what may
be the first online betting for cockfights, aiming to draw some of the
thousands of dollars that change hands during contests into a central
system.

Philweb wants to cash in on the tens of thousands of cockfights held each
year in a nation where enthusiasts say cockpits may outnumber pulpits in the
predominantly Roman Catholic country.

Much of the betting now is done through hand signals before two roosters,
fitted with steel blades on their feet, are thrown at each other in a clash
usually to the death.

"With the popularity of cockfighting in the Philippines, we are extremely
optimistic about the potential of this new format," Roberto Ongpin, chairman
of the listed Philweb, told the stock exchange in Manila.

Philweb, which operates online casino gambling and sports betting in the
Philippines, estimates cockfight betting online may generate annual revenue
of 60 million pesos, or about $1 million.

Philippine Amusement and Gaming, which regulates gambling and gets a
percentage of the proceeds, said it has not committed to the idea.

Cockfighting is already a hot topic on the Internet. Sabong.net.ph, which
calls itself the most popular Philippine cockfighting Web site, lists
contests, has links to feedmakers for breeders, and contains photos of fowl
with names such as Lemonbutcher.

Bloomberg News


Tuesday, July 27, 2004
 

Philippines Meralco 1H Net Profit PHP1.4B -2-


Philippines Meralco 1H Net Profit PHP1.4B -2-
MANILA (Dow Jones)--Manila Electric Co. (MERB.PH), the Philippines' largest
power distributor, said Monday net profit in the six months to June reached
1.4 billion pesos ($1=PHP56.055) on a 3.8% on-year rise in electricity
sales.

Meralco didn't provide revenue figures, comparative earnings data for the
year-ago period or data for the second quarter.





Financial statements filed by Meralco in the year-ago period and in the
first quarter this year, however, both point to a strong recovery of the
power distributor's earnings, which continue to be hounded by an ongoing
refund of overbillings since 1994.

Meralco posted a PHP66.1 million net profit in the first half of 2003 and
PHP344 million in the first quarter of this year.

"At its face value the reported net income of PHP1.4 billion is a pittance
compared to our financial obligations. This also includes the heavy burden
the ongoing refund has on oil financial position," said Elpi Cuna, Meralco
vice president for corporate communications.

Early last year, the Supreme Court ordered the refund of some PHP30 billion
in overbillings by Meralco after it secured in 1994 a rate increase that was
canceled by regulators four years later.

Cuna said Meralco still needs to refund PHP2.4 billion this year and around
PHP4.7 billion in 2005.

Meralco is also seeking to refinance its debt maturing in the next two
years. Its debt stands at PHP24.2 billion at the end of June, with PHP8.7
billion maturing in the second half of 2004.

Cuna said aside from its debt and the refund, Meralco also has to fund a
PHP5.75 billion capital expenditure program for this year.

"Our capital expenditure program is of primordial importance since this will
ensure that our company will be able to provide the level of service
expected by our customers," he said.

Meralco said power sales in the first half hit 12.03 billion kilowatt-hours
from 11.59 billion kWh in the year-ago period.

Sales rose 5% on year to 4.23 billion kWh to commercial customers; 4% on
year to 4.37 billion kWh to residential users; 2.3% on year for industrial
customers to 3.36 billion kWh, while sales for use of streetlights declined
5.8% on year to 69.1 million kWh.

Meralco said a more detailed financial report will be published by Thursday.


Monday, July 26, 2004
 

Philippine Shares End 1% Lower On Profit-Taking


MANILA (Dow Jones)--Philippine shares finished lower Monday on profit-taking after three sessions of gains, fueled by disappointment over the first-half earnings results that have come out so far, traders said.

The 30-company Philippine Stock Exchange Index ended down 15.96 points, or 1%, at 1543.26, after posting a 1.7% gain in the past three sessions, including Friday's 0.4% rise.

Profit-taking in select stocks weighed on the market. These stocks included Petron, down 0.15 peso ($1=PHP56.041), or 5.1%, at PHP2.80, after the company erroneously reported a sharp drop in second-quarter net profit earlier in the session.

In its press statement, Petron reported that its second-quarter net profit dropped sharply to PHP77 million from PHP836 million. A few hours later, the country's largest oil refiner corrected the numbers, saying its actual second-quarter net profit amounted to PHP572 million, though it was still lower compared with year-ago figures.

Another actively traded stock was Metropolitan Bank, or Metrobank, which fell PHP1, or 3.7%, to PHP26. The country's largest bank last week posted an 11% on-year rise in net profit to PHP1.73 billion, which some analysts felt was below expectations.

"So far, the earnings that have come out have been disappointing," said AB Capital Securities economist Jose Vistan.

Vistan said the market will first have to lower its corporate earnings expectations to jive with reality, and that may entail further weakness in the market.

"Investors have to first lower their expectations. The bar has been set a bit too high," said Vistan. "From there, the market may have to correct a little bit. That's the time we'll be seeing some market discounts."

Vistan said the market will likely continue to slide until the main index forms a solid base to prepare for a strong fourth-quarter economic and corporate performance. He pegged the index support at 1530.

Traders also blamed the market's fall on the 0.9% loss suffered by the Dow Jones Industrial Average Friday, the weakness displayed by most Asian regional markets earlier Monday, the dollar's persistence in trading above the PHP56.00 level, and higher world crude prices.

President Gloria Macapagal Arroyo's state of the nation address scheduled around 0800 GMT isn't expected to cause much of a ripple in the market, traders said.

"I don't see this SONA as a catalyst. It will just highlight Arroyo's 10-point agenda, which she already announced. She will most likely also focus on the budget deficit data, which is already expected," said Vistan.

Other active stocks included Pilipino Telephone, which shed PHP0.08, or 3.5%, to PHP2.20, and Bank of the Philippine Islands, down PHP1.50, or 3.6%, at PHP40, both on profit-taking.

Total volume of shares traded thinned to 414.8 million shares valued at PHP313.7 million from 2.04 billion shares valued at PHP332.9 million.

Decliners led gainers 39 to 22, while 40 stocks were unchanged.

Monday Previous Change
PSE Index 1543.26 1559.22 dn 15.96
All Shares Index 993.19 996.35 dn 3.16
Commercial-Industrial Index 2444.73 2458.09 dn 13.36
Property Index 515.24 522.23 dn 6.99
Banks-Financial Index 454.94 465.69 dn 10.75
Mining Index 1610.30 1604.44 up 5.86
Oil Index 1.48 1.41 up 0.07



 

INTERVIEW: Philippines To Again Borrow For Napocor


MANILA (Dow Jones)--The Philippine government is set to tap the international debt market again this year, primarily for financing for state utility National Power Corp. (NAP.YY), Finance Secretary Juanita Amatong said Monday.

Amatong told Dow Jones Newswires that Napocor still needs around $1 billion to complete its financing requirements for 2004.

"It will be used mainly for the payment of Napocor's debts," she said of the planned borrowing.

The Philippines - Asia's largest sovereign borrower after Japan - has so far raised $750 million for Napocor this year, through the reopening of a number of existing sovereign bonds.

Last week, finance and central bank officials went on a non-deal roadshow to explain the new Philippine administration and its policies. The weeklong roadshow was held in Hong Kong, London, Paris, and New York. Deutsche Bank, UBS AG and Credit Suisse First Boston coordinated the presentations.

Amatong said the government secured the approval of the local monetary authority last week for the planned debt issue. All foreign borrowing by public and private entities in the Philippines has to first be approved by the central bank's policy-making Monetary Board, of which Amatong is a member.

The government has been borrowing on behalf of Napocor over the past several years as the utility's mounting losses make it too costly for it to raise money under its own name in the global market.

The government has already raised the $1.85 billion for its own use from the international debt market that it planned to secure this year.

But with uncertainty surrounding its massive budget deficit, the government may look to fund 2005 requirements early, government and central bank sources said.

The government has penciled in a budget deficit target of 184.5 billion pesos ($1=PHP56.041) for next year, compared with a goal of PHP197.8 billion for the current year.

Analysts have said the new mandate for the administration on June 30 provides the government with a good opportunity to present itself again to international investors.

The Republic this year sold $200 million worth of zero-coupon bonds, pulled in $500 million through an 11-year global bonds issue, and raised $120 million through an external debt management program that included an exchange of old bonds for new debt. It also funded some of its 2004 financing requirement last year.

In September, the government will hold its regular international roadshow to update investors from Asia, Europe and the U.S. on the plans for the Arroyo government.


 

Philippines Meralco 1H Net Profit PHP1.4B -2-


MANILA (Dow Jones)--Manila Electric Co. (MERB.PH), the Philippines' largest power distributor, said Monday net profit in the six months to June reached 1.4 billion pesos ($1=PHP56.055) on a 3.8% on-year rise in electricity sales.

Meralco didn't provide revenue figures, comparative earnings data for the year-ago period or data for the second quarter.

Financial statements filed by Meralco in the year-ago period and in the first quarter this year, however, both point to a strong recovery of the power distributor's earnings, which continue to be hounded by an ongoing refund of overbillings since 1994.

Meralco posted a PHP66.1 million net profit in the first half of 2003 and PHP344 million in the first quarter of this year.

"At its face value the reported net income of PHP1.4 billion is a pittance compared to our financial obligations. This also includes the heavy burden the ongoing refund has on oil financial position," said Elpi Cuna, Meralco vice president for corporate communications.

Early last year, the Supreme Court ordered the refund of some PHP30 billion in overbillings by Meralco after it secured in 1994 a rate increase that was canceled by regulators four years later.

Cuna said Meralco still needs to refund PHP2.4 billion this year and around PHP4.7 billion in 2005.

Meralco is also seeking to refinance its debt maturing in the next two years. Its debt stands at PHP24.2 billion at the end of June, with PHP8.7 billion maturing in the second half of 2004.

Cuna said aside from its debt and the refund, Meralco also has to fund a PHP5.75 billion capital expenditure program for this year.

"Our capital expenditure program is of primordial importance since this will ensure that our company will be able to provide the level of service expected by our customers," he said.

Meralco said power sales in the first half hit 12.03 billion kilowatt-hours from 11.59 billion kWh in the year-ago period.

Sales rose 5% on year to 4.23 billion kWh to commercial customers; 4% on year to 4.37 billion kWh to residential users; 2.3% on year for industrial customers to 3.36 billion kWh, while sales for use of streetlights declined 5.8% on year to 69.1 million kWh.

Meralco said a more detailed financial report will be published by Thursday.


Sunday, July 25, 2004
 

Philippines Petron 2Q Net Pft PHP572M, Sales PHP33.60B


Petron Corp. (PCOR.PH) - Manila
2Q ended June 30:
Figures are in pesos
2004 2003
Sales PHP33.60 Bln PHP26.86 Bln
Cost of goods sold 31.46 Bln 24.72 Bln
Gross profit 2.14 Bln 2.13 Bln
Operating expenses 913.0 Mln 759.0 Mln
Operating income 1.23 Bln 1.38 Bln
Other charges 469.0 Mln 263.0 Mln
Pretax income 761.0 Mln 1.12 Bln
Income tax 189.0 Mln 282.0 Mln
Net profit 572.0 Mln 836.0 Mln
Per share earnings
(basic) 0.06 0.09

Corrected July 25, 2004 23:29 ET


Petron Corp. (PCOR.PH) - Manila
2Q ended June 30:
Figures are in pesos
2004 2003
Sales PHP33.60 Bln PHP26.86 Bln
Cost of goods sold 31.46 Bln 24.72 Bln
Gross profit 2.14 Bln 2.13 Bln
Operating expenses 913.0 Mln 759.0 Mln
Operating income 1.23 Bln 1.38 Bln
Other charges 469.0 Mln 263.0 Mln
Pretax income 761.0 Mln 1.12 Bln
Income tax 189.0 Mln 282.0 Mln
Net profit 572.0 Mln 836.0 Mln
Per share earnings
(basic) 0.06 0.09

(In items timed between 0117 GMT and 0141 GMT, the net profit and sales figures for the second quarter were misstated).

MANILA (Dow Jones)--Petron Corp. (PCOR.PH), the Philippines' largest oil refiner, said Monday net profit in the second quarter fell a sharp 32% on year as gross margins were squeezed by the higher cost of imported crude and higher financial charges.

Petron, whose major shareholders are the government and Saudi Aramco, said second quarter net profit dropped to 572 million pesos ($1=PHP56.03) from PHP836 million last year. Sales for the April-June quarter, however, surged 25% to PHP33.60 billion from PHP26.86 billion a year earlier.

For the first half, net profit rose 6% to PHP1.36 billion from PHP1.28 billion in the year-earlier period. Sales in the six months to June climbed to PHP66.14 billion from PHP55.32 billion.

Petron said sales volume in the first half rose 2.3% on year to 25.8 million barrels. Domestic sales rose 14% to 23.9 million barrels, while exports dropped to 1.9 million barrels from 4.2 million as most refinery output was used to cover rising domestic consumption. Exports provide a better yield for Petron.

It said sales to state utility National Power Corp. (NAP.YY) and industrial customers were up 20% and 27% on year, respectively.

Despite higher sales in the second quarter, gross profit was unchanged at PHP2.14 billion as cost of goods sold jumped to PHP31.46 billion from PHP24.72 billion last year. In the first half, gross profit rose 17% on year to PHP4.94 billion.

Other financial charges, which includes foreign exchange losses, rose in the second quarter to PHP469 million from PHP263 million, and in the first half climbed to PHP923 million from PHP667 million. Foreign exchange losses total PHP128 million in the first half compared to PHP42 million last year.

"We are pleased to report that the company has sustained its profitability due to the strategic initiatives that we implemented last year," Petron President Khalid Al-Faddagh said in a statement that refers to the first half results.

"We are hopeful that these initiatives will continue to support a favorable trend in our finances for the rest of the year," he added.

Petron Chairman Nicasio Alcantara said the company will continue to expand its network of gas stations to maintain its current leading market share of 37.4% in May, up from 33.8% in 2003. He said the company plans to set up around 200 new gas stations nationwide - some company-owned, others franchised - over the next five years.


Tuesday, July 13, 2004
 

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Monday, July 12, 2004
 

Philippine Shares Up Early On Select Bargain-Hunting


MANILA (Dow Jones)--Philippine stocks are inching higher early Monday on bargain-hunting in select stocks, traders said.

At 0232 GMT, the 30-company Philippine Stock Exchange Index was up 0.63 point at 1593.09, after Friday's 0.2% loss.

Philippine Long Distance Telephone Co. is among the most actively traded, up 5 pesos ($1=PHP55.684), or 0.4%, at PHP1,240 ahead of the release next month of what the market expects to be strong first-half earnings of the country's largest telecommunications group.

The all shares, banks and financial services, and property subindexes are advancing, while the commercial-industrial, oil, and mining subindicators are retreating. Gainers lead decliners 15 to 13, while 27 stocks are unchanged. Volume is at 705.7 million shares valued at PHP68.88 million.

"We would continue to see more consolidation in the coming sessions. There has been very little conviction behind the past weeks' trading," said AB Capital Securities economist Jose Vistan. "Investors are generally making few big moves as they await second-quarter earnings. Rallies in the market have been becoming increasingly selective and investors are not particularly interested in buying stocks at prevailing prices."

Vistan said with no major economic news expected, earnings news will receive a healthy dose of attention. He said corporate earnings, which will begin coming in later this month, will set the tone for the market.

The market's support is pegged at 1580 points, while resistance is at 1600.



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