JG Summit Earns Less As Airline Unit Withers

Weak performance of its airline business dragged down core earnings of conglomerate JG Summit Holdings Inc. of the Gokongwei Group in the first half, with profitability challenges expected to persist for the rest of the year.

JG Summit Holdings Inc.’s core net income fell by 37 percent to P13 billion in the first semester, as the fuel price shock significantly impacted the performance of the group’s airline.

In a statement issued on Wednesday, Aug. 12, the group said it also booked higher interest expense at the parent level after absorbing debt from its petrochemical subsidiary.

Incorporating non-core unrealized foreign exchange losses from the peso depreciation, JG Summit’s net income from continuing operations declined by 47 percent year-on-year to P11.4 billion.

Including discontinued operations, total net income fell by 29 percent to P10.7 billion, with smaller losses from its discontinued petrochemical operations helping cushion the decline.

Revenues for the period, meanwhile, grew by seven percent to P200 billion, driven by broad-based growth in its real estate arm, resilient topline expansion in its branded food and animal nutrition businesses, as well as more passengers flown by its airline even as fares increased.

In Universal Robina Corp., resilient core demand and sustained brand investments fueled a four-percent year-on-year revenue growth to P89.3 billion.

Robinsons Land Corp. generated a 10-percent jump in revenues to P25.4 billion, driven by higher office and mall occupancy, new leasable warehouse space and increased luxury hotel capacity, alongside a rebound in the development portfolio from higher realized residential sales.

Cebu Air Inc. also recorded an eight percent growth in revenues to P68.6 billion, with the airline flying a total of 14.5 million passengers.

JG Summit president and CEO Lance Gokongwei said the group’s businesses sustain their efforts to proactively mitigate the impact of higher costs and softening consumer demand.

“Our first half results reflect the underlying resilience of our diversified portfolio — with seven percent topline growth carried by our broad-based property gains and resilient food business, alongside our airline, which benefited from healthy passenger volumes despite higher fares,” he said.

Gokongwei said the group anticipates profitability challenges to persist for the rest of the year, particularly for the airline business, due to fuel prices that remain elevated and the leaner travel season this third quarter.

“At the same time, these inflationary pressures create further uncertainty on consumer spending and topline growth in the near term. Nonetheless, we remain committed to protecting long-term value for our shareholders while being realistic and proactive in improving our performance amidst the challenging economic backdrop,” he said.