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SM Recurring Income Grows 16% in H1 2017 to PHP16.6 Billion

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SM Investments Corporation (SM) said reported income grew 9% to PHP16.6 billion. Excluding one-time items in 2016, recurring income increased 16% in the first six months.

Consolidated revenues rose 7% to PHP181.6 billion in the first half from PHP169.7 billion in the same period last year.

“Even without the benefits of an election year, we saw sustained growth across all our core businesses, driven by the strong economy and resilient consumer sentiment. SM will continue to capture this momentum through nationwide expansion and by investing in high growth opportunities,” SM President Frederic DyBuncio said.

The property business contributed the most to consolidated net income at 42%. This was followed by banks with 36% and retail with 22%.

Outside of the core businesses, SM continues to build its portfolio of investments in complementary businesses that will help capture the high growth of the Philippine economy. Among its equity investments portfolio, Belle Corporation benefited from increased growth in the tourism sector, reporting consolidated net income growth of 93% to PHP1.8 billion.

Retail

SM Retail reported sustained growth in total sales of 6% to PHP131.6 billion, while net income rose 6% to PHP5.2 billion.

Net margin stood at 4.4%. At end-June 2017, SM Retail had a total of 2,357 stores, comprising 58 THE SM STORES, 1,709 specialty stores, 50 SM Supermarkets, 44 SM Hypermarkets, 170 Savemore stores, 41 WalterMart stores and 285 Alfamart stores.

The Food Retail Group pursued its aggressive expansion in both urban and rural communities nationwide, adding 15 mid-sized format Savemore stores, two SM Supermarkets and two WalterMart stores. Meanwhile, Alfamart increased its number of stores by 75 as of end-June from 210 at the start of the year.

THE SM STORE opened one store in SM CDO Downtown in Cagayan de Oro in May 2017. As of the first half, the total gross selling area of all 58 department stores stood at 760,000 square meters.

Revenues from SM Retail’s specialty retail stores grew 8% to PHP31.6 billion. Specialty retail brands include Ace Hardware, SM Appliance Center, Homeworld, Our Home, Toy Kingdom, Watsons, Kultura, Baby Company, Sports Central, Forever 21 and Body Shop.

Property

SM Prime Holdings reported consolidated net income of PHP14.4 billion, up 14%. Consolidated revenues increased 10% to PHP43.2 billion from PHP39.2 billion in the same period last year.

Mall revenues, which consist of rentals, cinema and event ticket sales and amusement revenues, accounted for 60% of total revenues and rose 10% to PHP25.7 billion in 2017. Mall rental revenues alone grew 10% to PHP21.8 billion from additional retail space of 1.1 million square meters of gross floor area added since 2015.

During the first half of 2017, SM Prime opened SM CDO Downtown Premier in Cagayan de Oro, S Maison at Conrad Manila in Pasay City and SM Cherry in Antipolo, Rizal, bringing total Philippine operating malls to 63 with a GFA of almost 7.8 million sqm. Including the seven malls in China, SM Prime has a total GFA of 9.1 million sqm.

SM Prime’s residential group recorded 5% higher revenues of PHP13.9 billion in the period, which accounted for 32% of total revenues, largely due to higher construction accomplishments of SM Development Corporation (SMDC) projects that were launched since 2014. SMDC’s reservation sales surged 22% to PHP27.6 billion in the first half, translating to a 8% improvement in unit sales to 8,699 units.

The Commercial Properties Group, which contributed 3% of total revenues, posted a 14% increase in revenues to PHP1.5 billion.

Hotels and convention centers revenues soared 73% to PHP2.2 billion in the first half, largely from the opening of Conrad Manila in 2016.

Banking

BDO Unibank, Inc. (BDO) reported its first half net income at PHP13.3 billion driven by the growth in loan portfolio, low-cost deposits and higher recurring fee-based service income. Excluding one-time gains from the consolidation of BDO Life in 2016 recurring income in 2017 grew by 16%.

Net interest income grew 22% in the six-month period to PHP38.6 billion. Customer loans increased 17% to PHP1.6 trillion while total deposits rose to almost PHP2.0 trillion, supported by the 17% growth in current account and savings account (CASA) deposits.

China Banking Corporation reported net income growth of 10% to PHP3.6 billion for the first half, driven by strong growth in its lending business and core recurring income.

Net interest revenues grew 16% to PHP9.2 billion year-on-year. Gross loans expanded 22% year-on-year to PHP401.7 billion while total deposits grew 20% to PHP554.0 billion.

Balance Sheet

As of end-June 2017, total assets of SM grew 17% to PHP916.3 billion. SM maintains a healthy balance sheet with a conservative gearing ratio of 43% net debt to 57% equity.

SM increased its investments in its subsidiaries in the first half with the PHP60 billion stock rights issue of BDO in January 2017 and PHP15 billion for China Bank in May 2017, as well as its acquisition of stakes in logistics company 2GO Group and Philippines Urban Living Solutions, the operator of a dormitel chain under the brand, “MyTown”.

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IKEA to Announce Opening Date This Year

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Swedish furniture company IKEA was planning to announce targeted opening date in the Philippines within the year, IKEA Sustainability and Communication Director Lars Svensson said Wednesday.

In an interview on the sidelines of Responsible Business conference in Makati, Swedish Ambassador Harald Fries said IKEA was planning to open its first Philippine store early 2020.

Asked about this, Svensson neither denied nor confirmed saying “until (they) have everything firmed up, that’s when (they’ll) announce the date of opening.

“I can say that within this year, we’ll announce it,” he said, explaining they were concealing it for the meantime so as to avoid influencing property prices.

“It’s just that it is an aspect of not fuelling speculation because the size of the company and the size of the brand equates to the interest, that’s a positive thing for us but we do not want to drive speculation where we’re going to be influencing property prices etc.,” he said.

“Absolutely, it is no secret we’re eyeing the Philippines to open next IKEA,” he added.

Svensson said they were highly optimistic about “the maturity and the development” of the Philippine economy. “We really believe it’s a place that is ready in terms of capacity and industry that could support.” 

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Cebu Landmasters Ends 2017 With Record P4.58-B Reservation Sales, Plans 20 New Developments in 2018

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Homegrown property developer Cebu Landmasters Inc. (CLI) finished the year 2017 with P4.58 billion in total reservation sales, exceeding its target by 13.75 percent and beating the 2016 result by 55.6 percent.

CLI attributed its exceptional performance mainly to newly launched residential projects: 38 Park Avenue (Cebu IT Park) with 745 units, Casa Mira South (Cebu) with 3,200 units, Mivesa Garden Residences (Cebu) with 1,514 units, Mesaverte (Cagayan de Oro) with 798 units, and the 694-unit MesaTierra (Davao City). These projects are now almost fully sold.

The listed company said its sales performance is resounding affirmation that its products respond to the needs of the market and are distributed strategically to the areas where demand is strongest.

“All the projects we launched were well-received by their respective markets making 2017 another banner year,” said CLI chief executive officer Jose Soberano III referring to the firm’s efforts to penetrate new markets such as Davao and Dumaguete and to diversify its products.

The past year saw CLI aggressively venturing into the hospitality industry to increase its inventory to a total of 610 rooms in four years. All CLI hotel projects are located within company-developed mixed-use communities. The 180-room “lyf Cebu City” by Ascott targeting millennial travelers and the 250-room Citadines Riverside Davao were launched in late 2017. They will complement Citadines Cebu City set for completion in 2018. More hotel projects are expected to break ground in 2018.

Cebu Landmasters is confident it will gain even greater momentum this year. The company has targeted reservations sales to hit P7 billion this2018, a massive 52-percent hike from the previous year, as it starts more projects and expands to more territories in Visayas-Mindanao growth centers.

The array of new developments planned for the year include 10 in Cebu (two residential subdivisions, three residential condominiums, three offices, one hotel and one industrial park). Details of these projects will be revealed in the coming months.

CLI has also set its sights on two new territories in the Visayas. Bacolod will play host to two residential condominiums and a hotel, while a residential condo is planned for neighboring Iloilo. Reports from the National Economic Development Authority (NEDA) show that the Visayas region will zoom ahead of other regions in the next five years and is expected to outpace the projected 7 to 8 percent growth for the Philippines.

The listed property developer also plans to fortify its foothold in Mindanao where it will launch two residential subdivisions and one residential condominium in Cagayan de Oro while a central business district and two residential condominiums will be unveiled in Davao. NEDA reports that in terms of economic growth, Davao ranks third among 18 regions in the country.

The upcoming projects boost CLI’s total number of projects to 66 from 46 last year, as it continues to strengthen its brand in its niche markets. The company’s residential condominiums are mostly designed for the mid-market segment, although it also offers condos for the high-end market.

“In 2018, we will continue to expand our footprint in the Visayas and Mindanao, and develop projects that respond to the growing market in these areas,” said Soberano who is confident CLI will meet its performance targets set for the year and beyond.

It expects that hikes in household income resulting from the newly approved package 1 of the Duterte government’s Tax Reform for Acceleration and Inclusion (TRAIN) will be channeled to housing.

Studies (TUCP, 2010) have also shown that around 2 to 2.1 percent of OFW remittances are channeled to housing. Total remittances in 2017 were seen to hit US$33 billion (World Bank, 2017). This means that at least US$693 million or about P35 billion would be used for shelter requirements.

CLI also expects that government spending in infrastructure will unlock land values outside Metro Manila and stimulate business in the countryside as the Duterte administration pushes for investments outside of the country’s capital.

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Ferrero to Acquire Nestle’s U.S. Confectionary Business

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The Ferrero Group and its affiliated companies (“Ferrero”), a global confectionary group, announced a definitive agreement pursuant to which it will acquire the U.S. confectionary business from Nestle for $2.8 billion in cash. Nestle’s U.S. confectionary business generated sales of approximately $900 million in 2016.

Ferrero will acquire more than 20 American brands with a rich heritage and strong awareness, including iconic chocolate brands such as Butterfinger®, BabyRuth®, 100Grand®, Raisinets®, Wonka® and the exclusive right to the Crunch® brand for confectionary and certain categories in the U.S., as well as sugar brands such as SweeTarts®, LaffyTaffy®, and Nerds®.

With this transaction, Ferrero will become the third-largest confectionary company in the U.S. market where it is best known for Tic Tac® breath mints, Ferrero Rocher® pralines, Nutella® hazelnut spreads, the Fannie May and Harry London chocolate brands, and the Ferrara Candy Company, which was recently acquired by a Ferrero affiliated company and whose portfolio of brands includes Trolli®, Brach’s® and Black Forest® Gummies.

Ferrero will acquire Nestle’s U.S. manufacturing facilities in Bloomington, Franklin Park and Itasca, Illinois, and the confectionary-related employees, and will continue to operate through the offices in Glendale, California, as well as from its other current locations in Illinois and in New Jersey.

Giovanni Ferrero, Executive Chairman of the Ferrero Group, said, “We are very excited about the acquisition of Nestle’s U.S. confectionary business, which has an outstanding portfolio of iconic brands with rich histories and tremendous awareness. In combination with Ferrero’s existing U.S. presence, including the recently acquired Fannie May Confections Brands and the Ferrara Candy Company, we will have substantially greater scale, a broader offering of high-quality products to customers across the chocolate snack, sugar confectionary and seasonal categories, and exciting new growth opportunities in the world’s largest confectionary market. We look forward to welcoming the talented team from Nestle to Ferrero and to continuing to invest in and grow all of our products and brands in this key strategic and attractive market.”

“Our commitment to deliver value to the North American consumers and customers will be strongly enhanced by the arrival in our portfolio of such powerful confectionary and chocolate brands,” said Lapo Civiletti, CEO of the Ferrero Group.

The transaction is subject to customary closing conditions and regulatory approvals and is expected to close around the end of the first quarter of 2018.

Credit Suisse Securities, Davis Polk and Wardwell LLP and Lazard served as advisors to Ferrero. (Ferrero)

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Globe myBusiness Helps SMEs Become Future Proof

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Participants of the Globe myBusiness workshop for Boracay SMEs

Globe myBusiness has brought its valuable expertise and tried-and-tested products and solutions to the country’s favorite tourist destination, Boracay, to help small and medium-sized enterprises (SMEs) become future-proof.

The workshop, dubbed as Globe myBusiness Digital Tools to Future-Proof Your Business, centered on the most prominent industries currently flourishing in Boracay such as tourism, hotels and accommodations, restaurants and food establishments, and retail.

In the four-day event, entrepreneurs, managers and various other staff members from all over the island were able to pick up a wealth of knowledge that allowed them to better understand technology and what it can do for them.

Derrick Heng, Senior Advisor for Globe myBusiness said: “Employing technology in business isn’t instantaneous. Rather, it’s a step-by-step process. It may take years for a business to fully maximize its digital potential, but the results are definitely worth the challenge. Globe myBusiness is here to assist entrepreneurs every step of the way.”

As a first takeaway from the workshop, the participants learned about the importance of social media which is the simplest way to use technology for business. Through social media, entrepreneurs can spread word about their business, get feedback, and contact their clients or customers in the blink of an eye.

“Digital marketing was the most important lesson for me, that you really need to make the most out of it through social media,” said Lourdes A. Ramirez of Secret Garden Boracay.

June Myrrh Dueñas and Dane Aldeguer of Isla Chicas Travel Consultancy added: “We understand that everything’s online, and everything’s on mobile phones, and we need to be a part of everything that’s happening. We have to grow with the changes, with technology.”

At the same time, Globe myBusiness educated the participants about different business solutions that can help them sell online such as Shopify; boost efficiency through the Gsuite online suite of productivity tools that can be used anywhere and on any device; and advertise their business like the Adblast targeted texts to consumers, among others.

“The workshop was very helpful for me. The things discussed were added nutrients for what I need for my business, like customer advocacy, offline tools, online tools … they’re very helpful because I discovered what else I need in order to improve the business,” said Jeyna Azugi of Team Sir George Salon.

Digital technology, however, has to be embraced not only by the decision-makers but the whole team for it to make a bigger impact.

“We learned a lot that could help us with our future plans for the business. We are most interested in the concept of GCash. Our consideration now is how we’ll train our employees, because they’re already doing things a certain way, so it’ll be a [challenge] helping them adapt to technology,” said Flory Jhen and Flory Vhel Alvarez of Shinyou.

However, technology only emphasizes what business owners already know and live by, that it is quality that still gets the customer. Thus, technology has to work side by side with current sales, service and marketing strategies in order for it to work.

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