March 12, 2015

Aboitiz Power Corp's 2014 core earnings falls 16% YoY

Aboitiz Power Corp (AP) disclosed today that it posted an 18% YoY decline in 4Q14 consolidated net earnings to P3.5b, thus bringing full year 2014 net profits to P16.7b, a 10% decrease. Excluding one-offs (consisting mainly of forex adjustments), AP’s core income dropped 21% to P3.4b in 4Q14 and 16% to P16.8b in 2014 because of lower income contribution from AP’s power generation business.

The power generation business contributed core net profits of P2.6b in 4Q14, down 27%. For the full year, the power generation business contributed P13.6b, a 21% decrease owing largely to the lower equity contributions from AP’s large hydro and geothermal power plants as well as the expiry to tax holidays for its Pagbilao and Magat power plants. The large hydros were adversely impacted by lower average prices for both its spot and ancillary sales while the Tiwi-Makban geothermal plant reported lower gross margins due to higher steam costs.

The power distribution group registered a 10% decrease in 4Q14 net profits to P721m, weighed down by higher operations costs. Electricity sales for the quarter increased by 12% but proved inadequate to offset the decline in margins resulting from higher operating costs. Because of the supply shortage in the Mindanao grid, AP subsidiaries Davao Light & Power Co Inc and Cotabato Light & Power Co had to operate their back-up diesel-fired power plants during the quarter. For the full year, the power distribution group contributed P3.2b, flat from last year.

Meanwhile, AP announced a P1.62/sh cash dividend (unchanged from the prior year). Although this year’s regular dividends of P1.14/sh is P0.12/sh lower than last year’s P1.26/sh this was compensated by the P0.12/sh increase in the special dividends to P0.52/sh from P0.40/sh. The cash dividend is payable on 20 Apr to all shareholders on record as of 24 Mar. Based on yesterday’s closing price of P45.40/sh, the cash dividend translates to a dividend yield of 3.6%.

Our take: The results came in a slightly lower than expected, falling 2.3% below than consensus average of P17.3b. The overall outlook for this year, however, remains positive with earnings growth seen recovering, driven by new capacity additions. AP is targeting the full commissioning of its 14 MW Sabangan hydro plant and 260 MW Davao coal plant by 1H15.
Combined with the 40 MW strip from Unified Leyte that was awarded earlier by Power Sector Assets and Liabilities Management Corp to a subsidiary of AP, the company’s net attributable sellable capacity will increase by 14% to 2,524 MW from 2,210. We expect to get more details on the results after this afternoon’s analysts’ briefing. – WealthSec