Ayala Corp Q2 profit falls 38%

August 12, 2008
Ayala Corp Q2 profit falls 38%

(MANILA) Ayala Corp, the Philippines' most valuable conglomerate,
said that second-quarter net income slid 38 per cent, as bank and
telecoms earnings weakened, and warned that inflationary pressures
would hit its second half.

'We expect operating conditions to remain challenging for the balance
of this year and perhaps into early next year as we continue to feel
the pressure from higher inflation and interest rates,' CEO Jaime
Augusto Zobel de Ayala said in a statement.

Ayala, valued at US$3.5 billion, owns the Philippines' top property
firm, Ayala Land, and water utility Manila Water. It also has
interests in telecoms, banking, car distribution, electronics and
business services such as outsourcing.

For the April-June quarter, unaudited net income was 3.7 billion
pesos (S$117 million).

For January-June, net income dropped 45 per cent to 6.3 billion
pesos, as capital gains fell and key businesses earned less.

Annual inflation hit a near 17-year high of 12.2 per cent in July and
the central bank has raised rates by 75 basis points since June to
prevent it from accelerating further. Borrowing costs are predicted
to rise again, by 25 bps, later this month, raising consumers' debt
repayments and further crimping spending power.

'The pressures of rising oil and commodity prices and tightening
credit globally have created a much more challenging operating
environment,' Chief operating officer Fernando Zobel de Ayala said in
the statement.

The group booked first-half capital gains of 2.7 billion pesos from
the sale of shares in Globe Telecoms but they were way below the 7
billion pesos reported a year ago.

First half earnings from key businesses fell 23 per cent, with net
profit at Globe Telecoms and Bank of the Philippine Islands slipping
from a year ago as the economy slowed.

Shares of Ayala Corp fell 45 per cent in the first half of this year,
underperforming the main stock index, which lost 32 per cent.

Ahead of the earnings yesterday, Ayala Corp closed up 2.4 per cent,
while the main index was up 2.8 per cent.