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August 12, 2008

Philippines’ Ayala sees weak 2008 outlook
Ayala Corp, Philippines’ most valuable conglomerate, sees its earnings weakened in the second half of this year with inflationary pressure and unfavourable returns on investment in bank and telecoms businesses, said Reuters on Monday.
Ayala, valued at $3.5 billion, which owns the country’s top property firm, Ayala Land, and water utility Manila Water, and also has interests in telecoms, banking, car distribution, electronics and business services, earlier reported its April-June unaudited net income was 3.7 billion pesos ($83 million) and a drop of 45 percent in its first half’s net income to 6.3 billion pesos.

Reuters quoted the company’s CEO Jaime Augusto Zobel de Ayala saying in a statement, “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.”

Philippines’ annual inflation hit a near 17-year high of 12.2 percent in July and the central bank has raised rates by 75 basis points since June to prevent it 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.

January-June earnings from key businesses fell 23 percent, with net profit at Globe Telecoms and Bank of the Philippine Islands slipping from a year ago as the economy slowed.

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