By James A. Loyola
LT Group, Inc. (LTG), the flagship of taipan Lucio Tan Sr., is allotting P10 billion for capital expenditures, with the bulk of the amount to be invested in the expansion of its real estate business.
In a press briefing after the firm’s annual stockholders’ meeting, LTG President Michael G. Tan said the amount is higher than the P7.4 billion spent in 2017 as prospects for the group’s businesses remain positive.
Tan said the biggest share of P3 billion will be used by Eton Properties Philippines, Inc. which will continue to bank on the strength of the office leasing business.
“Eton will continue to enjoy high occupancy rates for its BPO office buildings, as well as the retail space that complement these projects. Demand should continue for the buildings being constructed,” said Tan.
Aside from the P3 billion, Eton’s joint venture developments will also get a piece of the P10-billion capex.
Asia Brewery with get a P2 billion share of the capex as its bottled soymilk business continues to roll-out and expand to more areas.
Sales of bottled water is seen to remain strong but the tax on sugary drinks is expected to negatively affect the sales volumes of energy drink Cobra which has the highest share of Asia Brewery’s revenues.
LTG is allotting P500 million For Tanduay Distillers which is seen to enjoy stable to slightly higher demand even though excise taxes for distilled spirits will likely be further increased under Package Two of TRAIN as more jobs are expected to be generated by the Government’s infrastructure program.
Philippine National Bank will have a P2.0-billion capex as it sees growth in the economy to continue to fuel demand for loans.
For its tobacco business, Tan said that, “we are now operating in a level playing field” which enables the company to pass on additional taxes and no longer price products at economically unsustainable levels. But there may a further drop in volumes due to higher prices.
“Higher inflation is expected for 2018, which together with the depreciation of the peso and higher fuel costs will translate to higher production costs. Freight and transportation costs are also expected to go up, so it will be a challenge for manufacturers, including LTG’s subsidiaries, to keep costs down,” he noted.