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RNS Number:4322J
First Pacific Capital (1997) Ld
4 September 2001
PART 2
REVIEW OF OPERATIONS
Below is an analysis of results by individual company, classified within the
Group's three main business areas.
Contribution Summary
Six months ended 30 June
Contribution to
Turnover Group (loss)/profit(i)
2001 2000 2001 2000
US$m US$m US$m US$m
Consumer
Indofood 671.4 739.4 18.6 34.6
Berli Jucker 122.3 145.6 5.8 5.2
Darya-Varia 23.0 26.5 1.2 4.2
816.7 911.5 25.6 44.0
Telecommunications
PLDT ^ - - 21.9 8.7
Smart(ii) - 80.5 - (9.0)
Escotel ^ - - (3.7) (5.5)
Infrontier - - (3.8) -
- 80.5 14.4 (5.8)
Property
Metro Pacific 87.8 163.7 (4.3) (0.7)
From continuing businesses 904.5 1,155.7 35.7 37.5
From disposed - 95.7 1.6 8.0
businesses(iii)
From operations 904.5 1,251.4 37.3 45.5
Corporate overhead (6.3) (7.8)
Net finance charges (10.6) (11.7)
Recurring profit 20.4 26.0
Exchange losses (32.5) (63.3)
Gain on disposal and
dilution of shareholdings
less provision for - 87.7
investments
(Loss)/profit (12.1) 50.4
attributable to ordinary
shareholders
^ Associated companies
(i) After taxation and outside interests, where appropriate.
(ii) Merged with PLDT on 24 March 2000.
(iii) Represents SPORTathlon, First Pacific Bank and Savills plc, which
were sold on 29 June 2000, 28 December 2000 and 12 March 2001, respectively.
During a period of continued political uncertainty, declining regional
exchange rates, and restrained consumer demand, First Pacific has returned a
contribution from operations of US$37.3 million, down US$8.2 million against
2000's US$45.5 million.
This decline in profitability is largely a reflection of changes within the
First Pacific Group. Approximately US$6.4 million of the contribution in 2000
was derived from SPORTathlon, First Pacific Bank and Savills plc, which were
disposed in June 2000, December 2000 and March 2001 respectively. In
addition, Infrontier, First Pacific's start-up company that offers business
solutions, commenced operations in 2001, with start-up losses of US$3.8
million being recorded for the first time within contribution from
operations.
The Group's operating results are denominated in local currencies -
principally the rupiah, peso, and baht - which are translated and
consolidated to give the Group's U.S. dollar denominated results. The
depreciation of these currencies against the U.S. dollar is summarized below
and illustrates continued weakness through to 30 June 2001.
At 30 June At 31 December Six months At 30 June One year
2001 2000 change 2000 change
Closing:
Peso 52.43 49.96 -4.7% 43.20 -17.6%
Rupiah 11,390 9,650 -15.3% 8,740 -23.3%
Baht 45.28 43.16 -4.7% 39.19 -13.4%
Rupee 47.04 46.72 -0.7% 44.67 -5.0%
Six months 12 months Six months
ended ended Six ended One
30 June 31 December months 30 June year
2001 2000 change 2000 change
Average:
Peso 50.17 44.67 -11.0% 41.59 -17.1%
Rupiah 10,661 8,523 -20.1% 7,950 -25.4%
Baht 44.47 40.43 -9.1% 38.30 -13.9%
Rupee 46.77 45.07 -3.6% 43.96 -6.0%
The effect this has on the Group's U.S. dollar denominated results is to
reduce the translated U.S. dollar value of local currency results. It is
estimated that this has had an adverse impact on the June 2001 results of
approximately US$11.1 million.
At the operational level, weaker local currencies increase the cost of
imported raw materials which, unless these can be fully recovered through
increased selling prices, has the effect of eroding margins. In addition, the
servicing costs of foreign currency denominated debt are increased, and
unrealized exchange gains or losses arising on the translation of monetary
assets and liabilities are recognized in the profit and loss statement.
CONSUMER
Indofood, a leading processed-foods group with operations throughout
Indonesia, contributed a profit of US$18.6 million, down 46.2 per cent
against the comparative of US$34.6 million.
The Group increased its interest in Indofood by eight per cent in December
2000, as a consequence of which, the Group's average shareholding for the
first half of 2001 was 48.0 per cent, against 40.0 per cent for the
comparative period.
The majority of Indofood's revenues are denominated in rupiah, which averaged
Rupiah 10,661 to the U.S. dollar over the first six months of 2001, compared
with Rupiah 7,950 to the U.S. dollar over the first six months of 2000.
Because of the weaker average rupiah exchange rate, the 9.2 per cent decline
in U.S. dollar turnover, to US$671.4 million, masks an underlying 21.5 per
cent increase in rupiah-denominated turnover to Rupiah 7,158.0 billion. With
the exception of Baby Foods, all of Indofood's businesses increased turnover.
The divisions of Instant Noodles, Flour, and Edible Oils contributed
four-fifths of total turnover, with increased turnover from the divisions of
Flour (up 39.7 per cent), Instant Noodles (up 13.4 per cent), Distribution
(up 23.3 per cent) and Edible Oils (up 5.2 per cent).
Improved turnover was achieved through a mix of volume growth and price
increases. However, gross and operating margins came under pressure as the
cost of imported raw materials increased with the rupiah's decline, with
operating margins further eroded by fuel costs, which almost doubled, and
increases in salaries, electricity and transportation costs. As a result,
Indofood's overall gross margin declined to 26.0 per cent (1H00: 31.5 per
cent), while its operating margin was 14.4 per cent (1H00: 21.2 per cent).
Notwithstanding this, Indofood returned to paying dividends when a final 2000
dividend of Rupiah 18 per share, representing a payout ratio of 25 per cent,
was approved during the period. This dividend, which was paid in July 2001,
was the first dividend payment since 1997. Furthermore, approximately US$60
million of debt was repaid out of operating cash flows during the first half,
reducing Indofood's debt to approximately US$628.8 million and further
containing exposure to future exchange rate fluctuations. Approximately 77
per cent of Indofood's U.S. dollar debt is hedged and, as at 30 June 2001,
Indofood's net debt was US$426.8 million.
In May 2001, Indofood announced its intention to buy back up to 10 per cent
of its share capital, equating to 915,600,000 shares, by 30 November 2002. At
the same time, Indofood management also introduced an employee stock
ownership program as an incentive to motivate employees. Under this scheme
Indofood can issue up to five per cent of its issued share capital - equating
to 457,800,000 shares - to be made available for employee purchase.
Subsequent to 30 June 2001, Indofood repaid a further US$120 million of U.S.
dollar denominated debt, and in August 2001 announced that it no longer
intended to acquire a controlling stake in Singapore-listed Golden-Agri
Resources Limited. As Indofood's plantations only provide between 40 per cent
to 45 per cent of Indofood's crude palm oil needs, alternatives, for securing
the supply required for the Edible Oils division, are under consideration.
Berli Jucker, a manufacturer, marketer and distributor of glass, consumer,
technical products and imaging in Thailand, contributed a profit of US$5.8
million, up 11.5 per cent against the comparative of US$5.2 million. In
September 2000, Berli Jucker reduced its equity base by 30 per cent, through
dividending its retained earnings. As a consequence, return on equity has
increased to 9.5 per cent (1H00: 7.1 per cent). The Group's interest in Berli
Jucker has remained unchanged at 83.5 per cent.
The majority of Berli Jucker's revenues are denominated in baht, which
averaged Baht 44.47 to the U.S. dollar over the first six months of 2001,
compared with Baht 38.30 to the U.S. dollar over the first six months of
2000.
In U.S. dollar terms, Berli Jucker's turnover is down 16.0 per cent to
US$122.3 million. However, this is a reflection of a weaker baht as turnover
in baht terms is up 8.0 per cent as all divisions recorded stronger sales.
Gross margins improved with Packaging & Consumer Products returning a gross
margin of 28.3 per cent (1H00: 25.9 per cent), reflecting lower paper pulp
and palm oil prices, while Technical Products & Imaging achieved a gross
margin of 22.2 per cent (1H00: 15.3 per cent) following the deconsolidation
of Thai Klinipro.
Operating margins also held up, with cost control measures improving
Packaging & Consumer Products' operating margin to 9.9 per cent (1H00: 8.7
per cent), while Technical Products & Imaging returned an operating margin of
4.5 per cent (1H00: 3.7 per cent).
Darya-Varia, a leading fully integrated Indonesian health care company,
contributed a profit of US$1.2 million, down 71.4 per cent against the
comparative of US$4.2 million. The Group's interest in Darya-Varia remained
unchanged at 89.5 per cent.
The majority of Darya-Varia's revenues are denominated in rupiah, which
averaged Rupiah 10,661 to the U.S. dollar over the first six months of 2001,
compared with Rupiah 7,950 to the U.S. dollar over the first six months of
2000.
This weakening of the rupiah has masked a 16.2 per cent improvement in
Darya-Varia's rupiah denominated turnover, achieved off an aggressive
marketing drive. The gross margin, at 45.9 per cent, was maintained at a
similar level to the comparative period as operational efficiencies offset
increased costs for imported raw materials due to the rupiah's weakening.
The operating margin declined to 12.8 per cent, principally due to a
provision in respect of Stop Cold, Darya-Varia's leading cold preparation.
This product has been withdrawn from the market in compliance with Department
of Health regulations as, similar to other available cold medications, Stop
Cold contains an ingredient called Phenylprophanolamin (PPA). The health
authorities are concerned that PPA, if taken in large quantities, may cause
adverse side effects. Darya-Varia, consistent with its commitment to sell
only safe, high quality products, immediately withdrew the product and plans
to re-introduce Stop Cold using an equally effective raw material that has no
known adverse side effects.
TELECOMMUNICATIONS
PLDT, the principal supplier of national and international telecommunications
services in the Philippines, contributed a profit of US$21.9 million, up
151.7 per cent against the comparative of US$8.7 million.
As a consequence of a number of transactions - most notably the acquisition
of Smart by PLDT in March 2000, and First Pacific's acquisition of Metro
Pacific's eight per cent interest in PLDT in September 2000 - the Group's
average shareholding for the first half was 24.6 per cent, against 20.3 per
cent for the comparative period.
In the first half of 2001, 31.5 per cent of PLDT's operating revenues were
received in U.S. dollars, while 36.4 per cent were U.S. dollar-linked as PLDT
is able to adjust its monthly fixed line service rates by one per cent for
every Peso 0.1 change in the U.S. dollar exchange rate. The peso averaged
Pesos 50.17 to the U.S. dollar over the first half of 2001, compared with
Pesos 41.59 for the first six months of 2000.
PLDT's EBITDA grew 26.7 per cent to Pesos 19.8 billion (1H00: Pesos 15.7
billion), on the back of a 24.6 per cent improvement in revenues to Pesos
36.7 billion (1H00: Pesos 29.5 billion), and improved operating efficiencies.
Wireless services posted a dramatic turnaround in 2001 as revenues surged
from data services such as text messaging and enhanced services from Smart's
new mobile portal service 'Smart zed'. As a result, combined Wireless
revenues for the first half increased by 70.1 per cent to Pesos 12.0 billion
(1H00: Pesos 7.1 billion). Now accounting for 32.7 per cent (1H00: 24.0 per
cent) of PLDT's total revenues, Wireless is the driver of medium-term growth,
underscoring PLDT's transition to a full-service telecommunications and
multi-media group. Subscriber acquisition costs declined by approximately 63
per cent, this despite the doubling of subscribers to 5.0 million (1H00: 2.4
million) that secured Smart and Piltel some 58 per cent of the cellular
market by 30 June 2001. Around 93 per cent of subscribers are on prepaid
plans, while approximately 4.4 million (1H00: 1.3 million) subscribers are
for GSM services. Having together added 280,000 GSM subscribers, on average
each month, Smart and Piltel also maintained their leadership in the GSM
market with a combined market share of approximately 56 per cent.
PLDT's Fixed Line network, which platforms a wide range of PLDT's fixed,
cellular, cable and internet products and services, added 90,903 (1H00:
57,717) new subscribers, net of churn, during the first half of 2001. PLDT
better managed churn by achieving higher reconnections of previously
disconnected lines and, as at 30 June 2001, the PLDT Group had 2,106,211
(1H00: 1,963,711) fixed line subscribers. This increase of 142,500
subscribers, or 7.3 per cent, reflects organic growth as well as growth
through acquisition. PLDT has approximately 67 per cent of the fixed line
market, with the nearest competitor having approximately a 13 per cent market
share.
PLDT's total International Long Distance call volume grew by 40.5 per cent to
1,266.5 million billed minutes in the first half of 2001. Inbound call volume
grew by 41.6 per cent to 1,185.9 million billed minutes, while outbound
traffic increased by 26.3 per cent to 80.6 million billed minutes. However,
these volume increases were insufficient to offset the continued decline in
international settlement rates for inbound international calls, and
successive reductions in direct dialing rates for outbound international
calls. As a result, peso revenues declined by 3.7 per cent to Pesos 6.4
billion, from Pesos 6.7 billion for the same period of 2000.
National Long Distance recorded 1,488.7 million billed minutes, down 6.6 per
cent, with revenues down 17.7 per cent to Pesos 4.5 billion. This decline was
largely attributable to rate reductions implemented to enhance
competitiveness and a change in call mix such that more calls are subject to
revenue sharing with other carriers.
Data and Other Services, the driver of PLDT's future growth, recorded a 78.2
per cent increase in revenues to Pesos 2.3 billion, with this business now
contributing six per cent (1H00: four per cent) of PLDT's consolidated peso
revenues. Strong demand for domestic and international bandwidth underpinned
this growth as a range of value-added and broadband services were offered off
PLDT's fiber optic backbone. Technological upgrades have evolved PLDT's
infrastructure to a new packet-switched and Internet-based network offering
faster, improved transmission of voice, video and data. In addition, digital
subscriber line technology, which provides high-speed data transfer over
copper lines, is already available in Metro Manila and Cebu and is
progressively being introduced elsewhere.
In June 2001, PLDT concluded the debt restructuring of Piltel. PLDT's
interest in Piltel has now decreased to 45.3 per cent and as such, Piltel is
no longer treated as a consolidated subsidiary, but as an affiliate of PLDT.
Escotel, a New Delhi-based GSM cellular telephone services provider,
contributed a loss of US$3.7 million, a 32.7 per cent improvement against the
comparative loss of US$5.5 million. The Group's interest in Escotel remained
unchanged at 49.0 per cent.
Escotel's revenues are denominated in rupees, which averaged Rupee 46.77 to
the U.S. dollar over the first six months of 2001, compared with Rupee 43.96
to the U.S. dollar over the first six months of 2000.
Escotel recorded a maiden operating profit of US$2.9 million. This
achievement was underpinned by strong growth in subscriber revenues despite a
decline in ARPUs as subscribers increasingly use prepaid plans. As at the end
of June 2001, Escotel had 333,242 subscribers, up approximately 93 per cent
from June 2000.
In March 2001, Escotel put in place five-year financing when it refinanced
US$75.0 million of offshore debt and secured a domestic debt facility
equivalent to approximately US$112 million. These facilities enabled the
repayment of short-term debt, and provide the funds for network enhancements
necessary to support Escotel's growing subscriber base.
Infrontier, First Pacific's wholly-owned start-up offering business solutions
in both hosted and traditional environments, recorded a start-up loss of
US$3.8 million in its first period of commercial operations.
Infrontier offers business solutions that address all aspects of supply chain
management including logistics, asset utilization, warehousing and
manufacturing processes, sales automation, and demand planning and
forecasting. In addition, Infrontier offers wireless applications that enable
businesses and consumers to communicate and transact via a wireless
environment. In support of these core businesses, Infrontier has a team of
experienced and knowledgeable professionals who assist clients in the
development, integration, implementation, and maintenance phases, and can
also provide the technology infrastructure necessary to develop, manage and
host client applications.
Infrontier recorded its first revenues in July 2001.
PROPERTY
Metro Pacific, which principally holds Philippine property assets,
contributed a loss of US$4.3 million, compared with a loss of US$0.7 million
recorded over the first six months of 2000. The Group's interest in Metro
Pacific remained unchanged at 80.6 per cent.
Metro Pacific's revenues are denominated in pesos. The peso averaged Pesos
50.17 to the U.S. dollar over the first half of 2001, compared with Pesos
41.59 for the year-ago period.
Metro Pacific's principal property asset is its 69.6 per cent interest in
Bonifacio Land Corporation (BLC). BLC holds a 55.0 per cent interest in Fort
Bonifacio Development Corporation (FBDC), which is developing, in stages, 150
hectares of land in the former military base, Fort Bonifacio.
The decline in turnover and operating profit recognized from Fort Bonifacio
is primarily due to the completion of the horizontal development of Big Delta
in April 2000. Revenues in respect of Pesos 28.4 billion worth of land sales
made in 1996 were recognized over the period of Big Delta's development. By
April 2000, when the project was completed on schedule and below budget, all
revenues and profits on these 1996 land sales had been recognized.
A small land sale was concluded in June 2001, and Metro Pacific is confident
of securing further land sales in the second half. Alternative land use
opportunities continue to be sought by offering building leases, which
average five years, and land leases, which range between 25 and 50 years, to
Bonifacio Global City locators. In addition to generating short and medium
term cash flows, these establishments draw people to the Bonifacio Global
City to fulfill their business, entertainment, shopping or residential needs,
which is important for developing the project's overall critical mass.
Work has commenced on the horizontal development of Expanded Big Delta, an
area covering 54 hectares to the north and west of Big Delta. The first phase
of Expanded Big Delta is substantially complete and, together with Big Delta,
these areas represent approximately 75 per cent of the land under development
by FBDC.
Bonifacio Ridge, FBDC's first residential project, was 31 per cent complete
by the end of June 2001, and was officially topped-out on 2 July 2001, at
which time 70 per cent of the development's 288 units were sold. New bars and
restaurants are scheduled to open at The Fort, while S&R Price, a
membership-shopping club, opened in April 2001. The Bonifacio Global City's
first business tenants will shortly move into The Hatchasia GlobalCity
Centre, and work continues on the gas and retail plaza, Bonifacio StopOver,
scheduled to open in September. In July, St. Luke's Medical Center, the
Philippines' foremost provider of medical services, signed a 50-year
extendible long-term lease arrangement for a 1.6-hectare medical complex to
be located on 32nd Street.
In May 2001, BLC successfully refinanced Pesos 3.05 billion of long-term
commercial papers with a new Pesos 2.1 billion fully secured seven-year
facility. While in June 2001, BLC announced its intention to sell its
development rights in respect of the northern central business district of
the Bonifacio Global City. This initiative will accelerate the advancement of
the Bonifacio Global City's undeveloped areas and allow Metro Pacific to
concentrate on its ongoing and future vertical developments within Big Delta
and Expanded Big Delta. Interested parties are currently preparing their
submission bids, and it is anticipated that this process will be concluded by
late September 2001.
Pacific Plaza Towers recorded improved turnover and operating profit as unit
sales continued. As at 30 June 2001, some 283 of the development's 393 units
had been sold, with residents now occupying 42 units.
Metro Pacific's remaining property asset, Landco, recorded reduced turnover
and operating profit as key developments, Punta Fuego and Ridgewood Park,
have now been sold. Landco plans to launch four new projects this year to
enhance medium-term revenue streams.
Negros Navigation (Nenaco) returned improved peso turnover and operating
profit as price increases introduced in 2000 and efforts to streamline
Nenaco's operations took effect. In June 2001, in order to further position
Metro Pacific as a company focused on property, the board of Metro Pacific
approved a proposal to dividend its interest in Nenaco to the shareholders of
Metro Pacific, including First Pacific. This transaction is subject to
certain creditor and regulatory approvals and it is anticipated to conclude
by year-end.
FINANCIAL REVIEW
Liquidity and financial resources
CONSOLIDATED NET INDEBTEDNESS AND GEARING BY OPERATING COMPANY
At 30 June 2001 At 31 December 2000
Net Net Net Net
indebtedness/ assets/ indebtedness/ asset/
(cash)(i) (liabilit Gearing (cash)(i) (liabiliti Gearing(ii)
ies) (ii) es)
US$m US$m times US$m US$m times
Consolid
ated
Head 242.7 1,474.7 0.15 150.0 1,500.1 0.10
Office(iii)
Indofood 426.8 239.3 1.78 494.5 271.6 1.82
Berli 52.9 146.5 0.36 70.4 148.5 0.47
Jucker(iv)
Darya-Va (1.3) 7.6 - (1.6) 10.9 -
ria
Infrontier 0.4 (9.3) - - - -
Metro 247.3 1,176.7 0.21 303.1 1,287.9 0.24
Pacific(v)
Consolid 968.8 3,035.5 0.32 1,016.4 3,219.0 0.32
ated
before
goodwill
reserve
Goodwill - (1,897.3) - - (1,913.9) -
reserve
Consolid 968.8 1,138.2 0.85 1,016.4 1,305.1 0.78
ated
after
goodwill
reserve
Associated
companies
PLDT(vi) 3,280.4 1,681.6 1.95 3,730.3 1,746.1 2.14
Escotel 192.5 (65.1) - 176.6 (46.0) -
(i) Includes pledged deposits and excludes inter-company indebtedness.
(ii) Calculated as net indebtedness divided by net assets.
(iii) Head Office's gearing increased principally as a result of the
US$90.0 million advance made to Metro Pacific.
(iv) Berli Jucker's gearing improved due to cash generated from
operations.
(v) Metro Pacific's gearing improved mainly because of the repayment of
convertible bonds in April 2001.
(vi) PLDT's gearing improved as a consequence of the deconsolidation of
Piltel in June 2001.
The maturity profile of consolidated debt is summarized below. The change to
the debt maturity profile principally reflects the fact that the Head
Office's US$267.9 million convertible bonds (due March 2002) and Indofood's
US$200.0 million bank loan (due June 2002) are now due within one year.
MATURITY PROFILE OF CONSOLIDATED DEBT
At At
30 June 31 December
2001 2000
US$m US$m
Within one year 831.6 526.1
One to two years 190.2 637.1
Two to five years 144.2 221.7
Over five years 123.1 59.7
Total 1,289.1 1,444.6
The maturity profile of the borrowings of the Group's associated companies
follows. The change to the debt maturity profile of PLDT primarily reflects
the deconsolidation of Piltel with effect from 27 June 2001. The improvement
in Escotel's maturity profile reflects the impact of the debt refinancing
that was completed in March 2001.
ASSOCIATED COMPANIES
PLDT Escotel
At At At At
30 June 31 December 30 June 31 December
2001 2000 2001 2000
US$m US$m US$m US$m
Within one year 316.4 340.4 59.4 91.9
One to two years 619.2 657.3 10.1 24.3
Two to five years 1,595.6 1,518.3 103.9 45.9
Over five years 867.4 1,407.9 22.1 16.4
Total 3,398.6 3,923.9 195.5 178.5
CHARGES ON GROUP ASSETS
Certain bank loans and overdrafts included within consolidated borrowings are
secured by certain of the Group's property and equipment, interests in
subsidiary companies, trade receivables and inventories.
Financial Risk Management
FOREIGN CURRENCY RISK
(A) Company risk
First Pacific is exposed to foreign currency fluctuations arising from its
portfolio of investments. As all Head Office debt was denominated in U.S.
dollars at 30 June 2001, this exposure relates mainly to the receipt of cash
dividends, and to the translation of non-U.S. dollar investments in
subsidiary and associated companies. The Company actively reviews the
potential benefits of hedging based on forecast dividend flows.
The Company does not actively seek to hedge risks arising from foreign
currency translation of investments in subsidiary and associated companies
due to their non-cash nature and the high cost associated with such hedging.
Accordingly, First Pacific is exposed to the impact of foreign currency
fluctuations on the U.S. dollar value of its investments.
The following table illustrates the estimated impact on the Company's
adjusted net asset value (NAV) for a 1.0 per cent depreciation against the
U.S. dollar of the currencies in which the equities of subsidiary and
associated companies are quoted.
Effect on Effect on adjusted
adjusted NAV NAV per share
Company US$m HK cents
PLDT (5.7) (1.42)
Indofood (3.3) (0.82)
Metro Pacific (1.3) (0.32)
Berli Jucker (0.9) (0.22)
Darya-Varia (0.2) (0.05)
Total(i) (11.4) (2.83)
(i) The NAV of the Group's investment in Escotel is based on the
historical U.S. dollar cost and accordingly any depreciation of the
rupee would not affect the Company's adjusted NAV.
(B) Group risk
First Pacific's policy is for each operating entity to borrow in local
currencies where possible. However, it is often necessary for companies to
borrow in U.S. dollars which results in a translation risk in their local
currency results. A summary of consolidated net indebtedness by currency
follows:
CONSOLIDATED NET INDEBTEDNESS BY CURRENCY
US$ Peso Rupiah Baht Other(i) Total
US$m US$m US$m US$m US$m US$m
Consolidated
Total borrowings 779.9 260.8 178.7 12.6 57.1 1,289.1
Cash and bank (147.8) (21.3) (136.7) (14.4) (0.1) (320.3)
balances(ii)
Net 632.1 239.5 42.0 (1.8) 57.0 968.8
indebtedness/(cash)
Representing:
Head Office 242.8 - - - (0.1) 242.7
Indofood 382.9 - 43.3 - 0.6 426.8
Berli Jucker - - - (1.8) 54.7 52.9
Darya-Varia - - (1.3) - - (1.3)
Infrontier (1.4) - - - 1.8 0.4
Metro Pacific 7.8 239.5 - - - 247.3
Net 632.1 239.5 42.0 (1.8) 57.0 968.8
indebtedness/(cash)
Associated
companies
PLDT 2,893.5 230.2 - - 156.7 3,280.4
Escotel 77.0 - - - 115.5 192.5
(i) For Berli Jucker and PLDT, "other" represents Japanese yen. For
Escotel, "other" represents Indian rupee.
(ii) Includes pledged deposits.
During 2001, Indofood and Metro Pacific paid down their U.S. dollar
denominated net indebtedness by US$34.5 million and US$59.1 million
respectively in order to reduce their exposure to movements in exchange rates.
PLDT's U.S. dollar denominated net indebtedness decreased principally as a
result of the deconsolidation of Piltel in June 2001 and increased
utilization of peso borrowings to refinance U.S. dollar debt.
As a result of the relatively large unhedged U.S. dollar net indebtedness,
particularly at PLDT, the Group's results are sensitive to fluctuations in
U.S. dollar exchange rates. The following table illustrates the estimated
impact, arising from unhedged U.S dollar net indebtedness, on the Group's
reported profitability for a 1.0 per cent depreciation of the principal
operating currencies of subsidiary and associated companies against the U.S.
dollar. This does not reflect the indirect impact on the Group's operational
results as a consequence of changes in local currency revenues and costs due
to fluctuations in U.S. dollar exchange rates.
Profit
impact of Group
Total Hedged Unhedged 1% currency profit
US$
exposure amount(i) amount depreciation impact(ii)
US$m US$m US$m US$m US$m
PLDT 2,893.5 (223.4) 2,670.1 (26.7) (4.4)
Metro 97.8 (12.0) 85.8 (0.9) (0.5)
Pacific(iii)
Total Philippines 2,991.3 (235.4) 2,755.9 (27.6) (4.9)
Indofood(iii) 472.6 (343.0) 129.6 (1.3) (0.4)
Darya-Varia(iii) 8.8 - 8.8 (0.1) (0.1)
Total Indonesia 481.4 (343.0) 138.4 (1.4) (0.5)
Escotel (India) 77.0 (54.0) 23.0 (0.2) (0.1)
Head Office(iv) 242.8 - 242.8 - -
Infrontier (1.4) - (1.4) - -
Total (5.5)
(i) Excludes the impact of "natural hedges".
(ii) Net of tax effect.
(iii) Includes inter-company funding from Head Office of US$90.0 million
for Metro Pacific and US$8.8 million for Darya-Varia, and premium
payable on hedging contracts of US$89.7 million for Indofood.
(iv) As the Group reports its results in U.S. dollars, unhedged U.S.
dollar debt at Head Office carries no exchange exposure.
INTEREST RATE RISK
The Company and the majority of its operating entities are exposed to changes
in interest rates to the extent that they impact the cost of variable rate
borrowings. An analysis of consolidated net indebtedness and interest rate
profile, together with details for associated companies, follows:
Fixed Variable Cash and Net
interest interest bank indebtedness/
borrowings borrowings balances(i) (cash)
US$m US$m US$m US$m
Consolidated
Head Office 317.9 - (75.2) 242.7
Indofood 239.1 389.7 (202.0) 426.8
Berli Jucker 0.6 66.7 (14.4) 52.9
Darya-Varia(ii) 0.2 - (1.5) (1.3)
Infrontier 1.8 - (1.4) 0.4
Metro Pacific(ii) 84.3 188.8 (25.8) 247.3
Consolidated net 643.9 645.2 (320.3) 968.8
indebtedness
Associated
companies
PLDT 2,278.9 1,119.7 (118.2) 3,280.4
Escotel 28.8 166.7 (3.0) 192.5
(i) Includes pledged deposits.
(ii) Excludes inter-company funding from Head Office of US$8.8 million
for Darya-Varia and US$90.0 million for Metro Pacific.
As a result of variable interest rate debt at a number of operating
companies, the Group's results are sensitive to fluctuations in interest
rates. The following table illustrates the estimated impact on the Group's
reported profitability of a 1.0 per cent increase in average annual interest
rates for those entities which hold variable interest rate debt.
Profit
impact of
Variable 1% increase Group
interest in interest profit
borrowings rates impact(i)
US$m US$m US$m
Indofood 389.7 (3.9) (1.3)
Berli Jucker 66.7 (0.7) (0.4)
Metro Pacific 188.8 (1.9) (1.0)
PLDT 1,119.7 (11.2) (1.9)
Escotel 166.7 (1.7) (0.8)
Total (5.4)
(i) Net of tax effect.
Employee information
2001 2000
US$m US$m
Remuneration 74.5 113.2
Average number of employees for the period 50,274 50,030
For details regarding the Group's remuneration policies for Directors and
Senior Executives, please refer to Note 31 on page 87 of the 2000 Annual
Report.
REVIEW STATEMENT BY THE AUDIT COMMITTEE
In accordance with the requirements of paragraph 39 of Appendix 16 of the
Listing Rules, the Audit Committee has reviewed the unaudited Condensed
Interim Financial Statements for the six months ended 30 June 2001, including
the accounting principles and practices adopted by the Group. The Audit
Committee has also discussed auditing, internal control and financial
reporting matters with the Company's management and its external auditors.
The Company's external auditors were engaged by the Audit Committee to
perform a review of the unaudited Condensed Interim Financial Statements for
the six months ended 30 June 2001.
INTERIM DIVIDEND
The Board do not recommend the payment of an interim dividend in 2001 (2000
interim dividend: US0.13 cent or HK1.00 cent, payable in scrip with a cash
option, per ordinary share).
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
No purchase, sale or redemption of any of First Pacific Company's listed
securities has been made by the Company or any of its subsidiary companies
during the period.
COMPLIANCE WITH CODE OF BEST PRACTICE
None of the Directors of the Company is aware of any information that would
reasonably indicate that the Company has, during the period, not been in
compliance with the Company's Code of Best Practice, which incorporates the
items set out in Appendix 14 of the Rules Governing the Listing of Securities
issued by The Stock Exchange of Hong Kong Limited.
INTERIM REPORT
An Interim Report will be sent to shareholders on or about the 6 September
2001.
By Order of the Board
Manuel V. Pangilinan
Executive Chairman
3 September 2001
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