First Pacific Company Limited

Thank you for joining this online briefing to discuss First Pacific 2022 First Half of Financial and Operating Results. The resource presentation is available on First Pacific's website, www.firstpacific.com, under the Investor Relations Session presentation page. This resource briefing is being recorded, and the replay will be available on First Pacific's website in the Investor Relations Session. For participants from the media, please note the Q&A session is open for investors and analysts only. If you would like to raise questions, please contact us when the briefing finished. Today we have our executive director, Mr. Chris Yang. Our financial Our chief financial officer and associate director, Mr. Joseph Ng, and Mr. John Ryan, our associate director. Another senior executive from the head office of Hong Kong. Over to you, John, for the presentation, please.

Thank you very much, Sarah. We reported our half-year numbers at lunchtime today. I hope you've all had a chance to do some digesting of them. in the intervening hours between then and now. Each of the past few reporting periods, we've reported ever better numbers. So again, we've hit some record highs. Our contribution from operations up more than a fifth to a record high. Our recurring profit is up to a record high of $263 million, up by about 25%. We've increased our interim distribution by 17% to 10.5 Hong Kong cents a share. Our three-year share repurchase program with a budget of $100 million is well underway with about $32 million spent by the end of July when we reached a blackout period during which we had to suspend such share repurchases. We can expect those will be returning to the market in the days ahead. If we look at the graphic on the top right of page three, we can see that all of our operating investment companies there contributed to the increase in recurring profits. looking ahead for the rest of the year and further into the future broadly speaking all of our portfolio companies are expecting uh stronger earnings moving forward now um a brief look at our cash in the bottom right hand graphic on this chart uh we have um More cash at the end of June than we had at the beginning of the year, thanks to the dividend and fee income coming in. A relatively low net interest expense. Our newly appointed Chief Financial Officer, Joseph Ng, can speak to how that might change in the second half of the year in the higher interest rate environment when we turn to the Q&A. We've had very slight new borrowings and net investments. That is mostly our participation in a rights offering by Philex, the mining company, to help finance a mining project in Mindanao called Selangin. And our investment of $20-some million into that rights offering kept our stake unchanged at a little more than 30% in FILEX. And, of course, we've spent some money on share repurchases. Now, a little deeper look into our cash flow and balance sheet on page 4. A few months ago, we obtained investment trade credit ratings from Standard & Poor's and Moody's. You can see the details here. They both have stable outlooks. At the end of June, our gross debt was about $1.5 billion. Our cash on hand is about $139 million at the end of June. And when you look at the debt maturity column chart at the bottom of this slide, you see we have nothing to repay this year, and the $360 million or so that's coming due in 2023 has, in principle, all been taken care of with long-term banking facilities we agreed earlier this month. Our net interest, our blended interest cost has risen a little bit since year end, given the increase in interest rates across the board. And the average maturity has shortened a bit to about 3.3 years. The ever-important interest coverage ratio has unchanged at 3.8 times. And again, that is our dividend income minus our costs, and you divide that by the interest bill. So, we've got four times more money left over than we have in the interest bill. And now, let's have a look over two pages to page six, a snapshot of our gross asset value. One more page, please, Amy. As you can see, our three biggest assets there are Indofood, NPIC, and PLDT, our gap of just under $5 billion at the half-year mark. When markets are all closed later today, we will very likely be updating this presentation with end-August figures so that you've got you've got a more up-to-date number there. But for our half-year report, we want the half-year GAV chart there for you. On the next page, page seven, there are a few details here about sustainability matters, which are increasingly important. Not printed on this page is discussions we had yesterday in a two-hour meeting of our Corporate Governance Committee, where we've approved a couple of initiatives and changes to some of our policies. nothing quite major there but worth having a look um a look at on our website and um later we may announce some details of our tree planting initiative in cooperation with some of our companies down in the philippines um i'd like to draw your attention to the blue box at top right our iss governance quality score following our annual general meeting and publication of our Annual report in April remains at one, the best possible score. There hasn't been any change recently in any of those other scores. Now, let's move to our biggest single asset, Indofood, which at the half year reported, again, record high net sales. That was to be expected. core profit rose less um than it did for the full year of 2021 up by only two percent um and as you can see uh they've had some difficulties with um across the ebit margin box and the bottom right shows you that the noodles margins uh which a year ago were pretty much at a record high have come down quite a bit um but um other businesses which are more reflective of commodity prices saw the converse an increase in their margins so bogusari the flower and pasta division saw a healthy increase in their margins and so did the agri business um broadly speaking uh we had uh sales up across the board except in the agri business where volumes were down rather a lot in both the edible oils and fats and plantations business, each down by a third or more. Now, looking to the full year, Indofood expects continuing strong earnings with EBIT margin perhaps towards the bottom of that range of 18% to 20% that they expect. Sales growth is continuing very strong at consumer branded products, driven in particular by the Pine Hill business in Africa and the Middle East. We can discuss this more in the Q&A if you like. All in all, the full year should continue strong. A very brief look at ICBP, the consumer branded products business on the next page here. Their sales, again, were at a record high, just like the parent company. Their margins were down and their core profit fell quite a bit by 23%. Now, let's move to PLDT, which is the largest and highest quality telecommunications and data services provider in the Philippines. Again, we have record high revenues. This is a consistent theme in the companies that we are invested in here at First Pacific. Record high, 97 billion pesos in the first half. The EBITDA was up 8% to over 50 billion, and they're suggesting that EBITDA for the full year is probably going to be over 100 billion pesos. And that seems to me, looking at numbers over the past decade, to be a very likely record high. Telco core profit is expected to be up 10% or so to 33 billion pesos. At the interim, we saw a special dividend paid to shareholders, which is very welcome here at First Pacific. And CapEx at 85 billion pesos is down a bit from the previous year's 89 billion pesos. And we expect over the next few years to see the ratio of capital expenditures to service revenues to glide down to less than 40% of service revenues. Now, if we have a very quick look at the line charts on page 12, we can see, pardon me, page 12, one more page, Amy. We can see that PLDT maintains its continuing lead in network quality over its competitors, whether it's in the mobile space or in the fixed line. The earnings growth at PLDT is driven very hard, yet again, by the home business, where sales are up by about a quarter. We expect a similar performance for the full year. The individual business, which has been mobile phones in the hands of consumers, has had a bit of a struggle, but we're beginning to see signs of turnaround in the second quarter numbers from PLDT there. And the enterprise business itself continues to grow strong with service revenues up almost 10% in the first half. For fuller details on the performance of PLDT and the other companies, we invite you to look at their own investor presentations or speak to us in the Q&A. You can even ask me to email it to you. Now, let's briefly look at Metro Pacific Investments Corporation. Page 14 reminds us of the assets underneath MPIC. Moralco, the biggest electricity distributor in the country, and increasingly a major generator of electricity too, particularly with its fast-growing ambitions in the renewable space. And then we've got the toll roads business, which is growing very, very fast. We had a major bridge project open in April in Cebu, connecting the airport to the mainland. And later this year, we will see in Manila the opening of the connector road connecting the northern and southern Luzon highway systems. So we're seeing very strong contribution growth from the toll roads business, and that will continue surging on in the years ahead. And there we have the biggest water distributor in the Philippines and the biggest hospitals business. now turning to the next page we can look at the change in contribution chart on the bottom left and as you can see toll roads was the biggest contributor to the increase in contribution followed by the electricity business at moralco and some others we expect the earnings growth that we saw in the first half with core profit up almost a quarter to continue for the full year and i say again looking ahead we expect the toll roads business to deliver an increasing proportion of the earnings growth over at MPIC. While not to be outdone, the electricity business has got ambitions to build out 1500 megawatts of renewable capacity over the next five to seven years. So, those are the two biggest sources of earnings growth at MPIC in the years ahead. Now, let's move several pages ahead to page 19. where we've got our Singapore asset Pacific Light Power, a very modern gas-fired power plant, is generating far stronger earnings than it did a year ago when it began a turnaround after several years of difficulty. As we can see, for profit in excess of 130 million singapore dollars whereas a year earlier it was a little over a million singapore dollars uh what's going on here it's a very efficient plant demand is growing much faster than supply of electricity uh and the outlook over the next few months uh is fairly positive and um dialed into this call we've got stanley yang who's on the board of directors he's in charge of corporate development with us he can speak to any questions you might have about pacific light you might want to bring up this potential solar project based in indonesia where we would like to import solar-generated electricity into Singapore. From there, there is some regulatory and trade matters that need to be addressed there before that could go ahead. Now, we'll wind up with the operating companies on page 20 with a brief look at Philex Mining, which saw a decent increase in operating revenues because mostly of higher metal prices offset a little bit by lower metal production. Gold price up 3% to almost $1,900. Copper price up again, still quite high, to $4.38. The full year numbers might not be quite as strong if metal prices do not sustain at the level that we saw in the first half. And the outlook for this company very much hangs on the Salangan project. which was mentioned very briefly at the beginning of this presentation. They've got some additional financing in place after the stock rights offering. And in the meantime, study continues how they can keep the PadCal mining operations to extend beyond 2024 by looking at potential ore bodies in the environs of that mine, which would be used at the mill there at PadCal. Now, all in all, to recap, we've got record high recurring profit. The contribution from operations is at a record high. We've got a fairly high base from the second half of 2021. So, I don't know if we can promise again a 25% or so increase in our earnings. But the outlook is very, very positive. And you can see that in the 17% increase in our distribution to shareholders at the interim. We're very positive about the outlook for us, for our operating companies, and that winds up the initial introduction to this discussion. And Sarah will now moderate the questions.

Yes, we are now ready for questions. If you have any questions, you can raise your hand. So unmute, we will let you know when you can unmute your device, or you can put your questions in the chat box. Thank you.