San Miguel Corp Ord

Good afternoon, everyone. Welcome to the combined 2026 first semester results analyst briefing. I am Jericho and I will be your moderator for today. A few reminders before we begin. Number one, questions will be entertained only at the end of the presentation. and only via the Q&A feature. Number two, questions sent through the chat box will not be entertained. And number three, please be reminded that this webinar is recorded. Allow me now to introduce our panelists for this afternoon. We are joined here today by Ms. Jessica Tenorio, VP and Head of Corporate Financial Planning and Investor Relations, Ms. Tatish Pallabyab, SMC Chief Sustainability Advisor, Ms. Monica Ang Mercado, San Miguel Food and Beverage Incorporated CFO, Ms. Tina Garcia, SMFP Investor Relations Head, and Mr. Eric Peh Lim, Petron Corporation Investor Relations Head. We'd also like to acknowledge the presence of other key executives of the group who will be joining us in this call. I now turn you over to Ms. Cheska Tenorio to discuss the SMC Group's financial and operational results.

Thank you, Jericho. Good afternoon and welcome to San Miguel Corporation's combined first half 2026 results analyst briefing. We are very pleased to report that despite a more challenging operating environment, the SMC Group delivered resilient first half results, demonstrating the strength of our diversified portfolio and the continued execution of our long-term growth strategy. Let me begin with an overview of the key developments and drivers behind our performance during the period. The first half of 2026 was marked by a more challenging operating environment in the Philippines, with GDP growth slowing to 2.3% in the second quarter and 2.6% for the first half. Weaker investment activity, softer consumer spending, elevated inflation, faster depreciation, and disruptions arising from tensions in the Middle East weighed on overall business and consumer sentiment. Despite these headwinds, SMD delivered resilient first half results. Core net income grew significantly, while consolidated operating income grew by 17%, reflecting the resilience of our diversified portfolio. Although second quarter performance was affected by the Middle East crisis and foreign exchange movements, the group continued to benefit from solid top-line growth, steady domestic demand, and stronger contributions from the energy, food, spirits, and infrastructure businesses. On the sustainability front, SMC continued to advance the sustainability agenda in the first half of 2026, moving from establishing key frameworks toward greater integration into business operations and decision making. Key progress included advancing in the climate risk assessment, net zero roadmap, and people upliftment framework alongside the publication of the 2025 sustainability report. Flagship initiatives such as the Better Rivers Program continue to deliver measurable environmental and social outcomes, while stronger internal engagement and sustainability governance supported SMC's focus on long-term resilience, value creation, and sustainability growth. We will discuss these developments in greater detail in the succeeding slides. Let's now take a closer look at the group's financial performance. San Miguel Corporation remains resilient in the first half of 2026 with its diversified portfolio, supporting strong performance despite heightened external challenges. For the first semester of 2026, the group generated consolidated revenues of 964.1 billion pesos, up 34% from last year. Growth was driven by higher average selling price and volumes at Petron, sustained strength in the energy business and solid food business, led by record high feeds volumes and continued support from Magnolia Dairy. This growth was achieved despite more pronounced headwinds in the second quarter, when the Middle East crisis and foreign exchange movements weighed on Patron's margins. The resilience of the group's diversified portfolio, supported by stronger contributions from the energy and other key businesses, helped cushion these pressures and brought consolidated operating income for the first half to 102.3 billion pesos, and that's 17% higher year-on-year. Consolidated reported net income reached 37.7 billion pesos, 44% lower than last year, but this is mainly reflecting the absence of prior year one-off gains and the impact of a 16.5 billion foreign exchange loss from the peso depreciation. Stripping out these non-core items, consolidated net income would have grown 48% to 54.2 billion, reinforcing the strength of the group's core earnings. Now to walk us through the performance of San Miguel Food and Beverage, I'll turn the floor over to Tina.

Thank you, Chesca. San Miguel Food and Beverage remained resilient through the first half of the year, supported by the strength of our operations and the hard work of our teams, despite high inflation, slower growth, and geopolitical disruption. Let me start with the macro conditions. The economy grew 2.8% in the first quarter, and household spending was 3% down from 3.8% in the fourth quarter of 2025. Inflation moved from 2% in January to 4.1% in March, led by transport at 9.9% as the Middle East conflict pushed up fuel costs. That pressure intensified through the second quarter, with inflation reaching 6.8% and the peso weakening 4.6%, which raised the cost of our imported inputs. Consolidated sales reached $205.3 billion, 2% higher led by the continued growth in food, Food grew 5% on volumes, spirits were steady, and beer eased 1%. Food and beer are still our largest contributors at 48% and 36% of sales, with spirits at 16%. Cross-profit was steady at $58.4 billion, supported by revenue growth and efficient cost management. The earnings pressure this first half came through operating expenses, Rather than the top line or the gross margin, mainly on higher freight and handling costs and the cost of running new facilities. Income from operations and net income both eased 4% to 28.8 billion and 22.1 billion with both margins easing one percentage point. EBITDA was 1% lower at 38.8 billion with margin of 19%. Beer is still the largest contributor at 50% of income from operations and 52% of net income. Food follows at 31% and 30% and spirits at 19 and 20%. Despite these pressures, demand across our core categories remained relatively stable. We closed the first half with total equity of 205.3 billion, up 4% alongside improved liquidity and leverage ratios. Next slide, please. Turning to the food business, food revenue rose 5% to 99.3 billion, driven by the feed segment and sustained demand for branded products. Animal Nutrition and Health had its best first half volume ever, up 26%. This was driven by major growth in hog feeds, supported by product enhancements, effective sales and marketing programs, farm conversions, and industry repopulation. Layer, free range, and broiler feeds also posted strong rates. Volumes grew double digit across every channel, more notably from feed stores due to improved distribution and trade execution. Feeds accounted for most of food's added sales. Protein sales eased 5% to $35.9 billion amid a challenging industry supply situation and software demand. While poultry volumes remained stable, the sustained influx of imported frozen chicken continued to weigh on chicken prices, which averaged 5% below last year's levels. Industry frozen chicken inventory rose from 57.5 million kilos at the end of 2025 to 68.1 million kilos by June 2026, with imports accounting for 69% of total stocks. As the shortfall was driven by weaker pricing rather than lower volumes, it cut directly into profitability. There are early signs of improvement. Chicken prices have gradually recovered since April, although they remained below year-ago levels. Demand in the second quarter remained resilient, particularly from food service and wet market channels, helping support a more positive outlook for the business. Monterrey Meats also returned to profit given a more focused business team, a better channel mix, and improved farm efficiency. Prepared and packaged food grew sales 5% on stronger volumes, better prices, and improved product mix, supported by Magnolia Dairy and Coffee, Pure Foods Luncheon Meats, and Pinoy Favorites. Our economy brands Star and Bonga also contributed to the top line as consumers sought affordable yet trusted alternatives. Flower sales eased as customers moved to lower-priced alternatives, including imported flour. Our fighting brands, bakery ingredients, and retail premixes offset part of that, and operating income still improved on weak costs that were below last year's levels. For food overall, gross profit grew 4% to 22 billion, helped by favorable prices for most raw materials and by deliberate cost reduction efforts across operations. Operating income increased 2% to 8.8 billion. EBITDA was 5% higher at 13.8 billion and net income rose 8% to 6.4 billion. Favorable input prices and cost discipline helped the business cope with high inflation and the impact of the Middle East conflict and sustained margins. Next slide, please. Moving on to the beer business, beer remained the group's largest earnings contributor, although sales eased 1% to 73.7 billion as consumers became more selective with discretionary spending amid elevated inflation and a weaker peso. Domestic sales remained steady at 66 billion, supported by the January price adjustment implemented to offset higher excise taxes, despite a 5% moderation in volume. First quarter volume was partly affected by the trade's inventory buildup in December 2025, ahead of the adjustment, while second quarter performance reflected more cautious consumer spending amid elevated inflation. The June earthquake in Mindanao also temporarily affected volumes in the region. We continued investing in our brands with campaigns and sponsorships across our portfolio, alongside intensified sales and distribution initiatives that helped cushion the volume shortfall. Domestic operating income closed at 13.4 billion, 5% below last year, as lower volumes, higher fuel prices and excise taxes and fixed costs offset the pricing gain. International sales were $7.7 billion, 7% lower or 11% lower in dollar terms at $128.5 million, primarily because the Middle East conflict affected our exports business. That was partly offset by growth in the domestic operations of our international markets with stronger sales in Indonesia, South China and Hong Kong, and higher San Miguel brand volumes in Vietnam. Operating income declined on lower volumes, higher production costs driven by aluminum can prices, and increased distribution expenses, including freight subsidies. We are now gearing up for export recovery as conditions ease. For the peer business, consolidated operating income was down 11% to 14.4 billion and net income declined 12% to 11.4 billion. EBITDA was 19 billion, 7% lower, higher container amortization and the distribution costs from the conflict added to the decline. Next slide, please. Turning now to the Spirits business, Spirits revenue was steady at 32.3 billion as higher pricing offset softer volumes. Volume eased 5% reflecting more careful consumer spending against the elevated inflation and slower economic growth, which I described earlier. Our core brands held up well, supported by campaigns and in-store promotions that reinforced value and affordability. We also widened the portfolio and route to market, launching Vamos Tequila Gold in May and adding dealer routes, pool sailors, and warehouses, and exports grew as we reached overseas Filipinos in more countries. Profitability improved despite lower volumes. Cross-profit rose 5% to $8.9 billion, helped by lower molasses and alcohol costs, better distillery efficiency, and use of more secondhand bottles. Operating income rose 8% to $5.4 billion. EBITDA was up 3% to 5.8 billion and margin improved from 17 to 18%. Net income increased 3% to 4.4 billion. That concludes the update for San Miguel Food and Beverage. I would now like to invite Eric to present the updates on Petron.

Thank you, Tina. For the first half of 2026, Petron Corporation recorded a net income of 3.8 billion pesos, 27% lower than the same period last year, due to a challenging external environment mainly attributed to the continued impact of the geopolitical tensions in the Middle East. The war has pushed freight costs, insurance, and import premiums to record highs. Excluding trading activities, total volumes in the Philippines and Malaysia reached 52.9 million barrels during the period, down from 56.2 million barrels last year. This is due to a number of factors, namely lower refining output as the jetty port in the Port Cookson Refinery in Malaysia is still being constructed, a scheduled first quarter maintenance at the Bataan Refinery, and lastly, volumes strategically being funneled to more profitable business segments. This is most evident in the continued growth of the vital and profitable retail business in the Philippines, which continued its notable growth momentum, recording an outstanding 15% year-on-year growth as more motorists chose Petron due to competitive pricing and fuel availability and reliability. Revenues rose 57% to 605.9 billion on the back of higher prices and overall sales volume improvement. However, higher costs of products sold, both from production and importation, together with higher operating expenses, weighed on margins. Consequently, operating income fell to 12.6 billion pesos, while EBITDA likewise increased to 19.8 billion pesos. That concludes the update on Petrol's results. I will now hand the presentation back to Cheska to discuss the performance of the group's remaining business.

Thank you, Eric. Let me now continue with the performance of the remaining businesses in the group. The packaging group's first half revenues remain steady at 19.3 billion, a strong gains from international operations offset lower demand in its core domestic businesses. particularly in the glass segment due to the slowdown in market consumption of its food and beverage customers. Despite cost-saving initiatives, lower demand and significantly higher fuel and power rates weighed on the business and more than offset these measures. As a result, operating income declined to 1.2 billion pesos while EBITDA fell to 2.5 billion pesos. Moving on to our power business, Revenues rose 27% year-on-year to $101.9 billion, driven by the recovery of tariffs representing pass-through power supply costs incurred in 2022, higher realization rates, and the contributions of the five best facilities commissioned in 2025 and fully operational in 2026, with a combined capacity of 140 megawatt hours. Revenue growth was further supported by new power supply agreements supplied by the Mariveles, Masinloc, and San Roque power plants with a combined contracted capacity of 1,140 megawatts. These PSAs took effect in June, August, and September 2025, respectively. Excluding the impact of the recovery of incremental power supply costs, revenue growth will still be at 7%. Operating income surged 90% to 42 billion pesos, with operating margins expanding significantly to 41% from 28% on account of previously unrecognized revenues, better contract terms, and increased contributions from best facilities. Meanwhile, EBITDA grew 55% year-on-year to 53.4 billion pesos, while net income declined to 32.2 billion, mainly due to the 21.9 billion investment revaluation gain from the Chromite transaction recognized last year. Excluding the effects of the aforesaid revaluation gains and the 2022 incremental cost recovery, net income would have still increased by 52%. Turning now to our infrastructure business, SMC Infrastructure's operating toll roads in the first half of 2026 reflected the partial impact of higher fuel prices that started in March amid the ongoing Middle East conflict. As a result, traffic volume slightly dropped by 1% to 1.07 million. Despite softer traffic, revenues increased by 3% to 20%. Thank you for watching. Moving on to our cement business, the cement business posted first half consolidated revenues of 18.2 billion, up 2% year-on-year, driven by higher sales volume. The volume growth more than offset the decline in average selling prices, which remained under pressure by intense market competition. The increase in volume was supported by solid performance across all three cement businesses, with the group gaining market share as imported traded cement volumes remained low following the implementation of anti-dumping duties in February, even as overall market demand weakened. Despite higher revenues, operating income declined by 9% to 3.2 billion, while net income fell by 18% to 1.6 billion pesos. This is primarily due to elevated raw material and power costs resulting from heightened geopolitical tensions in the Middle East. Now moving on to a snippet of our balance sheet. Consolidated total assets as of June 30, 2026 for the consolidated SMC stood at 3.0 trillion pesos, while total liabilities amounted to 2.2 trillion. Stockholders' equity ended at 794 billion pesos. Consolidated cash balance stood at 454 billion, while interest-bearing debt totaled to 1.8 trillion. Now, I would like to invite Ms. Statish to provide an update on our sustainability initiatives and key developments during the period.

Thank you, Chesa. Good afternoon, everyone. I'd like to begin with a brief overview of our sustainability highlights before discussing some of our key initiatives and accomplishments in detail. We published our 2025 sustainability report in June. providing investors with a comprehensive view of how sustainability is embedded across the group. Rather than highlighting a single initiative, the report demonstrates how sustainability supports long-term value creation across all forms of capital. Financially, we generated over 1.5 trillion pesos in economic value. Operationally, we continue to provide critical infrastructure Through our power generation assets and expressway network. Socially, our employee volunteers and community programs continue to expand our reach, while environmentally, our reforestation program, water conservation, biodiversity, and river rehabilitation programs continue to deliver measurable outcomes. Equally importantly, Our governance foundation remains strong with 100% of directors and officers completing governance training and 282 internationally recognized certifications supporting discipline operations across the group. Next slide. One initiative that continues to distinguish San Miguel is our Better Rivers program. As of the end of June, we have drenched approximately 9.2 million cubic meters of accumulated silt and debris, restoring nearly 200 kilometers of waterways across Luzon, and more recently, expanding our efforts into Cebu through the Butuanan River. Beyond its environmental benefits, the program helps improve river capacity, reduce flood risk, restore water flow, and strengthen climate resilience in the communities we serve. It reflects our belief that sustainability investments should generate tangible benefits for society while supporting the long-term resilience of the areas where we operate. San Miguel continues to receive recognitions for its sustainability initiatives. In April, SMC was again recognized at the Cambridge IFA Global Good Governance Awards, receiving the 3G Excellence in Sustainable Development Award and the 3G Community Development and Philanthropy Award. In June, Eagle Cement Corporation, and SMC subsidiary was likewise honored at the Asia Responsible Enterprise Awards, earning accolades in the Green Leadership category for its waste heat recovery system and the Social Empowerment category for its Wealth on Waste program. While awards are not an objective in themselves, they provide independent validation that our environmental and community initiatives are producing results that are recognized internationally. While much of our sustainability work focuses on large-scale infrastructure and industrial operations, embedding sustainability into everyday employee behavior remains equally important. The relaunch of the Tamang Tatum program reinforces a culture of resource efficiency and accountability throughout the organization, complementing our broader operational initiatives. Following the completion of our climate risk assessment, net zero roadmap and people upliftment framework in 2025, our focus in 2026 has shifted toward implementation. On climate, we are translating facility-level assessments into resilient plans, integrating climate considerations into enterprise risk management, and incorporating ESG risk evaluation Thank you very much. so that we can better demonstrate progress toward our commitment to uplift 15 million people by 2030. We also continue strengthening our sustainability reporting and governance processes in preparation for evolving IFRS sustainability disclosure standards, enhancing the quality, consistency, and decision usefulness of information provided to investors. Overall, Our sustainability agenda continues to mature from establishing foundations for integrating sustainability into risk management, capital allocation, and operational decision-making across the group. That concludes our sustainability update. I hand the presentation back to Jessica.

Thank you, Mr. Tavish. Let me now highlight key developments across our businesses during the period and share the group's outlook for the remainder of the year. SMC successfully completed its 30 billion pesos of preferred shares follow-on offering, with strong demand from institutional and retail investors, driving a 3.3 times oversubscription despite the volatile and challenging market environment. The successful issuance reflects continued market confidence in San Miguel's long-term growth plans and supports the group's ongoing capital requirements, including investments in infrastructure and other strategic projects that contribute to national development. For SMFB, capacity expansion projects are currently ongoing. The dispirited business will have a new production line in Cabuyao by November, and its mechanized bottle washing facility was commissioned in March. For beer, its Lucanin malt terminal is expected to improve inventory management later this year. For the food group, additional capacities for butter, margarine, and salad aids were installed while a new cold storage facility for pure foods commenced operations already. Scheduled for completion within the year are the second Cebu feed mill, a new cheese processing line, and additional grain silos in Davao. Construction is ongoing on two more feed mills, a pet food plant, nuggets capacity expansion, and two grains terminal. For power, GP continues to advance its energy transition strategy through the development of its hydro and solar projects under the JIA program. Development and construction activities across the portfolio continue to advance in line with the planned project timelines. Meanwhile, for the Masinloc Power Plant project, Unit 4 is currently undergoing testing and commissioning activities while Unit 5 remains under construction. Our infrastructure business continues to make significant progress across its several key projects. Construction is progressing across priority toll road projects, particularly SLEX-DR4, which has reached approximately 50% completion. Significant progress continues in the widening and expansion of STAR, Eslex, NIA-X, and Skywing, MRT-7 continues to advance steadily with overall completion rate at 84.42% where civil works and site development activities are ongoing, as well as on the Manila International Airport, which has maintained its overall progress and continues to advance towards completion. For NAIA, actual passenger volume reached 26.9 million in the first half, reflecting 1% growth from the same period last year. Enhancing the passenger journey remains a key priority of the airport, with initiatives such as Terminal 1 airside F&B concession area, Terminal 2 mega toilet, Terminal 3 retail-level premium food and beverage, and shared business class lounge, as well as improvement of escalators, elevators, and moving walkways across all terminals. The airport continues to invest in capacity improvements, including construction of bus gates and ground transportation center, extension of immigration area and switching of security and immigration screening area. Furthermore, NAEA made several back-end investments to support long-term operational reliability, such as construction of new data center, implementation of queue management system, an SAP HANA plant maintenance module, and launch of the flight info display system into official airport website for real-time flight updates. Overall, the first half underscored the resilience of SMC's business model. The strength of our diversified portfolio combined with our scale, market leadership, and disciplined execution enabled us to deliver stable performance despite a more challenging operational difficulty. and environment marked by moderate economic growth, persistent inflationary pressures and evolving market dynamics. As we look to the second half of 2026, we remain cautiously optimistic. While economic and market conditions are expected to remain dynamic, SMC is well positioned to benefit from long-term growth drivers across its businesses, including anticipated increase in public Thank you for joining us today. So this concludes our presentation and thank you for your time and attention. So we'll now open the floor in the chat box for questions.

Thank you, Ms. Chaska. We now open the floor for your questions and we will be reading questions sent via the Q&A feature.

Go ahead, Jericho, we can ask questions now.

So for our first question, what is POWER's CAPEX guidance for 2026 and 2027, and how much is allotted for BESS and mass in locates 4 and 5?

I'll take questions for power. I'll take opportunity to answer CAPEX guidance already for the full group. Right now, I think we were... Ramon Bantigue, Ramon Bantigue, Ramon Bantigue, Ramon Bantigue, Ramon Bantigue, Ramon Bantigue, Ramon Bantigue, Bess already, I think Bess will only take up as much as single digits CapEx only for power, given that most of the expenses already were early on spent prior to 2026. Meanwhile, Masinlok 4 and 5 can be as much as, let me just double check. Close to about 30 billion of that total 100 billion for power.

Thank you, Ms. Chestra. Now for the second question we have, what is management's outlook for food, beers, and spirits segment for the rest of the year? What is the company's view on the proposed increase on excise tax on distilled spirits and sweetened beverages? Are there any plans to increase prices for food and or beer segment to preserve margins?

Thank you for that question. So for the second half of the year, we usually anticipate an increase or an improvement in the market demand, right? Especially with the OND or October, November, December, the berm months, that's usually the time where people start spending more for celebrations and family gatherings and fiestas. However, I do have to highlight that there remains to be a... Thank you for joining us. Even for June at the start of school season for many students, we saw a decline in the alcohol businesses. But of course, this was offset by our food segment. Now for the excise tax, there's a lot of talk on that proposed by some of our regulators, but we don't foresee there to be any impact or any effect this year or even till next year. So it's a long way away before this gets finalized. However, you know, excise tax remains to be a huge contributor to costs Thank you very much. Say the likes of Smirnoff Mule or Tanduay Ice, those kinds of categories. So we do think it's unfair that this discussion is being debated once again. Next, for the pricing, I do think that it is going to be very challenging and unwise for us to be increasing our selling prices for the alcohol or the beer and spirit segments. We do understand that margins are very important. And as you have seen from our figures, we have tried our best to contain increases in fixed costs, expenses, and cost of goods sold. In terms of fogs, it's a mix versus last year. Some materials have driven up, some have improved way better than budgeted. So we will try our best to maintain margins. However, again, selling prices, lifting that, that is not a decision we will be taking. It's also good for maintaining our market share.

Thank you, Ms. Monica. Now for our next question. Are there any updates on the planned merger of SMC and Metro Pacific Tollways?

I'll take that question. For the discussions between SMC, right, through San Miguel Holdings Corp, which is our holding company for our infrastructure group and Metro Pacific Tallways, relating to this contemplated merger of their respective Tallway business, it's, we believe, an appropriate disclosure Thank you, Ms. Jessica. We have another question for SMFB.

Can you provide some more details on volumes performance over the last two quarters? Why we experienced an accelerated volume decline? Should we expect a slowdown in price increases to help volumes? And could you also share the cases numbers for the quarter? Thank you.

Okay, I believe the question is from a Hinebra investor. For volume performance, the company was actually affected by the challenges that the country faced in the first half of the year. High inflation, slow economic growth, and weak consumer sentiment dampened the purchasing power for poor consumers. Nonetheless, we responded proactively through relevant campaigns, expanded distribution reach, and improved supply chain efficiencies to help mitigate headwinds. However, as the economic pressures persisted, the negative impact on demand became more pronounced, resulting in a 5% decline in our first semester sales volume from last year. First quarter volumes were 12.3 million cases, and the second quarter was 23.5 million cases. Thank you. Thank you, Mistina.

We have a question for Petron. How much inventory holding losses or gains did PCOR record in 2Q26 and how does this compare to 2Q25? Additionally, I understand that the situation is very uncertain still, but would you have an outlook how the remainder of the year might play out for PCOR, particularly with regards to sales growth and margins?

Thanks for the question. So for the first semester of the year, for the first six months, inventory gains amounts to around 3 billion pesos. And this is compared to last year for the same period where we had actually inventory losses of around roughly 2.9 billion pesos. Now in terms of outlook for the rest of the year, I'd say that we're cautiously optimistic. There are things that are Going to our paper, if you look at the first semester figures, and if I may point out some of them in terms of volumes I mentioned earlier that we actually continue to grow at a very healthy pace in terms of our retail sales volume, continuously growing year-on-year for the past, I think, four or five years already by double digits. So we were able to continue and capitalize on that momentum, growing by around 15% year-on-year in the first semester for retail sales in the Philippines. And we registered, actually, double-digit growth despite the high prices across We expect volumes to improve especially Thank you very much. Now, in terms of outlook, in terms of profitability for the rest of the year, I think a lot of it would depend on external factors, market factors, namely, of course, margins being pressured or compressed due to the landed costs, right? I've been explaining it to a lot of the analysts that I've been discussing with for the past five months, that landed costs have significantly increased. When we say landed cost, that includes freight costs, your crude premiums, and also your insurance. To illustrate, the costs that we have in terms of crude premium basically peaked at around $18, if I remember right, in April and May. And if you average it out for the past five, six months, The crude premium when you buy raw materials is roughly around $8 per barrel. This is compared to pre-war, where your crude premium would just probably be around $1 per barrel. Freight has likewise significantly increased. It peaked around close to $10 per barrel, I believe, in March when the war unraveled. and right now, I believe, in August, it's close to around $8 per barrel with the review uncertainties. So all of these increase in terms of costs will, of course, continue to, as I mentioned, pressure margins. Now, if there's one thing that is silver lining, again, in terms of market, is the very healthy refining margins that... is currently prevailing, right? If you look at the gross refinery margins on a per barrel basis, it has increased here and here on a spot basis around 200%. So that's something that we're trying to capitalize on by running our refinery higher, So we're running our refinery close to capacity, roughly close to around 90% as we speak. And of course, making sure that whatever we produce, we sell to the most profitable segments strategically. So put all of these things together, we hope that it would more or less be a continuation of the first half going into the second semester.

Thank you, Sir Eric. For the next question is for the group. Can you share core net income in 2Q26 and how this compares with 1Q26?

Okay, yeah, I think our 2026 results might be very interesting on this level beside our Forex exposure because, again, of some one-off gains. So let me describe that in detail. So on a reported net income basis, we are printing 37.7 billion pesos. That is... Down 44% from 67 billion pesos from last year's first half. Now, there are one of items, mainly one is the gain of fair valuation, which we had last year. So stripping that out. Two, we also had a Forex gain, again, that's non-core in nature from last year against a Forex loss this year. So our Forex gain last year is 8.1 billion versus our Forex loss this year of 16.5 billion pesos. So stripping those one of or I would say non-core items, we will be at 54.2 billion pesos this year versus last year's 37 billion pesos. So that is up 48%. So that was what was noted in the presentation. Hope that clarifies. Yes.

Thank you, Ms. Jessica. For our next question, how much cash is available at the parent company level?

Okay, I'll take that as well. Yes, for as of first half or as of June 2026, net debt for SMC parent is at 772.151 billion pesos. That is net of the cash at the parent level of 89.82 billion pesos. Hope that is clear for the net debt of SMC at parent level and cash as well.

Thank you Ms. Jessica. Next question is for Power. What is the expected revenue and EBITDA of the company's planned 4.2 GW hydropower capacity and 2.2 GW solar capacity?

EBITDA, we don't really provide guidance, but I would say at minimum, we would be way above 50 billion pesos coming from 50, 60 billion pesos coming from EBITDA. Again, on a mature full capacity of these JEO projects, JEO 3 and 4, solar and hydro, we should be hitting EBITDA of north of 50, 60 billion pesos on an annual basis, again, on a full capacity run.

Thank you, Ms. Jessica. Now, next question. Could you describe SMC's interest for the Semi-Area Block Coal Operating Contract and provide updates regarding the bidding?

Well, to be honest, there's not much update. We are interested to participate if that's what people are looking at. We are interested and when DOE comes up with the terms of reference, of course, but again, when this comes out, we will evaluate if we will continue with our bid participation. Right now, we will just show our interest to participate and and see what the bid terms would come out to.

Thank you, Ms. Jessica. Next question is for GSMI. Can management elaborate factors driving the gross profit margin improvement in GSMI year over year?

So for GSMI input costs and efficiency, there were some improvements in both. So cost of sales actually fell 1% even on higher excise tax because lower Raw materials costs such as molasses offset it, and gross profit rose 5%. So behind that, there were also better distillery yields and greater use of secondhand bottles alongside pricing or price increase.

Thank you, Ms. Tina. Now, next question. Is the $500 million RPCs raised by SGLPC in Q1 issued to a third party or related party?

This is for Global Power. Yes, it is a third-party private placement.

Thank you, Ms. Chaska. We have another question for Petron. Could you please provide an update on the current crude oil supply situation? In particular, have any cargos lifted from Yanbu Port been affected by the recent floods? Thank you for that question. I guess coming from

In March and April, there was a lot of uncertainty in terms of supply. Relatively speaking, in the past five to six months, supply lines have been established despite the uncertainty in the Middle East. Supply from the Middle East, categorically speaking, actually continued to flow, of course, to a lesser extent. It continues to come out of that region, of course, just at certain elevated prices. Hence, on our part, we have diversified our sourcing supply. So aside from the Middle East, which we still continue to get from, we do get more production from Asian producers. We do get also from North America, Latin America, and also West African crude. And that's particularly because of the capability of the refinery with the upgrade that we did a few years back, where the refinery now actually processed the whole spectrum of crude, right? So from light, we have a suit to start. So that basically gives us an advantage. In terms of supply sourcing. Now, in terms of percentage, I'd say a good chunk or supply still comes from the Middle East, probably around roughly around 50 to 60%. So the Middle East continues to be resilient, right? Yes, there are threats currently in the Bab el-Mandeh Strait, where the Houthis have some sort of pull. But I'd say, relatively speaking, based on the last reports that we've been getting from analysts, the shipping traffic, relatively speaking, is close to normal. So there are threats. But nevertheless, a lot of the ships to avoid that would go the other way. So they go north. So there are other alternative routes. It's a little longer because they have to go through the Suez Canal. and a lot of the Middle Eastern crew is particularly from the Southeast being actually noted in Egypt in the sea carrier support. So a lot have been allocated there and other food ports within the area. So they've been resilient. So they're still getting products out also through the north, through Suez Canal and the Mediterranean Sea and around the Cape of Goodwill. But of course, that would, again, be longer and entail certain costs, incremental costs. So strictly speaking, there is supply. It's just that it comes at a certain price.

Thank you, Sir Eric. Our next question, based on the news, the government is looking to fast track the Sangley Airport project in Cavite. How will this affect SMC's airport operations?

I'll take that infrastructure question. While we're not really privy to the feasibility of Sangley, it will be technically and financially challenging given the IA and The new Manila International Airport are both already in their advanced stages. Sangli may affect Naia since it shares the same airspace with Naia. But under the CA of Naia, Naia's operation should be prioritized and surrounding airports cannot hamper or limit the capacity of Naia.

Alright everyone, that concludes our Q&A. Thank you to everyone for your questions and to our panelists for providing detailed and informative answers to our queries. For those who have further questions, you may address it to us via email at smcinvestorrelations at sanmiguel.com.ph. Thank you and good day.

Thank you. Thank you all. Thank you.