Q2 2026 Aboitiz Equity Ventures Inc Earnings Call
Speaker #1: Good afternoon. Welcome to Aboitiz Equity Ventures' earnings results briefing for the first half of 2026. My name is Jackie D'Hesus, and I will be the moderator for today's call.
Speaker #1: Some reminders before we begin: we have put microphones on mute to minimize background noise during the presentation. Second, questions have been requested from the audience in advance, which we will go through during the Q&A portion.
Speaker #1: In case there are more questions from the floor, please feel free to click on the raise-hand button or submit questions via the Q&A box.
Speaker #1: Those not taken up during the Q&A session will be answered via email. And lastly, this briefing will be recorded by joining this session; you consent to your name, voice, image, and chat comments being recorded for use and dissemination.
Speaker #1: For today's call, the CFO of Aboitiz Foods, Ho Beng Ng, will kick us off. He will be followed by Rafael Fernandez de Meza, president and CEO of Aboitiz Real Estate Group.
Speaker #1: After him, Froc Choque, vice president and head of investments of Aboitiz Infra Capital, will update us with their performance. And then finally, John Rubio, the chief strategy officer of Aboitiz Equity Ventures, will close us out with the group's consolidated financial performance.
Speaker #1: After the presentations, we will open the floor for Q&A. For questions on the earnings results of Union Bank and Aboitiz Power, which were already discussed in separate sessions, we will be addressing those offline after this briefing.
Speaker #1: So with that, let me turn you over to Po Beng.
Speaker #2: Hi, good afternoon, everyone. And thank you for joining this session. Today we are presenting Aboitiz Food operating and financial results for the first half of 2026.
Speaker #2: Following the momentum from our first quarter, first half result, demonstrates the underlying strength of our core agri-business, fra, and trading segment, which continue to anchor group performance while we navigate ongoing operational headwinds in our downstream operations.
Speaker #2: To summarize, our high-level results: Aboitiz Food closed the first half of 2026 with a net income after tax of PHP 2.3 billion, a 8% increase year-on-year.
Speaker #2: Consolidated EBITDA reached PHP 4.7 billion, rising 9% over the same period last year, while margin improved within our core business unit. The overall EBITDA margin moderated by 84 basis points, reflecting the pricing pressures and operational challenges we faced in the farm and meat segment.
Speaker #2: Our top-line expansion was supported by our primary growth driver, which provided the stability to adjust this margin compression. I will now walk you through the detailed segment performance.
Speaker #2: Turning to our top line, consolidated revenue for the first half reached PHP 51.6 billion, up 19% year-on-year. This growth was underpinned by a 30% overall expansion in group volume, driven primarily by our regional agri-business and trading segment.
Speaker #2: The regional agri-business remained the chief revenue driver, with sales expanding 22% year-on-year to PHP 42 billion. This volume growth was broad-based, fueled by steady livestock feed demand alongside expanded contribution from our aqua pet food and specialty nutrition units.
Speaker #2: Our food and nutrition segment, however, saw a 3% revenue decline year-on-year, reflecting performance divergence across its units. Trading delivered a strong gain with volume expansion to 47% year-on-year on higher feed weight and soya bean milk offtake, supplemented by corn integration.
Speaker #2: Fra revenue eased by 2% year-on-year as we deployed strategic pricing to protect our market share amidst aggressive competition. Meats revenue declined 35% due to a 38% volume reduction, resulting from our deliberated decision to rationalize China exceeding traditional trade to focus on core retail concession doors.
Speaker #2: Farm revenue fell by 29% year-on-year, primarily constrained by depressed livestock selling price and lower production productivity. Moving to operating profitability, consolidated first half EBITDA rose 9% year-on-year to PHP 4.7 billion.
Speaker #2: This result reflects solid operational execution in our core unit, which successfully adopted the ongoing drag from our downstream operations. Regional agri-business delivered a 31% year-on-year increase in EBITDA, fueled by sustained livestock performance in Philippines, Vietnam, and Malaysia.
Speaker #2: Alongside margin recovery in aqua pet food and specialty nutrition. Trading recorded a 3.6-fold increase in EBITDA, benefiting from volume expansion improved margin and warehousing.
Speaker #2: That offset freight cost pressure. Fra EBITDA grew 13% year-on-year, driven by stronger gross profit from. Product margin. This gain was strong, with it faced several contractions in our downstream segments.
Speaker #2: Farm EBITDA fell by 135% year-on-year, pressured by weaker selling price amid a competitive supply environment and elevated production costs. Meat posed a loss of PHP 103 million; this reflects the impact of strategic China rationalization, specifically our shift away from traditional trade as well as lower average selling price driven by soft demand and record-level port imports.
Speaker #2: Building on the EBITDA performance, we just discussed, our bottom-line result for the first half reflects both operationally growth and treasury management. We closed the first half with a net income after tax of PHP 2.3 billion, an 8% increase year-on-year.
Speaker #2: This was supported by a 2% reduction in interest expenses compared to the previous years, which reflects working capital management efforts across our regional business units.
Speaker #2: In summary, the growth result for the first half reflects the combination of operational adjustment in our downstream segment and the performance of our core operation contributing to the financial result for this period.
Speaker #2: That concludes our update on Aboitiz Food for the first half of 2026. Thank you for your time.
Speaker #1: Thank you so much, Po Beng. And now, to present the real estate group, I would like to call on Rafa.
Speaker #3: Good afternoon, everyone. Today I'll walk you through the first half of 2026 results for the real estate group. For the first half of 2026, we recorded consolidated revenue of approximately 2 billion pesos, EBITDA of 460 million pesos, and a net loss of 37 million pesos.
Speaker #3: Compared with a 4 million net loss in the same period last year. The results reflect two different dynamics. Residential returned to profitability with net income of 102 million pesos compared with a 52 million loss last year.
Speaker #3: EBITDA increased 26% to 203 million. This reflects the work undertaken to improve buyer quality, reduce forfeitures, and prioritize ready-for-occupancy inventory. Economic estates EBITDA declined 27% to 257 million, and recorded a net loss of 140 million.
Speaker #3: This is driven mainly by the timing of milestones-based revenue recognition. Industrial reservations activity remained strong, while leasing continued to grow. Economic estates leasing revenue increased 13%, supported by higher commercial occupancy, and scheduled rent escalations across industrial assets.
Speaker #3: Consolidated revenue declined 11% to 1.98 billion pesos. Residential revenue increased 16% to approximately 1.05 billion, supported by ready-for-occupancy sales, improved account quality, and continued recognition from prior year bookings.
Speaker #3: Economic estates revenue declined from 1.33 billion to 933 million. Lot sales recognition was lower, reflecting both the timing of current transactions and the higher first half 2025-based that included recognition from prior year sales across Lima Industrial Base Hub at Lima, and Tari Industrial.
Speaker #3: This was partly offset by leasing revenue, which increased from 706 million to 799 million. The growth in recurring income remains important. It provides greater earnings stability while land transactions progress through development, collection, documentation, and recognition milestones.
Speaker #3: Reservations sales provide a clearer view of the underlying demand. Economic estates reservations sales increased 70% to 2.26 billion. Industrial reservations nearly doubled, increasing 97% to 2.15 billion.
Speaker #3: This reflects the continued demand for manufacturers seeking reliable infrastructure operating support and long-term expansion capacity. Commercial lot reservations at Lee Base Hub at Lima declined 54% to 110 million.
Speaker #3: Interest remains, but softer local investor confidence has extended decision timelines and affected conversions. Residential reservations sales declined to 718 million from 1.89 billion. This reflects both the ongoing sales organizational reset and a deliberate shift toward stricter buyer qualification and ready-for-occupancy inventory.
Speaker #3: We accepted lower near-term volume to improve account quality, reduce forfeiture risk, and support stronger cash and revenue conversion. Monthly sales momentum has been improving from a low base; our second half priority is to accelerate.
Speaker #3: Responsibly while preserving these gains. At the earnings level, the same two dynamics are evident. Consolidated EBITDA declined 10% to 460 million. Residential EBITDA increased 26% to 203 million, while net income improved to 102 million from a 52 million loss last year.
Speaker #3: This reflects better account quality, lower forfeitures, and a stronger operating discipline. Economic estates EBITDA declined 27% to 257 million, while net income moved from 48 million last year to a loss of 140 million.
Speaker #3: The principal driver was the recognition timing. Industrial demand and leasing remained resilient, but several transactions had not yet met the milestones required for first half recognition.
Speaker #3: Our focus for the second half is to convert the advanced pipeline into recognized revenue, sustain the residential recovery, and maintain capital discipline. The first half results should also be viewed within the context of a longer-term strategy that has been underway for several years now.
Speaker #3: In 2020, we sharpened our focus on industry-anchored townships and accelerated the growth of economic estates. From 2013 to 2020, our footprint grew at approximately 4% annually.
Speaker #3: Since 2020, that growth has accelerated to around 12% annually. By the end of 2025, the platform had expanded to 2,070 hectares, supporting 266 locators and more than 101,000 jobs.
Speaker #3: Our model goes beyond industrial land. We bring together infrastructure, utilities, talent, regulatory support, commercial services, housing, and long-term estate management. As the ecosystem grows, each new locator and complementary development strengthens the platform and makes it increasingly difficult to replicate.
Speaker #3: Today, a Boise real estate is the Philippines' leading developer of industrial parks. Our 2070-hectare footprint is the largest privately owned industrial estate portfolio in the country.
Speaker #3: We also hold approximately 367 hectares of freehold, PESA-proclaimed land for future growth. Our operating portfolio carries green building certifications from the Philippine Green Building Council; however, our competitive advantage is not land alone.
Speaker #3: Through the wider Aboitiz Group, we can bring together power, water, construction, financial services, housing, and technology around the needs of our locators. This reduces the cost, friction, and execution risk of investing and operating in the Philippines.
Speaker #3: Lima is the clearest proof of this model. Over three decades, it has evolved from an industrial park into a broader economic ecosystem where industrial, commercial, institutional, hospitality, and residential uses reinforce one another.
Speaker #3: We are now applying that experience and developing Tari Estate in Central Luzon. At 384 hectares, Tari is the largest privately owned industrial park in the region and is strategically located within the Luzon economic corridor.
Speaker #3: It provides connectivity to Clark, Subic, Metro Manila, and the wider Central Luzon manufacturing net. Existing infrastructure, including a 250 MVA Aboitiz Power substations and a 6 million liter per day integrated water facility.
Speaker #3: Over time, the estate is also being designed to support renewable energy: electric mobility, circular resource systems, and green building certification. Tari remains an emerging estate and transaction timelines can be difficult to predict within a single year.
Speaker #3: However, the platform is progressing infrastructure is being delivered, and the first locator investments are providing visible proof of execution. The strongest validation so far of Tari is the quality of companies investing there.
Speaker #3: Coca-Cola Euro Pacific Aboitiz Philippines is developing a 42-hectare facility; its largest investment in Asia, and one of its most advanced production sites. Operations are targeted to begin in the third quarter of 2027.
Speaker #3: Ajinomoto Philippines is developing a 16-hectare facility representing approximately 9.1 billion pesos; its largest investment in the Philippines. And operations are targeted to begin in April 2028.
Speaker #3: Construction is progressing across both sites. These investments validate Tari's location, infrastructure, and long-term operating proposition. They also help attract suppliers and related industries strengthening the emerging ecosystem.
Speaker #3: Our objective to build Tari into Central Luzon's next major industrial platform, applying the lessons from Lima, while capturing the opportunities created by the Luzon economic corridor and the continued evolution of regional supply chains.
Speaker #3: So, to close our first half results reflect two distinct stories: residential return to profitability through improved buyer quality, lower forfeitures, and stronger operating discipline.
Speaker #3: Economic estates, on the other hand, continue to deliver strong industrial reservation activity and leasing growth, but earnings were affected by the timing of sales recognition.
Speaker #3: Our priorities for the second half are clear: convert the advanced pipeline, sustain the residential recovery, continue growing recurring income, and execute with discipline. Lima demonstrates the strength of our integrated model, while Tari represents the next major platform for growth.
Speaker #3: Thank you, and have a good afternoon.
Speaker #1: Thank you so much, Rafa. For Aboitiz Infra Capital, may we call on FROX? Please.
Speaker #2: Good afternoon, everyone. I will walk you through Aboitiz Infra Capital's results for the first half of 2026. This update covers AIC's various business sectors, which are airports, water, and digital infrastructure.
Speaker #2: Overall, AIC sustained its growth momentum in the first half of the year, revenue and EBITDA continued to expand, supported by strong airport operations while disciplined execution helped improve our position and strengthen the overall earnings of the portfolio.
Speaker #2: For the first half of 2026, AIC generated 4.6 billion in revenue, up 30% from 3.5 billion in the same period last year. This translated into EBITDA of 2.5 billion, a 26% year-on-year increase, driven primarily by the continued strength of our airports business, particularly Mactan, Cebu International Airport, which sustained healthy passenger traffic growth.
Speaker #2: Airports contributed 65% of beneficial EBITDA, reaffirming its position as AIC's primary earnings engine. The Guindingan International Airport and Bohol-Panglao International Airport also continued to contribute positively during the period.
Speaker #2: At the bottom line, AIC's net loss narrowed to 278 million, a significant improvement from the 336 million net loss recorded in the first half of 2025.
Speaker #2: This reflects stronger operating performance across the portfolio, although reported earnings continue to absorb non-cash amortization charges related to MCIA service concession assets. Revenue growth remained broad-based in the first half of the year, with airports continuing to anchor overall performance.
Speaker #2: Complemented by steady contributions from water and digital infrastructure. Airports revenue increased 38% year-on-year to 3.4 billion pesos, driven by sustained passenger traffic growth at MCIA.
Speaker #2: Despite the ongoing conflict in the Middle East, total passenger traffic across our airport portfolio grew 4% to 8.6 million, led by a 9% increase in MCIA traffic to 6.47 million passengers.
Speaker #2: Water revenue grew by 2% to 590 million pesos during the period, Apoagua reached a peak distribution of 303 MLD, reflecting continued operational reliability and steady demand.
Speaker #2: Unity Digital Infrastructure delivered another strong performance with revenue increasing 25% to 660 million pesos, as of June 2026. Unity Digital Infrastructure had approximately 3,070 total tenancies, 513 colocations, and a tower tenancy ratio of 1.30x.
Speaker #2: Reflecting continued portfolio expansion and improved asset utilization. As mentioned, AIC generated 2.5 billion pesos in EBITDA for the first half of 2026, up from 2 billion pesos in the same period last year.
Speaker #2: EBITDA growth tracked our top-line momentum, while maintaining a healthy EBITDA margin of 54%. This reflects sustained operating performance, supported by continued cost discipline and efficiency initiatives across the portfolio.
Speaker #2: Airport EBITDA increased to 1.6 billion pesos, driven by continued growth in passenger traffic at MCIA, water EBITDA rose to 443 million, benefiting from effective cost controls, while Unity Digital EBITDA reached 503 million reflecting continued expansion of its tower portfolio and tenancy base.
Speaker #2: At the corporate level, expenses were reduced from 148 million to 78 million, demonstrating the impact of our ongoing cost optimization efforts. The improvement in our operating performance continued to translate into stronger earnings in the first half of 2026.
Speaker #2: AIC's net loss narrowed to 278 million, a 48% improvement from the 536 million net loss recorded in the same period last year. This reflects stronger operating performance across our portfolio, although, as mentioned, reported earnings continued to reflect non-cash amortization charges associated with MCIA service concession asset.
Speaker #2: The improvement was led by airports, which posted 51 million in net income, compared with a 144 million net loss in the first half of 2025.
Speaker #2: This reflects the continued strength of MCIA's operations and sustained passenger traffic growth. Water and digital infrastructure also reduced their losses year-on-year, corporate expenses increased to 183 million, primarily due to 55 million non-cash write-off related to project development costs.
Speaker #2: Include excluding this one-off underlying corporate costs remained well-managed, reflecting our continued focus on cost discipline. Overall, our first half results demonstrate a strong revenue growth and disciplined execution, and steadily improving the earnings profile of the business.
Speaker #2: To close, the first half of 2026 reflects the resilience of AIC's portfolio and the progress we continue to make across our businesses as we move through 2026.
Speaker #2: Airports remained our primary growth driver, supported by sustained passenger traffic at MCIA. At the same time, water continued to provide stable operating performance while Unity Digital maintained its expansion through higher tenancies and improved asset utilization.
Speaker #2: Looking ahead, our priorities remain unchanged. We will continue to strengthen the performance of each business, maintain cost discipline, and improve earnings as we build a more diversified and resilient infrastructure portfolio.
Speaker #2: Thank you, and good afternoon.
Speaker #1: Thank you so much, Folks. And finally, for Aboitis Equity Ventures, can we call on John? Discuss the first half results.
Speaker #3: Thanks, Jackie. Good afternoon, everyone. You've heard from our subsidiaries on their respective performances in the first half of 2026. So what I wanted to do is bring these together to provide an overview of the group's total results.
Speaker #3: AEV delivered another strong quarter in Q2. With that beneficial EBITDA is up 19% year-on-year and up 9% Q1, Q2, which brings us to 19.9 billion for the quarter.
Speaker #3: If I take that with the strong performance in Q1, the total first half beneficial EBITDA is at 37.9 billion. This was a 25% increase versus the same period last year.
Speaker #3: So when you look at it, group performance driven by strong year-on-year improvements across most of our strategic business units that you've heard this afternoon, which more than offset weaker results from cement and real estate.
Speaker #3: I won't go through the specific numbers in the table, but I just wanted to call out a few, I'll call it top-line Aboitis Power, for example, remained the group's largest earnings contributor, which roughly represents about 60% of our total beneficial EBITDA.
Speaker #3: AP's strong performance was supported by four main areas. The first was higher contracted capacity, second was favorable energy market prices, third was additional renewable energy capacity that came online, and lastly was contributions from Chromite Gas and CBK Hydroelectric Complex.
Speaker #3: If we look at the bank, UnionBank more than doubled its beneficial contribution. This was driven by sustained loan growth across institutional credit card and our salary loan segments.
Speaker #3: That, together with our lower funding costs and continued expansion in net interest margins. Lastly, what you heard from Pobank, our food and beverage business continued to deliver solid growth.
Speaker #3: Beneficial EBITDA, as we mentioned, increased 7% year-on-year driven by strong volumes and margin expansion in Aboitis Foods' flour, regional livestock feed, and our trading business.
Speaker #3: And secondly, this is also from higher sales volume and sustained market leadership of Coca-Cola Philippines. Speaking of Coke, next slide, please. So Coca-Cola, Euro Pacific Aboitis Philippines, or what we call CCEAP, delivered another strong set of results for the first half of 2026.
Speaker #3: Revenue grew 11% year-on-year, which was driven primarily by 8% gross in sales volumes, which is very exciting because that was despite the high inflation environment.
Speaker #3: Volume growth was driven by a higher number of selling days, but largely due to the continued strong consumer demand across the portfolio. Coca-Cola Original remained resilient, while Coca-Cola Zero Sugar sustained double-digit volume growth.
Speaker #3: Some new product launches, Sprite Zero and Royal posted healthy gains from successful marketing campaigns, and the launch of the new Grape and Lychee variants hope you all have tasted that.
Speaker #3: They're really good. Despite softer consumer spending, supply chain risks, and persistent inflationary pressures, the environmental context allowed our businesses in the Philippines went through in the first half of the year.
Speaker #3: At CCEAP, disciplined cost and risk management enabled us to deliver strong year-on-year growth in volume, revenue, and operating profit. Lastly, looking ahead and Rafa mentioned this, CCEAP's new production facility in the Philippines, which is being built in the Philippines' primary economic estate, it remains on track to commence operations in 2027.
Speaker #3: This will further strengthen our manufacturing capacity, which will support our future growth. There. 20 first half 2026, Mia. You look at our strong EBITDA growth, that translated directly to consolidated net income after tax, so NIAT of Philippine 13.6 billion.
Speaker #3: This was 65% higher compared to the same period last year. Again, we highlighted some of the SBUs earlier, the strong performance was driven by Aboitis Power, which contributed $10 billion in NIAT, up 44% year-on-year.
Speaker #3: UnionBank, 3.4 billion in NIAT, which is more than double last year's level. Aboitis Foods and Coca-Cola, which together contributed Philippine 4 billion, up 10% year-on-year.
Speaker #3: Lastly, let's go to the balance sheet. When you look at our balance sheet and capital position, this remains very healthy as of the end of June 2026.
Speaker #3: You look at our consolidated cash, it stood at $86.6B, which is broadly stable to the level it was at the end of 2025 at $87.8B.
Speaker #3: If you look at our gross interest-bearing debt, this actually declined to $484.8 billion, versus $493.7 billion at the year-end of 2025. This was driven by partial repayment of the bridge financing for Aboitis Power's acquisition of Chromite.
Speaker #3: Because of that, our net debt-to-equity ratio improved from 0.99x to 0.95x. This actually represents our strong commitment at the group on balance sheet discipline and financial flexibility.
Speaker #3: So with that, I just wanted to wrap up with some quick macro thoughts as we look ahead to the second half of 2026. Macro environment, again, like everywhere else, remains tough, but we with solid momentum will remain disciplined in our capital allocation and strong execution.
Speaker #3: We continue to expect improved performance versus 2025 because this is supported by resilient earnings across our portfolio. Even as we navigate what I mentioned is an uncertain macroeconomic and geopolitical environment.
Speaker #3: The end, our priorities remain clear. We want to focus on three things. One, is to always continue enhancing operational excellence across our businesses. Number two, as mentioned and as seen, we will further strengthen our balance sheet.
Speaker #3: Lastly, is this balance sheet flexibility will give us the opportunity and the flexibility to invest prudently and opportunistically in things and opportunities that will generate sustainable long-term value for our shareholders.
Speaker #3: Thank you for your attention, and happy to take questions.
Speaker #1: Thank you so much, John. So we now open the floor for questions. As mentioned earlier, we will start off with the questions we received in advance, but to the participants in this call, if you have any questions, you may also click on the raise hand button or submit your questions via the Q&A box on the webinar controls.
Speaker #1: So we'll kick this off with questions for Pobank on Aboitis Foods. The first question reads, asks, please help us understand the weakness in the food business, especially for farms and meat.
Speaker #1: Do we see any positive mitigating factors for the second half of this year?
Speaker #2: Yes. And I think the downstream profitability is a key operational priority. And we are taking decisive structural action across both businesses. In meat, we have already rationalized our distribution footprint, but exceeding lower margin transitional trade China to focus exclusively on the core retail and supermarket accounts.
Speaker #2: This stabilized the unit profitability against market pressures. In farm, we continue to execute capacity optimization initiatives to improve farm utilization and streamline operating costs to align with market conditions.
Speaker #2: While we do not provide forward earnings guidance or quarter on quarter projections, these structural adjustments are designed to stabilize unit economics and protect consolidated earnings in the Aboitis Foods.
Speaker #2: In the meantime, our core agribusiness trading and farm segment continue to perform well, and this provides a strong earnings buffer for the group.
Speaker #1: Thank you so much. The next question for you would be on costs. So oil prices have been rising again. How much of this will impact Aboitis Foods margins?
Speaker #2: Yes. The rising oil prices primarily impact us through higher logistics and outbound freight costs, particularly within our Philippine operation. When we utilize dynamic pricing and operational adjustments to cushion the impact, full-cost pass-on is not always immediately, achievable across all competitive markets.
Speaker #2: This created a localized and temporary residue margin pressure. Across the group, we rely on supply chain optimization, route efficiency, and strict working capital discipline to manage all these exposures.
Speaker #1: Thank you. And then final question. For you. It's on hedging. So are you hedged against the weakening peso? How will the continued weakness in the Philippine peso impact the bottom line of Aboitis Foods?
Speaker #2: Yes. We maintain an active hedging framework to manage currency risk, given that roughly 65% of our group cost base carries FX exposure. Mainly through the imported grain requirement for our Philippine feeds and farm operations.
Speaker #2: We utilize forward contracts stacked up FX purchases to lock in rates and smooth out the volatility. Regarding the bottom line, while peso depreciation increased our lendered raw material price, we mitigate these exposures through dynamic product pricing and operational efficiency.
Speaker #2: While short-term timing lag can create localized margin pressures, in competitive China, our discipline treasury controls and regional diversification help insulate our overall profitability against future currency weakness.
Speaker #1: Thank you so much, Pobank. Now we move on to questions on Aboitis Real Estate. On the Aboitis Real Estate group, so these next questions are going to be for Rafa.
Speaker #1: So the first question is, are there potential headwinds or tailwinds that could be brought about by Pax Silica for Aboitis Real Estate group?
Speaker #4: Yeah. So Pax Silica, it's a potential tailwind because it raises the Philippines profile when it comes to semiconductors, advanced manufacturing, and the broader AI supply chain.
Speaker #4: It also reinforces the country's industrialization agenda and the role of economic zones in attracting investment and creating jobs. So together with the Luzon Economic Corridor, it could expand Aboitis Economic Estate's investment pipeline and accelerate enabling infrastructure, particularly at TARI, given its strategic location next to Clark.
Speaker #4: The key headwind is probably execution, these industries require reliable power, water, connectivity, talent, and regulatory certainty. And investor confidence will depend on the country's ability to deliver.
Speaker #4: But overall, we view Pax Silica positively. Lima and TARI, in particular, are well-positioned to support investors today while continuing to build the capabilities needed to capture long-term industrial growth as well.
Speaker #1: Thank you. That's good to hear. So a little bit more on the economic estate side as well. Could you elaborate more on the timing of the revenue recognition that drove NIA to a loss for the first half?
Speaker #1: And then also, how do you see this trending moving forward?
Speaker #4: Yeah. So the 140 million net loss for EE was primarily driven by the timing of revenue recognition. So beyond construction accomplishment, revenue recognition is contingent on the locator's that we sell to meeting specific documentary regulatory and contractual requirements.
Speaker #4: So in the first half of 2026, these transactions had not yet satisfied their final recognition conditions. As of the June reporting cutoff. So as a result, the related revenue will be recognized in the subsequent periods.
Speaker #1: Thank you so much, Rafa. That's all for Aboitis Real Estate group. Moving on to Aboitis Infra Capital now. So the next few questions will be for FROX.
Speaker #1: First question is, based on your first half NIA breakdown, only airports have been turning a profit. What is causing the challenges in your other businesses?
Speaker #1: And do you expect this to continue in the coming quarters?
Speaker #3: Yeah. So for the water sector, Lima Water has been consistently profitable. While ApoAgua, the biggest contributor to the water business, is a newly operational asset.
Speaker #3: That's only completed its first full year of operations in 2025. So despite being affected by El Niño in the first half of the year, ApoAgua actually successfully lowered its operational cost base and has therefore delivered positive operating income already, despite the negative NIA for the first half of 2026.
Speaker #3: Unity, on the other hand, is coming from a period where the industry was focused on completing sale and lease back transactions from the telcos.
Speaker #3: Now, with the focus now on Build to Suit and co-location, Unity has been scaling up and has been able to achieve substantial growth in its tower count and tenancies.
Speaker #3: Leading to a mid-year co-location ratio, as mentioned, of 1.3x. So similar to our water business, Unity is scaling up and has already delivered positive operating income despite the negative NIA for the first half of 2026.
Speaker #1: Thank you for that. And then specifically, for the airports business, among our airports, which has been contributing the largest in terms of NIA, and for those who have not yet begun to contribute, can you tell us your expansion progress and plans to raise profitability?
Speaker #3: So as the largest and most mature asset among the airport portfolio, MCIA or Mactan-Cebu International Airport is the main contributor to NIA. As for our other two airports, AIC has been operating Bohol-Panglao and Lagindingan for about 13 and 15 months, respectively.
Speaker #3: And so we are currently working with government towards the implementation of our reconfiguration and expansion plans. Nevertheless, we are already working on route development and joint destination marketing campaigns to actively stimulate inbound traffic.
Speaker #3: And we're optimizing commercial opportunities in the two airports to drive revenue and profitability moving forward.
Speaker #1: Thank you. Thank you, FROX. And then the last question is really on the GIP. So could you provide us an update on the GIP transaction?
Speaker #1: And if so, how do we expect this to contribute to the business moving forward?
Speaker #3: So the GIP transaction is yet to close. We expect to be able to do so this year. Nevertheless, we have been consulting with GIP already, and their specialist teams to optimize both current operations and planned capex.
Speaker #3: And the expectation is that, as the investment comes in, they'll be even more heavily involved in the deployment of capital and, of course, in optimizing our operations across the group.
Speaker #1: Thank you so much. That's all for AIC. Thank you, FROX. And then the last question that was sent in was on COG. Maybe I'll throw this question to John.
Speaker #1: So on CCEAP, have you seen any significant impact to margins in NIA amid the ongoing Middle East crisis, particularly on the oil on the fluctuations in oil prices?
Speaker #1: If so, how does the company plan to mitigate the risks posed by this?
Speaker #2: Great. Like any consumer package good, transport is a really large component of our cost base. So the situation in the Middle East has created cost headwinds.
Speaker #2: I think the good thing is, the team has a really proactive risk management profile. So what was actually done was very early on significant I'll call it cost optimization initiatives across the business throughout the supply chain, was implemented.
Speaker #2: So because of doing that early, what we were able to do was, at the same time, we still had volume growth, is because of all that optimization, we still were able to deliver EBIT margin improvement, which protected profitability and supported NIA despite this inflationary cost environment.
Speaker #1: Thank you, John. So I don't see any more open I don't see any open items on the Q&A box. I guess last call. For those of you who want to ask questions, again, you may click on the raise hand button or submit your questions via the Q&A box.
Speaker #1: Okay. Okay. So there is a question on the capex program for the group. Of the group's capex program, how much is allocated to maintaining the current earnings base versus growth initiatives?
Speaker #1: May I ask John to answer this question?
Speaker #2: From John's perspective, I think we have a traditional split between MOB versus growth and strategic capex. And again, a lot of it is if you look at the distribution from a I'll call it NIA perspective, it roughly mirrors that.
Speaker #2: So again, AP is a large portion of our business. I shared earlier that it was 60% of our EBITDA. It would then also take a large proportion of that capex.
Speaker #1: Thank you so much. Again, final call. For anybody who would have questions on for our non-powers subsidiaries? Okay. I don't see any hands raised or any open questions on the Q&A box.
Speaker #1: I think with that, we can now close our Q&A session. So for the benefit of those who missed the entire presentation or would like to rewatch the event, a recording of this briefing will be uploaded on our website.
Speaker #1: On behalf of Popeng, Rafa, FROX, John, and the entire presentation team, development team, we would like to thank everybody who joined us in this call.
