Good day, everyone. Thank you for joining this online briefing to discuss the First Pacific 2022 full year financial and operating results. The results presentation is available on First Pacific Website, www.firstpacific.com, under the Investor Relations section presentation page. A piece of excuse results briefing is being recorded and the replay will be available on First Pacific Website in the Investor Relations section as well. For participants from the media, please note the Q&A session is open for investors and analysts only. If you would like to ask questions, please contact us when the briefing finish. Today, we have with us Mr. Manuel Pangilinan, our Managing Director and Chief Executive Officer. Mr. Chris Young, who just joined us, our Executive Director. Mr. Joseph Ng, our Chief Financial Officer and Associate Director. Mr.
Jon Ryan, our Associate Director and Chief Sustainability Officer, and other senior executives from the head office of First Pacific. Over to you, Jon, for the presentation, please.
Thanks very much, Sara. As ever, I'll do a quick run through, highlighting the important factors in our results for the full year of 2022, and then we'll switch to our Q&A. Our Chief Executive, Manny, is primed to help you, and so are our other senior executives. Now, Amy, could you please click on the screen so that I can press page down? Thank you. Now, a quick overview of the assets that we hold. Not much change since we've last spoken to you back in August. We own a little bit more in MPIC, owing to repurchases by that company of their shares. I'm sorry, but when you click away from here, I cannot page down. Right. Sorry about the interruption there. Amy, could you click it forward one page, please? Thank you, Amy.
Page three, we're looking at, everyone. Notwithstanding a sharp decline in the Indonesian rupiah almost 10% last year, and of the peso almost 4%, we managed to deliver recurring profit increase of almost one-fifth to a record high, and that's on the basis of record high turnover and record high contribution from operations. As you can see in the column chart on the top left of this page, the change in recurring profit is led by higher contributions from PLP and Indofood, followed by MPIC and slightly improved results from our sugar business underneath First Pacific Natural Resources. As you can see from the head office red line, our net interest expense rose about 7% to just under $55 million, owing to higher interest rates, which we'll discuss in a moment.
Notwithstanding that increase, we have recurring profit of over $ 500 million for the year. Recurring earnings per share, as you can see, rose just a little bit more to just under $0.12 a share. The distribution for the full year was up 16% to a full HKD 0.22 a share, up HKD 0.03 from a year earlier. As you can see from the cash flow column chart, that distributions paid was just over $110 million. Turning over now to the next page. Let's have a look at our balance sheet and borrowings. Amy, could you please page forward the slide?
Yes, this is page four.
Thanks. Thanks. Okay. Just about a year ago, we were granted investment-grade credit ratings from S&P and Moody's. Our debt levels and cash levels are really unchanged over the course of the year. As you can see from this, debt maturity chart at the bottom of the page, we've got an average maturity that's a little bit short at 2.8 years, and our interest coverage ratio is at four times, well above the minimum of three times, that we'd like to see, regarding our borrowings. Please bear in mind, that there's a bond maturing next month. You can see in the blue box at the top. It's on the 16th of April. We have funds in hand in our bank account, to pay those bonds when they mature.
Our CFO, Joseph Ng, who also runs our treasury operations, can also talk about the bank loans that we've got coming up due in 2024. Overall, fixed rate borrowings are just under two-thirds of the total at 64%. Do remember that none of our associates, affiliates or subsidiaries have any recourse to head office on their borrowings. Now the next page shows us a quick pie chart of our gross asset value. There's a change here that I'd like to draw your attention to. We have a valuation now of $150 million on PacificLight Power. That's our power company in Singapore, which we noted a moment ago, was a big source of the increase in recurring profit for us last year.
Let's flick forward two pages to page seven, and a quick word about our ESG report for 2022. That'll be published on April 27 along with our annual report. There are some highlights listed here. Key among them are ESG performance KPIs and the annual staff bonus. Just agreed by our board of directors this morning, First Pacific head office now has a net zero target for Scope one, by the year 2030, by which time we will have no automobiles that run on ICE, internal combustion engines. Let's move to our biggest holding on page eight, Indofood. Record high net sales, record high EBITDA, record high core profit. That's notwithstanding some gyrations in soft commodities, particularly with regard to wheat and palm oil, which affected the Bogasari Flour and Pasta business and the Plantations business as well.
As you can see, the EBIT margins pretty much held up in the blue box down at the bottom, a little bit down on the noodles, and rather up in Bogasari, where we balanced the price movements of wheat rather well. It was a strong year. Again, record high numbers. Looking ahead, 2023 revenues are seen up by double digits. The EBIT margin, their forecast is 18%-20%, and that's the same forecast they gave for 2022 as a whole. Now, the Pinehill transaction saw the first major penetration into markets in Middle East and Africa and a little bit in Southern Europe. That expansion is continuing now, and moving into 2023.
Two years ago, when we bought Pinehill, almost three now, two and a half years, there was a noodle-making capacity of nine billion packets a year. That is now up by one-third to 12 billion packets a year. That shows the confidence that Indofood has in the growth of those markets. A quick look on the following slide at ICBP, which is the parent of those Pinehill companies. Again, we've got some record high numbers for sales and so on going forward. We've got a flat EBIT margin with the noodles EBIT at 22.9%, and that was down largely because of higher input costs, the CPO and the flour that it uses in the manufacture of the noodles.
Noodles are particularly important, as you can see, an 82% almost share of EBIT, when you take away unallocated income and before elimination. Moving quickly to page 10, let's have a quick look at the external sales column chart in the top left. As you can see, every single business saw an increase in sales except for edible oils and fats, which declined rather a lot. All of these businesses, almost all of them, saw increases in volumes however. Ones that didn't include the aforementioned edible oils and fats. Bogasari saw lower volumes and so did dairy. Now let's move to PLDT, the largest and highest quality phone company in the Philippines. More record highs here. Service revenues up 6% to a record high.
EBITDA over PHP 100 billion, first time ever, and the margin's still strong at over 50%. We see the service revenues and the EBITDA hitting consecutive record highs in 2023. As you can see in the column chart down at the bottom, this is all driven by data. On the next page, there's a glance at the three main businesses. The ring chart shows you on page 12 that data and broadband service now generates 80% of revenues, and that ranges from 73% at the enterprise business up to 85% of all the revenues at the home business, where demand for data is flat out. Likewise, with the individual business, where data traffic on mobile phones was up by almost a third in 2022.
Very quickly on the next page 13, the network quality continues to be well ahead of all the competitors, whether they are on the fixed line or wireless segments. Let's move over to Metro Pacific Investments, a holding company in Philippines, which has these investments, which I think we're all familiar with. Turning very quickly to page 15, you can see the rise in contribution was led by the toll roads business and power as the country began to recover from pandemic-mandated shutdowns across the economy. If you look at the operating revenue and core profit column chart to the right there, you can see in 2019 that we had some record high numbers. MPIC's best year ever was there.
There is some hope that the improvements expected in 2023 might have investors thinking fondly about those levels yet again. On the next page, a quick word about Meralco, biggest electricity distributor in the country. Enormous growth in electricity generation, where it's got a commitment to build out 1,500 megawatts of renewable capacity over the next four years. Revenues and profit up to record highs, and we see continued steady and growth at Meralco going forward. On the next page, we have got the toll roads business, where the map shows you that the biggest toll road network in the country is growing very, very well. Revenue's up by almost a third in 2022. As you can see in the blue box, more roads are being built out domestically as well as abroad.
We expect to see further record highs in revenues and profit in that company going forward. A last quick word about water underneath MPIC. Maynilad continues to be a steady generator of cash flows for the company. Revenue's up just a bit. Core profit down by 7%, and that's due mostly to concession amortization from completed CapEx. Now to PacificLight Power. That's the LNG fired power plant in Singapore, which has seen a 50% growth in revenues. More record highs here, I'm repeating myself rather a lot. EBITDA tripled to SGD 365 million and even faster growth in core profit. Pedder, if you don't have a question about PLP, I'll be rather disappointed. Now, let's move on to Philex Mining.
In 2022, we had some difficulties with some breakdowns of machinery, so revenues were down and core profit was down. Grades were not terribly changed from the year previously, but as we can see, this is a mine, Padcal, that's been in operation for 64 years. The focus now is towards development of the Silangan project down in the south of the country, which is expected to begin operations in 2025, a good two years before the Padcal mine is expected to run out following a life of mine extension there. That's a quick snapshot of what's been happening with First Pacific and the operating companies. We've had, I think, two years in a row of some record high numbers at First Pacific head office and some of our other companies.
We're quite optimistic by the future, for the future, as the increase in our distribution to shareholders suggests. We're quite confident, and in this mood, we're ready to take questions.
Thank you, Tom. We are now ready for questions.
Mm.
If you have any questions, you will either type your questions in the chat box or you can raise your hand. We've got Jeffrey. Jeffrey, go ahead.
Hi. Can you hear me?
Hi, Jeff.
Hi. Thank you for taking my questions and congratulations for the results. I have three questions, but my first question is really about FPM Power. The business has done quite well in 2022. How should we think about the business earnings capability going into the current year? How many of the strength last year can be carried forward into 2023? And maybe in the longer term, it would be helpful if you can help us think through this business. Thank you.
Jeff, Stanley Yang is, one of in charge of corporate development for us. He's on the board of this PLP and help respond to you.
Hi, Jeff. On PLP, one of the aspects of the business is the improvement in performance was driven by a mix of a few things. One being demand has continued to rise in the Singapore market. There's been no supply of capacity, and in fact, some of the F-class units, I think seven, are gonna be more than 25 years or older soon. When you look at these factors, plus in terms of the LNG and the gas shortage that's been in the market, that's led to the strong performance for PLP in terms of the numbers. On a 100% basis, EBITDA in 2022 was SGD 365 million versus the prior year in 2021 at SGD 111 million.
Looking to this year, one of the things that management was able to do was to lock in a number of retail contracts which constitute the bulk of their generation capacity that they're expecting for this year. Those margins are quite attractive. The sustained margin in the market has carried into this year, in the early months, we're seeing that growth continue. We expect that, you know, when you see the first half, that that'll be a strong result stemming from the continued shift. Longer term, I think where Singapore is facing is that need to build additional capacity. EMA, the regulator, has pushed for improving the potential for imports of solar as well as domestic supply.
The question really in the long run will be whether that additional capacity will be enough to make up for, one, the aging of the some of the existing generators. Second, in terms of the continued demand, I think that's where we're really gonna see. EMA is aware of that. They're aware that the crunch today is leading to that under shortage of the supply and pushing up prices very high. One of the things that they're looking to do is to implement more of the vesting contracts. That was something that in the past when PLP was struggling, was a lifeline. Today, that's a way to cap the prices, but these are pretty high margins. They're close to around SGD 50 per megawatt hour.
I think that this, bodes well, in the absence of significant capacity coming in in the future, for a sustainable, return at the business. Will it continue at the high levels, as last year? Perhaps not, right? I think the EMA and the regulatory is something that we're aware of. What I would say is that for this year, the outlook continues to be very strong.
Thank you. I will go back to the queue.
Thank you. The second question is from Grant, at Capital for Business. His question is, can you please give us an update on the CapEx overspending and the misreporting at PLDT? Will the investigations and accountability go up to the highest levels?
Well, the forensics that have been authorized by the board, sometime mid-December last year, has been completed and, sometime, third week of March, the final report was rendered to the board first in executive session and in the board meeting of PLDT when the results were announced sometime 24 March ?
24, yeah. Last week.
24. Basically, the leader of the forensics was Milbank, which is a New York-based law firm, led the investigation with the help of PwC and a local law firm, which is the first time that PLDT has commissioned all three. These are independent agents that did the forensics on behalf of the board and reporting through the audit committee of the board. The investigation has gone up to the highest level of the corporation, which is the board and of course to the senior management of PLDT. In terms of accountability, yes, we have identified who were responsible for this, as you said, the misreporting. I think that's what you said, no?
first to senior management and eventually to the board. I think one of the major highlights of the forensics was that there was no fraudulent transaction that the team uncovered. No intent, deliberate intent to hide the mistakes. There was no basis to restate the historic financial accounts. The period in question of the investigation was to cover 2019 up to the year 2022. Those are the highlights of the results of that investigation.
Now, I think after the investigation was finished and reported to the board and publicly as part of the overall disclosure of PLDT, last 24 March , now we have to address how we deal with the, with those who were responsible for this overspending or misreporting, as you put it. I think we should be able to announce it next week or two as to the results. There are now active discussions with certain of these individuals. I think we're making progress in terms of the approach to the separation of these individuals from PLDT.
Amy, if you could turn to page 13, I'll just add a point or two to what Manny has to say. There was a CapEx last year amounted to PHP 96.8 billion. As you can see, there's some details written down here. I think it's worth drawing attention to the fact that, we've now got over almost 77,000 base stations, across the Philippines, owned by Smart. Most of them, about 39,000, are LTE base stations. We've got over 7,000 5G and 17,000 3G base stations.
I think the net greatest consequence of this CapEx overspend was perhaps to build up a lot of capacity rather quickly in a short amount of time with the end result that we've only got that 2% increase in base stations over the course of the whole year. I think you'll find over 2023 that 5G base station construction is gonna go a bit more slowly. That full year 2022 CapEx number, that's a peak, both in absolute terms and as a share of service revenues. As you can see, it's just under half of the total. A little less CapEx going forward, I think is what I wanted to add to Manny's words.
Yeah.
Thank you. Are there any other questions?
Jeff's got his hand up.
Hi. Yeah. Thank you. Thank you very much for taking my question again. Metro Pacific has recently made a few investments in agriculture and solar businesses, as I read from the media reports. Maybe the thing that I would just like to ask is, on a broader group perspective, what kind of assets are you looking to invest in in the near term and the medium term? If there's any implication on the underlying entities' dividend and also the capital allocation strategy at the Pacific head office level? This is something that would just like to learn your thoughts, latest thought on it. I will have a follow-up after that.
Well, I think that to answer your question, right, what is it?
To Jeff.
To Jeff, yeah. Let me deal with the easier one, the investment that we made in Solar Philippines Nueva Ecija Corporation, which is We call it SPNEC, right? That is an investment in a pure solar facility. Somewhere in the middle of Luzon, the island of Luzon, which is the biggest island and closest to the main market of Metro Manila. The partner there is a person called Leandro Leviste, who's really in charge of gathering together as many as 3,000 hectares, or a bit more, in order to be able to enable SPNEC together with the ICTSI group to build as much as a nameplate capacity of 3,000 megawatts of solar. Effective capacity, this is without any batteries, of 815 megawatts supply.
I think so far, SPNEC has acquired about 1,100 hectares, subject to conversion because these are mainly agricultural land, and there's a conversion requirement from agricultural land to commercial industrial use no. He's two-thirds of the way there, he and SPNEC. Metro Pacific is, yes, this is an important piece of investment for Metro Pacific no. The PHP 2 billion that Metro has made would be sufficient to pay for the balance of the cost of the land that part of which SPNEC has advanced already, you know.
I would dare say, though, that eventually we would have to pass on the investment made by Metro Pacific to Meralco, which I believe should be the proper owner of this generation facility, which would be the largest in the country, and I would guess one of the largest in Southeast Asia. In many ways, this is an interim step for MPIC in order to secure that big share in this very important solar facility for the group and for the country. As to the second part of your question, which is the agri facilities or the agri investments, we made a modest investment in dairy farming with Carmen's Best.
That cost us about PHP 180 million or a little less than $4 million. The next one we made was in Axelum Resources Corp., which is the largest coconut processing facility in the country. It's a facility that processes 700,000 coconuts each day, and 90% of its revenues are export. The business model is quite good because it is a dollar-based revenue and peso-based expenses no. We export the coconut products into the US, which is the main market for it, and to some degree, beginning to export to Europe no, to the EU community.
The buyer of our finished coconut products are the branded, like coconut water, the pharmaceutical companies and the cosmetic companies for desiccated coconuts and for the coconut cream. That's the investment in Axelum Resources Corp.. That's probably our biggest investment in a single agri-related company in the Philippines. The third one is in these greenhouses located north of Metro Manila, 22 hectares, and I think the projected volume of... It's a pure vegetable operations with the, whose partners we partnered with the Israelis. They are both on the dairy side and on the greenhouses side, where I think the LR Group of Israel has taken a 40% stake. This is the first step in our greenhouse effort.
It's all organic, and we want to expand that. That those 22 hectares are on land that First Pacific, sorry, Metro Pacific, bought for its logistics business. There's another 20 hectares we own in the southern part of Metro Manila, and we want to invest greenhouses as well in that piece of property owned by MPIC, no. I think the idea now, or the intent is to expand the dairy business and when we announce our investment there, it has elicited quite a number of interest from local dairy farms not doing well, but bigger than Carmen's Best. That's the ability, I believe, to be able to obtain scale in the dairy farm business with the help of the Israelis and as well as with greenhouses, with them.
Axelum also offers us the opportunity to consolidate the coconut industry in a bigger way. We're looking at other coconut processing facilities and coconut plantations that are available for investment or partnership in the Philippines. Basically, that's the waterfront for now in terms of the agribusiness. Where the real test will be is to get into large scale commercial farming. A number of the local government units have offered land to us for development in large scale farming. Nothing concrete has been agreed. It's a choice or an option that we have to consider very carefully.
Thank you. Joseph, just while you're out, the follow-up question was, what's our thinking about capital allocation going forward? Do you want me to grab that?
Well, the capital allocation program is clearly a function of the kind of a strong cash flow situation at headquarters level. We put up our numbers for 2022 and showing a dividend income of $220 million in aggregate. Seeing the cash flow that the big part of that is for, how over had an interest roughly aggregating $70 million. People would be aware that the interest rate actually has gone up starting from the second half of 2022. The interest ticket will be a little bit increased starting the first half 2023 onwards. There will be some uplift in that interest expenses figure from the $52 million reported in 2022 to a higher level.
Now, we have across that a little bit less than $1.5 billion, and let that say $1.4 billion. At an interest cost of 5% thereabout, and it's talking about $60 million-$70 million. That will be some uplift. Quite a bit of uplift, I would say, to the interest expenses. Net of all this then is actually the cash that we would allocate for return to the shareholders and any capital investment. We announced the dividend payout of final dividend payout of $0.115. Adding together is $0.22. In a full year basis, that's roughly $120 million. That's a big part of the so-called cash that we have. Going forward, we'll really monitor the cash flow.
Bear in mind that in 2022 we have not received any PLP dividend yet. That is a very strong performance of PLP in 2022. We started to collect quite strong stream of dividend from PLP starting in Q1 2023. We expected that the dividend stream coming from PLP in the course of 2023 will be very strong, and then total dividend would be increased quite a bit as a result of that. We will look into on a full year basis as to the overall cash flow situation as to how to allocate between return to the shareholders in the form of a distribution and then further investment in other investment opportunities that will be available to us.
Thank you, Joseph.
Thank you. May I just have a very quick follow-up, touching on the dividends here? The full year payout ratio slightly dipped to 24% in this year, which is below the 25% sort of the committed payout, I would say. Just learn to see if there's any structural change in thinking about a dividend policy or whether there is just a one-off consideration here.
Well, let me take that. I mean, in terms of a dividend per share growth, that's very, I mean, that's 16% growth, very broadly in line with the 19% growth in the recurring profit. We say that, yes, I mean, the dividend policy has been 25%. Last year it was a little bit more than 24%. This year is actually on a random basis. It's actually close to that. As I say, it's all subject to the head office cash flow situation. At HKD 120 million a year to our cash flow is not a small amount, and I think on a dividend per share basis, on a growth basis is very, I think reasonable and it's actually mid-teens.
If we compare to the dividend we pay in the past two years or so, you're talking about increasing 50% in absolute amount in two years' time. We need to balance all this. We need to monitor the dividend streams from the other units, including the big boys like PLDT, like Indofood, like Metro Pacific, and in particular PLP in the course of 2023. In terms of whether there's any significant change in the dividend policy, I think we set that out in our announcement that we basically stick with the 25% but up to 25% in order to build in some flexibility in terms of percentage payout. On a dividend per share basis, I think we kind of maintain at least at that level.
That's, that's what we are thinking for the moment.
I think in terms of total return, if you had the share purchase we did in 2022, the total return is about 27%. It's above your 25% guidance.
Great. Thank you very much.
Thank you.
We have another question from Grant at Capital for Business. He asked, Metro Pacific trades at a deep discount to book value, suggesting the market has a concern about capital allocation amongst other things. Will it be better to address those concerns by buying back stock rather than investing in new unrelated business lines?
Well, of course, we know that MPIC trades at a deep discount to the underlying market value of the company. We've tried to address that by buyback shares, I think which we've done for the past two or three years. It hasn't really moved the stock price up despite doing that. You know, that was a significant buyback effort by MPIC. Despite, I must say, for the past year or so, despite the regulatory capture that has been alleged or thrown at MPIC for being unable to realize the tariff adjustments scheduled. I think we managed to get tariff adjustments for the water business, for the tollways business, not fully, but significantly, the light rail and Meralco.
That was a delay of seven years from July 2015 to June of 2022, and it did not move up the share price. I think there might be some real more basic issue with MPIC. I don't think it's the underlying business as such, but it's something perhaps some people call structural subordination of the cash flows because there are operating debts of the operating companies. Metro itself has some debts at the parent and is it the structure? Is it because conglomerates are an obsolete concept nowadays? That's something we're trying to address, or we have to address that because we cannot. You know, Metro has not raised any new money in recent memory, and it cannot do that at these share prices.
We gotta get to the root of this issue.
Yeah. These, these new investments in new businesses, I think, one thing that is worth emphasizing is that they are far less regulated than the water toll roads and electricity businesses that Manny's just mentioned, where there have been struggles, big struggles in recent years, with regulators to get contractual tariffs allowed. On balance, none of the businesses have gotten everything that they felt that they were due. There's a little bit of a diversification, is the investment in the new businesses.
Thank you, John and Manuel. Are there any questions? I think there's no more questions. Please may I invite Manny to give us a closing remark.
Well, first of all, I'd like to thank everybody for joining us this afternoon. I guess the Having just announced the 2022 results, so it's time to look forward and think when you ask the question, at least in reference to Singapore Power Plant, what the outlook is at least for 2023, you know. I think in our outlook or conclusion portion of our press release, we were quite positive and in terms of a robust outlook for 2023 at least. I think was it Jeff who asked a question about PLP? The outlook this year is very positive actually for PLP.
If you look at who will be the main driver of growth in profitability for this year to be PLP, it is actually Merauke itself. The distribution business continues to grow at a pace a little higher than economic growth. The efficiencies of scale prove that its earnings, the distribution earnings, will rise this year. At the same time, there's a recovery in profitability of Global Business Power Corporation. Last year, they produced a loss of PHP 1.8 billion for a number of reasons. Starting this year, they've returned to profitability. That has added to a positive outlook to the generation business. The San Buenaventura Power plant is also past two or three months, also showing higher profitability this year compared to last year.
Our retail supply business, this is the direct supply of electricity to mainly our enterprise customers, are also showing a positive growth compared to last year. The other driver of profitability this year would be Tollways. I think in our blurb, we have about 436 kilometers of network in the Philippines, Indonesia and Vietnam. Roads under construction will be about 160 kilometers more. By the next 12 months or so, we will have more than 600 kilometers. We anticipate the Tollways group to grow by something like 40% in net profit in 2023. Of course, there's the useful reliables, PLDT and Indofood.
We guided PLDT to mid-single digit growth in revenues to EBITDA this year. We hope to do... We certainly improve in 2023 over 2022 core profitability. The CapEx issue is behind us. There'll be some residue that we need to reflect as the work's flowing from the 33 billion adjusted outstanding POs with the major vendors will have to be complete or delivered in 2023 and 2024. We'll have to deal with those additional CapEx. We have reduced the CapEx, the fresh CapEx levels in both years to lower levels, so that the overall online CapEx will be in the area of around PHP 50 billion only. For Indofood, I think should be... Go ahead, Chris.
Yeah. I think, Indofood certainly had a good second half. The indications are that that'll continue into the current year. Yes, also a positive outlook from the Indofood business.
I think part of your question related to the dividends at First Pacific and the laggards in giving us the proper level of dividends really do. One is MPIC, we should get on MPIC's back to give us more dividends and Indofood. We have some work to do on our subsidiaries.
Thank you, Manny. If you have any follow-up questions, please get in touch with Jon and me. Thanks, everyone, for joining today's online briefing.
Bye-bye. Thanks, everyone.
Happy Easter to all.