Good afternoon, everyone. Thank you for joining this online briefing to discuss First Pacific 2021 first half financial and operating results. The latest presentation for the results is available on First Pacific website, www.firstpacific.com, under the investor relations section presentation page. This results briefing is being recorded and the replay will be available on First Pacific's 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 raise questions, please contact us when the briefing is finished. Today we have with us Mr. Manuel Pangilinan, our Managing Director and Chief Executive Officer, joining us from Manila, Mr. Chris Young, our Executive Director and Chief Financial Officer, Mr. Joseph Ng, and Mr. John Ryan, our Associate Directors, and other senior executives from the head office of First Pacific.
At this point, I would like to turn to John for his presentation.
Thank you, Sarah. Thank you everyone for joining. We see some familiar names there on the list, and we're very glad to have you with us today. A strange little housekeeping note, please. We were able to unload a presentation version with the Indofood first half data only with the close of their market in Jakarta. You will look on our website now to see that we have the Indofood and ICBP pages updated with 1 H material. Let's jump in. Turning to page two, we have the familiar list of group companies. There has been substantially no change since we last spoke to you in March. It's worth reminding you that under Metro Pacific, Global Business Power now is owned wholly by Meralco. All the electricity production business is now housed under one parent, Meralco.
Turning to page three, you might hear me say highest ever or 10-year high a few times. I beg your indulgence because it is very cheering to say these words. Looking at the top right font chart on page three, we see that nearly all of our operating companies increased their contribution as our recurring profit rose 38% to just under $210 million. This was led, as you can see, by a sharp increase of the contributions of Indofood and PLDT. We had good improvement at head office owing to the efforts of our treasury department under Joseph Ng to reduce our interest bill and so on following through. We've got also MPIC and Philex improving their contribution to us as well. As mentioned, interest expense was sharply lower.
Net profit amounted to $181 million versus just over $100 million a year earlier, owing to a very sharp fall in non-recurring losses. In line with our, I believe it's our 12th year now that we're doing it, our 25% recurring profit distribution to shareholders continues with a HKD 0.02 increase in our interim distribution to HKD 0.09 from HKD 0.07 last year. You may recall in March we launched our three-year, $100 million share repurchase program. That's been in abeyance during our blackout period and will be set to continue moving forward with the opening of share trading tomorrow. We've got the highest-ever turnover in the first half. On present trends, it would be the same for the full year.
The contribution and recurring profit were at 10-year highs. That's what allowed the seven-year high in the interim distribution. A little bit more about cash flow and balance sheet is on page four. As you can see, our interest coverage ratio has improved to 3.5 times. At the end of last year, Joseph, it was about 3.1, was it?
Yes.
Thank you. Not a lot of change in our gross and net debt. The coverage there for each is around about four. Cash balance is $132 million. Six months since we spoke to you, we've lost three months on the average debt maturity. It's down to 3.4 years. The blended interest cost, thanks to our treasury department's keen bargaining with banks and bondholders, is now just 3.5%. It's, I think perhaps as low as it's ever been. You can see in the blue box, the prices of our three outstanding bonds are well over face value. The column chart at the bottom of the page shows you we've got a well-spread-out maturity profile. We've got $300 million of bank borrowings coming due next spring, followed by a bond in 2023.
We've got our treasury team here, led by Joseph, to answer questions on those matters. Now, a quick look at page six at our gross asset value as of the end of June. It was $4.91 billion at that time. You can see it's fairly well-balanced between the core holdings that we've got there in Indofood, MPIC, PLDT, and the Philex Group, worth just under half a billion dollars at that date, not least because of the excellent performance of Philex and high metal prices. A brief word on slide seven, with respect to ESG matters. The proxy advisor ratings are updated just a little bit. We've seen an improvement in our score from Sustainalytics from April to June, from 19.2 to 15.2, moving us deeper into the low-risk category. We published our sixth, I believe, ESG report in April.
That's along with all the others available on our website, you can click a link as shown here on this page. ESG is very much led by the operating companies where almost the entire bulk of GHG emissions, a key indicator for us all, are produced. They are moving actively to become leaders in the ESG space. In time terms, they were led by the plantations business, and lately MPIC and PLDT are catching up quite quickly. Here at head office, we've only got a headcount of perhaps 40 people. Our emissions are quite negligible, as you can see in the column charts. We are currently reassessing what our targeting will be for greenhouse gas emissions at head office.
They may well go up if a post-COVID world allows us to come visit you in your offices by the time spring rolls around, but we will be keeping a sharp eye on that. Let's turn over towards the operating companies, which are really the key important items that we're talking about today. Looking at page nine, we've got some results from Indofood. Forgive me please if these first half numbers are particularly fresh for you. I'll try to explain them briefly. The net sales growth of 20% to a record high is on double-digit external sales growth at all divisions in that business. That went down to a core profit increase of 37%, again to a record high of just under four trillion rupiah.
The reason behind this is the six months of contribution from Pinehill, the noodle maker bought last August, based in North Africa, the Middle East, and Southeastern Europe. We had stronger gross profit margins. That's hinted at in the EBIT margin chart you can see on the bottom right-hand part of this page. Noodles remains, particularly after the Pinehill purchase, the major food item sold by the Indofood Group. As you can see, following that acquisition, they've got a very strong improvement in their EBIT margins. The outlook is described in some bullet points here, but broadly speaking, it's very positive. Now a little more detail on ICBP, the 80% subsidiary of Indofood, is on page 10. As you can see, net sales rose by a similar amount, just a bit more at 22%.
EBIT rose by a very strong 33%, and its EBIT margin is at a level of 22.6%, and that's the highest that I have seen looking back over the years since its listing. Core profit itself rose by a full quarter to around IDR 4 trillion, and if we look at the change in net sales chart in the bottom right of this page, we can see that the contribution from Pinehill here cannot be disguised at all. The vast bulk of the increase in net sales is by the noodles division, most of that delivered internationally, and that, of course, is mostly Pinehill. As you can see in the table on the bottom left, the noodles business saw an increase in sales of almost a third, followed there by dairy, snack foods, food seasonings, et cetera.
The intermittent lockdowns imposed during the Indonesian government's response to the COVID-19 crisis did not hinder the performance at Indofood, particularly in the consumer-branded product segment of that company. We are very happy with the first half numbers, and I don't think you would be misleading yourself if I stated something about the potential performance for the full year. Now let's move on to PLDT, where again, we see record high revenues. They rose 10% in the first half of the year to almost PHP 92 billion. EBITDA was up 8%. Again, we're looking at a record high. Telco core income up 10% to a bit more than PHP 15 billion. The service revenues are seen continuing rising strongly.
They are forecasting a full-year telco core profit of PHP 30 billion. The heavy hinting about an extra dividend payment to shareholders continues with the promise of an additional 5 percentage points onto the regular 60% payout ratio that they provide to shareholders. The CapEx budget that they announced to us when they reported their full year 2020 numbers remains unchanged at PHP 88 billion-PHP 92 billion. All of that spending, well over $1 billion a year for the past five or six years, has resulted in those pretty shades of green that we see in the change in service revenues chart on the bottom right. It's a bit simplified from earlier versions because it delivers a clearer message this way. Essentially, it's wireless and fixed-line data that are driving the growth. If we look at page 12, we'll see where that growth came from.
At the bottom of the page, honestly, it was led by the home business. We've seen surging data increases in the wireless space over the past several quarters, and with people locked up in their homes for many months during 2020 and 2021, there have been a lot of new connections of people getting new home Wi-Fi. As you can see, the service revenues are up by almost a quarter, and they make up, again, a quarter of all service revenues. The individual business where you think that would be consumer mobile. Their revenues grow at a slower 7% pace. Mobile data traffic's continuing to surge, but a bit more slowly.
Moving over to the enterprise business, they're managing to register revenue growth, as you can see there of 2%, notwithstanding that many businesses have got work from home policies during the community quarantine that they are having off and on there in the Philippines. A brief word on page 13 about the quality of the network. As you can see, in both fixed line and wireless, where I think it's fair to describe PLDT and Smart as market leaders. They are very strong, though we've got Converge in the fixed line space, as you can see, offering a very competitive offering.
It is worth noting in this context that PLDT has got far more fixed line customers than anyone else, and in fact, are building out very quickly as we can see the number of homes passed in the first half of the year was 13% from the end of 2020 level. Very interestingly, while the mobile business in the individual is slowing its growth a little bit, PLDT Smart is maintaining a market share in the wireless space of about 48%. Interestingly, they have now moved ahead of their main competitor on average revenue per user, leading in both postpaid and prepaid categories for the first time in perhaps a very long time at the end of the second quarter. Let's have a glance at Metro Pacific here.
Page 14 reminds us of the assets we hold underneath Metro Pacific, and as you can see, GBP, Global Business Power, is held entirely now by Meralco, which is owned 46% by MPIC. Let's look at what has happened in the first half on page 15. With the easing of quarantine restrictions, people have returned to the roads, and that's quite evident in the change in contribution chart that we see in the bottom left here with the increase in contribution, it was up 11%, being driven very hard by toll roads, followed by power and then other smaller businesses, such as the hospitals business. Water was held back by lots of people staying at home, during the period.
Looking ahead, we see the water business and all others having a pretty good 2021. There are forecasts of core profit at MPIC, I believe heading firmly into double digits, PHP 12.0 billion for the full year. They are having a strong recovery from what was for MPIC, in contrast with PLDT and Indofood, a difficult 2020. In a little bit more detail, let's have a look at Meralco on page 16. Distribution revenues up strongly. Earnings growing a bit faster than GDP growth there in the Philippines. They are turning their focus now to renewables, where they forecast that renewables will make up fully half of new capacity that they plan to install over the next five to seven years. There are two solar power plants, either in operation or being built at the moment. Some details of them are here on this page.
A quick look at toll roads on the next page. Revenues up by well over a third. Core income rising much better, doubling to just under PHP 2 billion, helped by a change in the tax regime. That was all driven by a big surge in traffic, 38%. Maynilad saw its revenues down 2% as industry remains to a great extent closed during quarantine periods. This led to a decline in core income, double digits, I'm afraid of 15%, offset a little bit by the new tax legislation. Non-revenue water increased fairly significantly to well over 30%, largely because they were much less able than they wanted to get crews out into the fields to fix leaks. As quarantine eases, that number will improve very much.
Perhaps the most important news with respect to Maynilad is resolution of a long enduring difference of opinion with their regulator, MWSS, which has resulted in new concession terms offering them a 12% rate of return and confirmation that the concession will extend until the end of July in 2037. I'll finish the look at the operating companies with a glance at Philex, which saw a very strong increase in its earnings core income nearly tripling, thanks to a very big increase in copper prices, a smaller increase in gold prices. Volumes mined were not much changed. Cash production costs were up a little bit, but really it was the surge in copper prices that led to the huge improvement in their earnings. At the same time, they have confirmed the increase in mine life at Padcal by another two years to the end of 2024.
Management at Philex is now looking to the future, organizing themselves to get financing in hand for the Sulangan projects down south in Mindanao, so they could begin building it out in 2022 with commercial operation planned three years later in 2025. That's the snapshot of the performance of the operating companies. In the appendix, you'll see there is some tables and other details describing net and profit and cash flow, and so on. All in all, I think this is the best six months that we've had in quite some time. We are very enthusiastic about the future, as demonstrated in the increase in the interim dividend and the continuation, beginning tomorrow morning, of our share repurchase program and the glowing numbers from the operating companies. That ends the narrative. I think Sarah now will turn us over to Q&A.
That's right. We are now ready for questions. There's one question.
Yes. We have two sets of eyes, so I can scroll to read this entire question. Okay. By extension. Okay. We've got a question about the bank loans that are coming due next year and have to be repaid to the banks. The questioner continues to ask, how much will gross debt decline by year-end 2021 and next year, taking account of our current views of cash flow? What's the target for our debt level? Which the questioner cites as a major reason for the high discount to net asset value at First Pacific. Joseph, would you please help?
Yeah, let me address that. It's Joseph here. First part of that is, we've got $300 million bank loans due in the first quarter 2022. We're actively discussing with banks and putting in place kind of framing facilities just to refinance it. We are making quite good progress that more than 40% of the $300 million are already committed and signed. Working on the other 60%. Remember, we just published a very strong set of numbers, and we have been in active discussions. All the positive signals we received from the banks are that we'll get that done in the next one to two months signed, and then we'll get that ready and refinance the bank loans for the latest first quarter 2022, if not annual 2021. That's purely a refinancing exercise, that would not change the so-called gross debt level at all.
It's just terming out the bank loan, the $300 million bank loans to the whole years. That would clearly improve the average maturity of the debt profile. That's actually the main purpose of then taking out the so-called refinancing risk and liquidity risk in the course of 2022. Once that's done, then we basically have a clean path for 2022, and the next one coming up would be the $358 million bond due in April 2023. That's the first part of the question. The second part of that is, what's the so-called target debt level? Currently we have a gross debt of $1.4 billion, and taking out the cash is roughly $1.3 billion. That's been the case in the past 18 months since December 2019.
We were actually keeping at that level of 1.3. When you track the interest coverage ratio that we have been publishing, it's actually keep on improving from, in December 2019 it was just over two, and then December 2020 it was 3.1, and today, June, we're talking about 3.5. With further initiatives that we have in our plan, that will actually improve further. I think that's the main measurement of our interest coverage ratio and the so-called debt servicing or interest servicing capability. When we launched the bond last September 2020, I think we indicated to the bond investors that, well, in the medium term, we targeted to reach 3.5, and we did actually deliver the 3.5 by June 2021 this year. Measurement of the debt level, there are a number of ways to measure that.
If you track the value of the portfolio, I think today it's roughly $4.8 billion. With a net debt of $1.3 billion, you're talking about 27%-28%. Is that high or low? Anyone could have their own kind of estimate and to what extent that actually ties to the NAV discount. Everybody's own assessment, but at less than 20% of the total value of the portfolio or the total value of the asset, we don't really consider that as a high level. Then we keep on improving the interest coverage ratio by all sorts of liability management initiatives that we 18 months or 24 months. Hope I have addressed the second part of that question as well.
Thanks, Joseph. Any other questions? Sure, Mark.
The share buyback program. We were compelled by listing rules to suspend it for, I think it's 30 days, prior to our results announcement. We've got the budget commitment of $100 million over the 3 years. We anticipate that will all be spent at a fairly even pace over that 36 months. Joseph, more to add?
There's one more point on the regulatory side. When the share price going up, like today, it actually went up quite a bit. There's also a regulatory kind of concern that under the listing rules in Hong Kong. We can't buy back shares more than the 5% of the 5 days average. When, like today, it actually goes up to 2.6x, something like that, it actually passed the 5% higher than the five days average. That's all of our listing rules that we need to observe and comply with. It's not that we are not going to buy back shares, but we need to observe those rules. Also the other point mentioned by John, that it's spread out before announcing our interim and final results.
Okay. Can you update us on the sale of non-strategic assets? Are all participations except the three big ones still categorized as non-strategic? I believe we would leave this question to our executive directors, both of whom I believe we have online. Manny and Chris.
Well, I'm not sure we have any more that is non-strategic, perhaps because, well, the Singapore power plant is doing very well starting this year and showing respectable profits. I think we continue to have issues with the sugar business, I think they have plans to turn it around, we may have to give that a bit more time. In any event, I'm not sure we can sell it at this stage, the industry itself is struggling here in the Philippines. I think the rest of the companies, or the bulk of the companies are doing very well this year. I see no reason why they shouldn't do well in the coming years. Yeah.
Thank you, Manny. Have we got some more questions from our audience?
There's one more.
Can we expect a rise in the final dividend in June next year? Manny, do you want to speak about our 11, now 12-year-old commitment to the minimum payout ratio?
Well, addressing the secondnd half, I see no reason why it should not perform as well as it did for the first half, no? It's a bit early days to forecast what 2022 would look like. Again, I think the major companies are well-positioned to perform creditably next year, when hopefully the COVID-19 situation would improve. For the past two years, the major companies, namely Indofood, Meralco, PLDT, and even the Tollways have performed well in the case of the pandemic. I see no reason why 2022 should not be a better year compared to 2021. I think the payout could improve next year if profits do rise. I see no reason why not.
Thank you, Manny. There's a question here about ESG and the plantation businesses no longer being members of the Roundtable on Sustainable Palm Oil. Our plantation businesses left RSPO several years ago. It's a long and involved story, which I think would be quite tedious for all of us to go through right now, particularly as among all the notes that I've brought with me, I haven't brought notes on the plantation business. Indofood will be reporting its own results to analysts on Monday. That question can be brought up there. With respect to ESG more broadly than the narrow question of RSPO membership, IndoAgri has, for many years, been a leader in this space since publishing their first sustainability report back in 2013. They don't do any planting in peat, regardless of depth. They do zero deforestation.
They are members, or rather have signed up to the core tenets of the International Labour Organization. The vast bulk of all their staff in the plantations, they've got about 300,000 hectares, are members of unions, with remuneration and other benefits fixed for the entire workforce. They are generally well-regarded in the ESG space. There are those who have very strong feelings about palm oil. This RSPO question does come up from time to time. It is worth noting in the context that palm oil is the least costly of all edible oils. It is widely used in foods, in chemicals, in paints, in coatings. The modern world global economy really isn't prepared to run without palm oil. The IndoAgri and the plantation companies under it have a vocal, open, and transparent commitment to sustainable production of this edible oil.
To shut it all down would mean unemployment for the vast bulk of those living in the countryside in Indonesia, which is a country of 260 million people, not to mention Malaysia and other places. There's a lot of nuance. To the RSPO and ESG question, I invite you to join the Indofood earnings call on Monday, where their Head of Investor Relations, Mark Wakeford, is also Chief Executive of the plantation business and can answer this sort of question much more fully than I can.
Follow-up on RSPO.
Just one quick follow-up. What's stopping IndoAgri becoming a member of RSPO again? IndoAgri is a member of ISPO, which is a palm oil association set up domestically in Indonesia. It is very similar in terms of the rules and requirements that it imposes on palm oil producers. We frankly regard it as a better standard to adhere to. Patrick, let's take that offline. I could go on for hours and hours. We got some more questions coming up. On noodle sales. I've just lost it. Here it is. Doing very well in the first half. Honestly, I think the vast bulk of the increase in noodle sales is the addition of Pinehill to the Indofood group while under ICBP.
That acquisition closed only on the 27th of August last year, so when we're comparing first half to first half, there was no Pinehill whatsoever. Most of the increase in noodle sales will be from Pinehill. We've got a question now.
PLP.
A very popular company with us now, PLP, based in Singapore. LNG power producer. Stanley Yang, who's on the board of that company, will talk us through what's going on there.
Sure. The turnaround really started at the end of last year. This was reported after the year-end results in terms of a bank refinancing that was completed in October, along with some savings generated from the procurement of gas and other operating expenses. This year, the improvement has also been supported largely by a turnaround in the market. We have seen generation demand levels rise to all-time highs this year for the Singapore market. At the end of last year, in terms of the system-wide generation, it was approximately 5,900 megawatts, and it's since, by the end of first half, risen to around over 6,300. That generation increase is partly the rebound from the COVID-19 situation, but also general economic growth.
You may have seen some of the recent forecasts by the Ministry of Trade and Industry, the government that expects the GDP growth for this year to be in the 6-7% range. That is helping the power generation. In addition, in the Singapore power market, demand is being driven by increase in data center usage and demand, with some of that build out. That has supported higher pool prices, which in turn also benefit PLP in terms of the retail contracts they signed as well. That has really been the factors behind the improvement in PLP this year.
Any other questions? As there's no more questions, may I invite Manny to give his closing remarks, please?
Well, first of all, thank you for joining us this afternoon for the review of the first half results. We look forward to a really much better year, taken as a whole, for 2021 compared to 2020, even better than 2019 pre-COVID-19. We look forward to speaking to you again early next year after we announce our full-year results. Again, thank you.
Thank you, Manny. Thanks again for all the participants joining today's online briefing. Have a good day.
Thank you.
Thank you.
Thank you.