As large global corporations continue to split up their businesses, the established Philippine conglomerate Ayala has chosen to maintain a diversified group structure. The current CEO Cezar Consing stated that the group will not be split due to external preferences, but rather, it will raise the return requirements for its subsidiaries and enhance the capital efficiency of the parent company.
Ayala is one of the oldest corporate groups in Asia, with its business covering banking, real estate, telecommunications, energy, logistics, automotive, healthcare, and education. Consing is the first non-family member to take on a position in Ayala CEO. In an interview with Fortune, he stated that the group was previously adept at investing capital in new businesses, but the parent company's requirements for returns were not high enough, and this approach is now being adjusted.
Profit decline in the first half of the year
Ayala started the year under pressure. The group achieved a net profit of 22.1 billion Philippine pesos in the first half of the year, which is approximately 359 million US dollars, a year-on-year decrease of 7%. Among them, one of the core subsidiaries, Ayala Land, saw its net profit decline by 19% year-on-year, reflecting the pressures brought about by the slowdown in the Philippine real estate market.
BPI remains relatively stable. Data shows that the oldest bank in the Philippines reported a net profit of 32.8 billion Philippine pesos in the first half of the year, which is roughly the same as the same period last year. Ayala Land was also reclassified from the Philippine Standard Index to the Small Cap Index by MSCI this month, due to a significant decline in market value.
Parent company raises dividend requirements
Consing indicates that the group is introducing stricter financial discipline. Unlike in the past when 'after investing capital, the subsidiaries would operate on their own', Ayala now requires subsidiaries to increase dividends more explicitly and to release more value to the parent company.
He believes that if the parent company is unable to continuously generate returns from its various business segments, both its presence at the group level and its ability to allocate resources will be weakened. For Ayala, the premise for maintaining the consortium structure is not simply to preserve its territory, but to prove that its diversified business portfolio can still create higher shareholder value.
Electric vehicles and energy advancing together
Consing believes that synergies do not form naturally, but can be actively designed within a group. When Ayala was promoting the electric vehicle business, multiple core subsidiaries were involved: Ayala Land was responsible for deploying charging facilities in residential areas and shopping malls, ACEN provided clean electricity, Globe was in charge of connecting the charging networks, and BPI offered car purchase financing.
This layout has propelled ACMobility to become the third-largest automobile distributor in the Philippines, with a market share of 10.9%. However, the business still recorded a loss of 57 million Philippine pesos in the first half of the year, mainly due to high investments in marketing and charging infrastructure.
Consing also mentioned that the Philippines is highly dependent on energy imports, and the recent tensions in the Middle East have further exacerbated this issue. Ayala Therefore, they continue to increase their investment in renewable energy business ACEN. The company currently obtains all its electricity from renewable sources, including solar, wind, and geothermal energy, which also makes it one of the Ayala most internationally oriented businesses.
Medicine and education are regarded as long-term directions.
In addition to energy, Ayala has also increased its investment in healthcare and education services in recent years. Consing believes that these areas correspond to long-standing real needs in the Philippines, and there is still a gap between the market size and social demand.
He stated that Ayala hopes to continue to enter industries that are more important to the domestic economy and to enhance the efficiency of new business expansion through the coordination of internal group resources. This is also one of the core reasons why Ayala chooses to maintain the overall structure rather than splitting up for listing or selling off segments.
