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Government’s foreign loans reach $8 billion at end-June

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THE GOVERNMENT received $8.203 billion in foreign currency (FX) loans in the first half of the year meant for its coronavirus disease 2019 (COVID-19) response, disaster risk management and Marawi’s reconstruction, among others, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Friday.

The $8.203 billion was made up of $3.672 billion in commercial borrowings and $4.531 billion in program and project loans disbursed by multilateral lenders, Mr. Diokno said in a Viber message to reporters on Friday.

“We’re providing you this update in the spirit of transparency,” Mr. Diokno, a former Budget secretary, said.

Broken down, the government’s commercial borrowings were made up of $2.348 billion in global bonds and $1.324 billion in euro global bonds.

Meanwhile, for the program loans worth $4.277 billion, $1.512 billion went to the government’s COVID-19 active response and $498.8 million was allocated for emergency coronavirus response and development policy.

The rest of the program loans went to other initiatives such as disaster risk management ($498.8 million); youth-to-school transition ($400 million); promotion of competitiveness ($399 million); local governance reform ($300 million); social welfare development ($299.3 million); emergency assistance for Marawi’s reconstruction ($206.8 million); social protection ($100 million); and social protection support ($60 million).

Mr. Diokno also broke down the $254 million in government project loans which came from the Japan International Cooperation Agency ($98.069 million), International Bank for Reconstruction and Development ($30.84 million), International Fund For Agricultural Development ($11.146 million), the Asian Development Bank ($1.576 million) and other agencies ($113.073 million).

“For the same period, the national government’s FX disbursements amounted to $6.275 billion,” the central bank chief said.

Broken down, $3.305 billion went to debt servicing or principal and interest payments on the government’s commercial borrowings, and program and project loans. Meanwhile, $2.916 billion went to foreign exchange conversion.

Other net disbursements amounted to $54 million, which includes charges and disbursements of grants to other government agencies and net of interest income on the national government’s deposits.

“In sum, net national government receipts amounted to $1.928 billion for the same period ended 30 June 2020,” Mr. Diokno said.

BANKS’ FCDU LOANS

Meanwhile, foreign currency loans of local banks rose in the first quarter amid lower interest rates and an increase in working capital requirements, BSP data released separately on Friday showed.

Outstanding loans by foreign currency deposits units (FCDUs) of banks inched up 1.3% to $18.3 billion as of March from the $18 billion seen at end-2019.

Credit disbursed by FCDUs rose 8.7% year-on-year from the $16.1 billion seen at end-March 2019.

“The growth in loans may be attributed to borrowing firms’ higher working capital requirements, lower interest rates as well as increased investment in plant or equipment,” the central bank said.

FCDUs are central bank-approved bank units that perform transactions involving foreign currencies, mainly by accepting deposits and handing out loans.

The BSP said 79.5% of FCDU loans in the period were medium- to long-term debt, meaning they are payable over a term of more than a year. This is higher than the 75.8% level logged as of March 2019.

Central bank data showed loans to residents, which made up 64.8% of the outstanding loans, went to power generation companies (18%); merchandise and service exporters (13.9%); public utility firms (7.8%); towing, tanker, trucking, forwarding, personal and other industries (6.9%); and producers/manufacturers, including oil companies (5.2%).

Gross disbursements hit $14.3 billion in the first quarter, higher by 7.8% from a year ago, on the back of higher funding requirements of an affiliate of a branch of a foreign bank, the BSP said.

Loan repayments also rose 7.2% which resulted in overall net disbursements.

Meanwhile, FCDU deposit liabilities stood at $43.1 billion as of March, up 4.9% from the end-December 2019 level of $41.1 billion and by 7.8% from the end-March 2019 level of $40 billion.

The BSP said 98% of these deposits continue to be owned by residents, “essentially constituting an additional buffer to the country’s gross international reserves.”

The FCDU loans-to-deposit ratio was at 42.4% as of end-March, lower than the 43.9% as of end-December but slightly higher than the year-ago ratio of 42%. — LWTN



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Lopez holding firm reports 26% profit decline during pandemic

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First Philippine Holdings Corp. (FPH) saw its net profit in the first semester fell by 26% to P3.5 billion as the pandemic pulled down its income from operations.

In a regulatory filing, the Lopez-led holding company saw its topline falter by 21% to P53.9 billion on reduced power and real estate sales.

The company incurred one-off losses due to coronavirus pandemic-related expenses, which reached P235 million. Excluding these, its recurring net income in the period stood at P10.2 billion, lower by 21% from over a year ago.

FPH’s electricity sales declined by 18% to P10.4 billion on lower revenues from First Gen Corp.’s natural gas plants, hydro platform, and geothermal unit.

The power company in a separate disclosure said its recurring attributable profit dwindled by 15% to P6.7 billion in the first half of the year as the decline in power demand worsened in the second quarter when the economy entered into recession.

Its total revenues from power sales fell by 15% to P47.7 billion in the January-June period. First Gen’s natural gas plants delivered P4.5 billion to the holding firm’s recurring revenues, down 16% as it continues to suffer from low electricity sales in the second quarter. Making up 61% of their parent’s revenues, the gas plants posted a 17% drop in earnings due to lower average natural gas prices and a decline in their dispatch.

Energy Development Corp. posted a slightly lower earnings’ share of P2.4 billion because of a slump in revenues from lower electricity prices. It netted P2.4 billion in revenues, forming 36% of First Gen’s topline.

Its hydro platform, First Gen Hydro Power Corp., brought in P200 million, a 68% share decline, due to lower prices at the Wholesale Electricity Spot Market (WESM). Its revenues, which account for 2% of its parent’s earnings, plunged by 47% to P900 million on poor spot market sales.

Meanwhile, FPH’s real estate sales dropped by over half, or 52%, to P2.2 billion because of the combined reduced sales take-up and slow construction completion of Rockwell Land Corp. following quarantine restrictions.

It also earned 23% less from contracts and services, which stood at P3.2 billion, because of the slowdown in construction activities and drilling services of First Balfour, Inc. and ThermaPrime Drilling Corp., as well as the reduced lease revenues of Rockwell’s commercial spaces due to rent concessions.

Merchandise sale earnings dropped by 26% to P805 million as First Philippine Electric Corp. sold fewer electrical transformers after its plant went on a shutdown.

On Friday, shares in FPH inched up 0.25% to close at P59.15 each, while First Gen’s shares declined by 3.83% to close at P22.60 apiece. — Adam J. Ang



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How a hair-care company went from salon supplier to sanitizer powerhouse

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When AG Hair moved into its new, 70,000-sq.-foot, state-of-the-art manufacturing facility in Coquitlam, B.C., two years ago, it was part of a plan to supercharge expansion of its hair care product line to salons in international markets. Europe was next on its list. Then COVID-19 hit.

Not only was the European expansion put on hold, but salons in major markets across Canada and the United States were temporarily closed. Very few were purchasing hair products, so manufacturing was halted in mid-March, leaving most of the company’s 82 employees out of work.

AG Hair could have waited out the pandemic but instead decided to lean into its entrepreneurial culture and make a sharp pivot. It began providing hand-sanitizing products for front-line health-care workers, addressing a global shortage.

“We realized there was this massive need for health-care professionals, and we wanted to make a difference and be able to provide them with the products they needed,” says AG Hair CEO Graham Fraser.

AG Hair received Canadian and U.S. approvals a week after applying for the licences needed to make sanitizer, and produced samples to show local authorities within 48 hours.

AG Hair’s Coquitlam facility has pivoted to making hand sanitizer (Photograph by Alana Paterson)

“That rapid response time, and the fact that we had gone through all of the Health Canada regulatory hurdles, showed [the local health authorities] that we were a partner they could trust and someone they could look to, to deliver the products they needed,” Fraser says.

Within a month, the company started pumping out the products, first for the health-care industry, then for consumers on its own website and on Amazon. About 10 per cent of AG Hair’s hand-sanitizer production also went to people in need, as identified by organizations such as United Way.

Parallel 49 Brewing Company is also using AG Hair’s Coquitlam manufacturing facility to produce its own blend of liquid hand sanitizer for front-line health and emergency workers, in partnership with the B.C. government.

Fraser credits his team for its energy and creativity in making the hand-sanitizer production happen, and helping put AG Hair staff back to work.

“We realized we had an opportunity . . . and then it became this incredible, almost war-room mentality and collaboration with our owners, our executive team and our people to say, ‘How are we going to get through this?’ ” Fraser recalls. “I think our success speaks to the type of people we have and the entrepreneurial spirit of pursuing every avenue we have, understanding how we can produce the products and making it happen.”

AG Hair’s commitment to investing in future growth is a big part of what makes it a Best Managed company, says Nicole Coleman, a partner at Deloitte and co-lead of its Best Managed Program in B.C.

“Capability and innovation come through quite strongly with this company,” says Coleman, who is also AG Hair’s coach at Deloitte. “I don’t think they would be able to pivot as quickly if they weren’t so strategic and had the internal capabilities to do it.”

The manufacturing facility was a big investment, but one Coleman says has already paid dividends.

“They were looking forward with a strategic plan in mind about future growth and how they could expand, rather than just focusing on the day to day,” she says. “Best Managed companies are always pushing the envelope and are conscious about planning for the future.”

AG Hair was founded in Vancouver in 1989 by hairstylist John Davis and graphic artist Lotte Davis. The husband-and-wife team began bottling hair products in their basement and selling them direct to salons from the back of a station wagon.

The company eventually moved its manufacturing off-site, to a third party. One day, John went to watch the operations and was surprised to see salt being poured into the mixture. Although he was told salt is commonly used as a thickener, he didn’t like the potential side effects of dry hair and skin.

It was at that moment John decided the company would oversee its own manufacturing. “Through that experience, John also became an expert in product development,” says Fraser, who came to the company in 2000 as director of sales.

After having worked for more than two decades at PepsiCo and Kraft Foods, Fraser was eager to work at a smaller, more agile company where he felt he could help make a difference.

“It was perfect because I got to bring a lot of structure and process that I learned in those organizations, but I also learned an awful lot about being an entrepreneur from John and Lotte: that sense of urgency, the decision-making process, the need to get things done and drive things forward and pursue opportunities,” he says.

Fraser has helped drive AG Hair’s expansion into the U.S. and internationally, including Australia, Taiwan, and Central and South America. A portion of its sales go to One Girl Can, a charity founded by Lotte that provides schooling, education and mentoring for girls in sub-Saharan Africa.

Fraser also oversees the development of new, trending products, including a new deep-conditioning hair mask made with 98 per cent plant-based and natural ingredients. Hand-sanitizing spray and gel will be the latest addition to the company’s product lineup.

“We don’t see the demand [for hand-sanitizing products] going away,” he says. “As the isolation policies start to get lifted, people are going to need forms of security and protocols as they get back into regular life and work. We see there’s going to be a need for these types of products long-term.”


This article appears in print in the June 2020 issue of Maclean’s magazine with the headline, “Working out the kinks.” Subscribe to the monthly print magazine here.

The post How a hair-care company went from salon supplier to sanitizer powerhouse appeared first on Canadian Business – Your Source For Business News.



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Amazon Considers Relocating Some Employees Out of Seattle

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(Bloomberg) — Amazon.com Inc. is offering Seattle-based employees a choice of smaller offices outside the city, suggesting the Covid-19 outbreak and a new local employers tax have pushed the e-commerce giant to consider alternatives to its hometown.In a message to employees Thursday, Amazon asked which communities near Seattle — including Tacoma and Redmond, Washington — they’d prefer. The title on the message, which was shared on Reddit and later deleted, was “office workplace options.” Amazon declined to comment on the matter.Amazon, which reported a total global workforce of almost 877,000 as of June 30, has been expanding beyond Seattle for years. It is building a second major office center in suburban Virginia near the nation’s capital and has satellite locations in cities including New York, Austin and Los Angeles.The company has threatened to focus employment growth outside Seattle due to a rocky relationship with city officials and new taxes imposed on big employers. The message suggests Amazon could significantly shrink its presence in its hometown, where it employs about 50,000 people in a mixture of offices it owns and leases. In 2019, it announced it would relocate its worldwide operations division, which oversees Amazon’s shipping and logistics, to nearby Bellevue where it currently employs 3,000 people.Even before the pandemic, Amazon considered building more satellite offices outside the city, according to a person familiar with the matter. The company plans to expand its Bellevue offices, which it has had since 2017. Such locations are seen as an amenity for employees tired of commuting to Seattle and as a way to reduce the company’s exposure to the city’s taxes targeting big employers, said the person, who asked not to be identified discussing private matters.Two years ago, Amazon helped defeat an effort in Seattle to raise money for homeless services and affordable housing by levying a per-employee tax on large businesses. The “head tax” would have raised about $47 million a year.The political climate has since shifted against the company after Amazon’s big spending on a Seattle City Council election backfired last year. In July, the council passed a new levy that will tax large businesses on employees who make at least $150,000 per year. The tax is expected to raise more than $200 million annually and cost Amazon even more than the earlier proposal.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.



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