1998 Third Quarter Performance

November 4, 1998 PSE CIRCULAR FOR BROKERS NO. 2507-98 November 3 1998 Securities & Exchange Commission Director Linda A. Daoang Money Market Department S.E.C. Building, EDSA Mandaluyong City Philippine Stock Exchange Ms. Maria Isabel T. Garcia Head, Listing Department PSE Center, Exchange Road Ortigas Center, Pasig City SUBJECT : 1998 Third Quarter Performance Gentlemen : We are pleased to inform you of the highlights of the consolidated financial performance of Ayala Corporation for the third quarter of 1998, to wit: Ayala Corporation reported a consolidated net income of P5.29 billion for the nine-month period ended September 1998, representing a slight growth over last year's P5.24 billion. Sales and services of P15.7 billion and equity in net earnings of affiliates of P1.3 billion remained flat owing to the general slowdown in the economy. A 54% increase. however, was posted from year-ago levels by interest, rental, and investment income. As in previous years, the company's income base continues to be largely comprised of recurring income. For the period under review, the Company's recurring income amounts of P3.9 billion, 73% of the total consolidated net income. Ayala's consolidated assets of P120.6 billion remain well distributed, with current assets constituting 29% of its total resources. Cash and cash equivalents to P16 billion equivalent to 13% of consolidated assets. The company's current ratio remains healthy at 2.39. aisadc Stockholders equity grew by 16% to P42.5 billion from the 1997 year-end level of P36.6 billion. With a strong equity base, gearing ratio was slightly reduced to 0.92x:1. The company's sound credit quality is reflected in the trading of the company's outstanding notes which now trade at equal to that of sovereign papers. Ayala's real estate subsidiary, Ayala Land; Inc., posted a consolidated net income of P1.9 billion despite a weak property market. Leasing operations continued to drive revenues with a contribution of 25% to total consolidated revenues. ALI successfully launched Westgrove Heights Phase 1A in September. The project demonstrated Ayala Land's unique capability to exploit niche markets for highly selected products. Ayala Land's fundamentals continue to be strong with consolidated assets of P53.4 billion and cash reserves of P6.3 billion. The Bank of the Philippine Islands registered a consolidated net income of P3.9 billion for a return on equity of 20% and return on assets of 2.5%. The revenue growth was driven largely by interest income which grew by 33% to P8.7 billion from a year-ago level of P6.6 billion. While loan portfolio contracted by 4% to P104.7 billion, the Bank's portfolio remained highly diversified across various markets, ensuring a better balance on risk and stability of revenues. As of the 3rd quarter, BPI's resources expanded by 9% year-on-year to P211.7 billion. The Bank's large deposit base continues to provide a source of stable, low-cost funding, posting an 11% growth from last year to reach P170.2 billion by end-September. With its stockholders' equity at P27.6 billion, capital adequacy has also remained high, further increasing to 22% versus BIS standard of 8%. LexLib Globe Telecom posted a net income of P4.7 million compared to a year-ago loss of P793 million. The increase in subscriber base fueled the growth of revenues to P3.7 billion as of end-September which was more than double year-ago level of P1.7 billion. Cellular subscribers reached 122,912 for post paid and 34,394 for prepaid while fixed line subscribers totaled 116,678. Coming from a negative P127.1 million for EBITDA and negative P701 million for EBIT in 1997, the Company turned around to record positive EBITDA and EBIT levels of P1.3 billion and P155.4 million, respectively. Globe Telecom's balance sheet also remains strong with total assets growing 52% to P24.7 billion versus year-end 1997 levels. Stockholders' equity increased to P10.3 billion after the company P6 billion rights offering. Pure Foods' nine-month net income of P58.7 million reflects the substantial improvement in meats and poultry business in terms of volume and selling prices. Revenue contribution of these two divisions amounted to P5.1 billion, accounting for 76% of the company's total revenues. Leadership in processed meats continued with Pure Foods securing market shares of 47% for refrigerated and 22% for canned meats. The Group remains confident of its year-end performance despite the economic crisis. Indeed there is growing optimism about the economy as the country's fundamentals proved the wisdom of government policies on liberalization and privatization. With Ayala's solid balance sheet, the quality of its assets, and the strategic position of its subsidiaries, the company looks forward to the opportunities that the forthcoming economic upturn will bring. The foregoing is submitted in compliance with the rules of the SEC and the PSE. Very truly yours, (SGD.) RENATO O. MARZAN Managing Director AYALA CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) As of September 30, 1998 and 1997 (In Thousand Pesos) Sept. 1998 Sept. 1997 ASSETS Current Assets: Cash and cash equivalents 15,984,138 15,348,628 Accounts and notes receivable - net 6,136,393 7,119,183 Inventories 2,428,761 1,985,840 Subdivision land salable within one year 4,634,429 2,856,581 Condominium and residential units for sale 4,299,211 3,870,546 Deferred income tax and other current assets 1,506,057 712,689 Total Current Assets 34,988,989 31,893,467 Noncurrent Accounts and Notes Receivable 3,736,247 2,475,213 Land and Improvements 14,755,539 11,055,657 Investments 36,929,816 33,455,689 Property, Plant and Equipment - net 5,909,542 5,087,658 Total Insurance Assets 13,479,304 12,289,251 Other Assets 10,772,324 5,296,250 120,571,761 101,553,185 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses 9,233,352 7,001,724 Income tax payable 176,690 359,267 Loans payable 3,372,141 2,022,931 Current portion of: Long-term debt 1,424,692 1,413,521 Estimated liability for land and property 303,797 2,302,223 development Other current liabilities 151,800 380,303 Total Current Liabilities 14,662,472 13,479,969 Long-Term Debt net of current portion 34,352,935 29,989,043 Total Insurance Liabilities 8,292,253 5,848,072 Other Noncurrent Liabilities 6,979,125 2,466,157 Estimated Liability for Land and Property 1,186,480 1,248,232 Development Minority Interest 12,586,546 9,758,630 Stockholders' Equity 42,511,950 38,763,082 120,571,761 101,553,185 AYALA CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME & UNAPPROPRIATED RETAINED EARNINGS (UNAUDITED) For the Nine Months Ended September 1998 and 1997 (In Thousand Pesos) Sept. 1998 Sept. 1997 REVENUES Sales and Services 15,736,610 15,742,863 Interest, rental and investments income 7,630,951 4,948,190 Insurance premiums and commission income 1,849,007 1,705,461 Equity in net earnings of affiliates 1,343,473 1,360,397 Others 329,782 238,313 26,889,823 23,995,224 COSTS AND EXPENSES Cost of sales and expenses 10,887,418 9,528,887 General and administrative 4,421,853 3,355,529 Insurance underwriting deductions 1,747,811 1,499,449 Provision for income tax 1,019,989 1,427,528 Interest and other financing charges 2,763,584 2,006,634 20,840,655 17,818,027 INCOME BEFORE NET EARNINGS APPLICABLE TO MINORITY INTEREST 6,049,168 6,177,197 NET EARNINGS APPLICABLE TO MINORITY INTEREST 754,748 937,811 NET INCOME 5,294,420 5,239,386 UNAPPROPRIATED RETAINED EARNINGS AT BEGINNING OF PERIOD 26,056,217 20,017,765 Stock dividends 292,269 Cash Dividends 390,529 357,967 UNAPPROPRIATED RETAINED EARNINGS AT END OF PERIOD 30,667,839 24,899,184