Top Philippine conglomerates are signaling a strategic shift, bracing for higher operating costs amid the war within the Middle East and ongoing supply chain instability, at the same time as they continue to be optimistic about long-term growth.
“Right now, with all of this conflict within the Middle East, I assume possibly there’s still plenty of fear in all of us. But having said that, I assume the lights go on, business goes on, capex (capital expenditure) goes on. After all, there are more risks, and possibly the thing that will likely be higher is the opex (operating expenses). So, we just must make our business more efficient, lower our margins, to survive these temporary hiccups,” SM Investments Corp. Vice-Chairperson Teresita T. Sy-Coson said during a panel discussion on the Philippine Stock Exchange’s InvestPH conference on Mar. 17.
She also expressed hope that the present volatility could be short-lived, noting that the broader business community stays hopeful.
“I’d prefer to think that it’s temporary, and as I can see from the survey, I feel most of us are optimistic that it’s not going to take very long. And I feel that we want prayers for that,” she added.
Jaime Augusto Zobel de Ayala, chairman of Ayala Corp., said that the present environment serves as a reminder of how “intertwined” global economies have grow to be, no matter isolationist trends.
“It’s a reminder to all of us that as a community of businessmen, a community of nations, I feel all of us must take the additional step to proceed constructing good relations with one another from each an economic and political perspective… I feel it’s a credit to our President this time that he’s actually a one that enjoys constructing linkages with the world, and we’re lucky to have that,” he said.
He added that these linkages are only as vital throughout the domestic market. “A day doesn’t go by—even in our local environment—where we in our group don’t understand that every one of our businesses are really linked up to one another. All of us must make that effort.”
Addressing the particular nature of the present crisis, he said that his primary concern is the physical availability of resources slightly than simply fluctuating costs.
“My concern is less price volatility of what’s happening to the energy sector. I feel that’s just the truth of the world we’re facing. My concern is a drying up of supply… If we return to something that happened within the 70s, which was really a drying up of supply to a bigger system, that will really have a giant effect on all of us.”
To navigate these risks, he called for a dual-track management style that addresses immediate supply threats while protecting future commitments. “When you will have a crisis of this magnitude, you will have two frames of mind. One is the crisis mind set which is the now and the opposite one is the long term… we are able to’t escape from the incontrovertible fact that we want a short-term plan to handle it. And I feel all of us are faced with a situation where we’ve got to have our brains work on those two fronts,” he said.
Francisco C. Sebastian, chairman of GT Capital Holdings, Inc., noted that the economic system stays robust, characterised by solid income, healthy money flows, and significant bank capital buffers. He specifically credited the role of national regulators in maintaining this stability.
“I feel the banks are very healthy due to our BSP (Bangkok Sentral ng Pilipinas) and financial regulators to start out with. Our economic system is powerful and over time we’ve got built up income and money flows that allow us to be strong… Our banks, I feel no complaints here, we’re doing quite well. Good capital buffers and good income, good returns and good dividends too,” he said.
Mr. Sebastian added that the group’s core businesses have been well-positioned to ride the wave of the country’s improving economic fundamentals.
“We’ve been one beneficiary of those demographics. Toyota has been a beneficiary of the rising income and demographics… I feel I’ll [not] forget that EV cars can even profit from the present drivers,” he said. — A.G.C.Magno