Severe losses

The impact of COVID-19 on corporate profitability is getting clearer as publicly traded companies report their financial performance for the second quarter of 2020, the height of one of the most stringent lockdowns in the region aimed at controlling the spread of the virus.

With very few exceptions, the corporate sector either suffered losses for the first time in years or severe income declines during the quarter. For some, the worst isn’t over as only parts of the economy were allowed to reopen under the general community quarantine.

The country’s biggest lender, BDO Unibank of the Sy family, incurred a net loss of P4.5 billion for the April-June period, reversing the net income of P10.39 billion a year ago. Ayala-led Bank of the Philippine Islands also saw its net profit fall 24.6 percent in the second quarter to P5.29 billion. These losses reflected the performance of most financial institutions at the height of the crisis, with nearly all of them jacking up loan-loss provisions to brace for an expected surge in corporate delinquencies.

As the tourism sector got badly hit, leisure estate and gaming firm Belle Corp. suffered a net loss of P355 million in the second quarter, reversing the P1.21-billion net profit a year ago, after gaming revenues dried up due to the closure of casinos as part of the lockdown protocol.

Home improvement retailer Wilcon Depot Inc. saw a 95-percent drop in second-quarter net profit to P24 million due to the closure of most of its stores. The biggest blow came in April with a net loss of P248 million, though May and June saw a recovery trend with a net profit of P18 million and P253 million as the economy was gradually reopened. The country’s leading cement-maker, Holcim Philippines, registered a net loss of P88 million in the second quarter following the shutdown of its factories in Luzon due to the lockdown. Again, this was a reversal of the net profit of P716 million in the same period last year.

Conglomerates were not spared. Aboitiz Equity Ventures Inc. saw a 63-percent slump in second-quarter net profit to P2 billion as most businesses—except for the food segment—were affected by the lockdown. Gokongwei-run retailer Robinsons Retail Holdings Inc. saw a 33.2-percent decline in second-quarter net profit to P719 million as sales were weighed down by the shutdown of most shopping malls in line with the government-sanctioned quarantine measures.

Others managed to stay afloat by getting financial help from their majority owners. Beleaguered Philippine Airlines, for instance, saw a P15-billion infusion from taipan Lucio Tan, helping tide the firm over during the difficult lockdown. To save further, PAL is slashing investments and expenses, including delays in new plane deliveries and cuts in senior management pay.

Many others either suspended or reduced their expansion plans. Convenience store chain operator Philippine Seven Corp. is halving its capital outlays this year to P2 billion. Shakey’s Pizza Asia Ventures Inc. is similarly holding off the rollout of new stores and cutting its capital outlay by half this year to prepare for a tough operating environment over a prolonged period. The Po family-led restaurant group originally planned to open 38 new stores this year, but only one was opened in the first quarter.

Many other publicly owned companies have yet to report their financial performance for the second quarter, but the emerging picture is very clear. It is our hope that during this difficult economic period, private companies will exhaust all measures to survive, with retrenchment off the list or at least at the bottom of their options. Unemployment has risen sharply as it is, and the government has said it has little financial capacity to offer long-term help to the still-ballooning number of millions of Filipinos rendered jobless by the economic downturn, much less a comprehensive stimulus package to help battered companies, especially micro, small and medium enterprises, get back on their feet.

Private companies will have to step up once again to keep their workers with them as much as they could, and maintain strict health guidelines in workplaces to prevent the further spread of the disease and disruptions to their operations. Another lockdown, if the infections surge again, will spell utter disaster for an economy already laid low both by the pandemic and the government’s response, such as it has been, to the crisis.