Ayala Corporation SWOT & PESTLE Analysis

Strength

1. Strong Financial growth and profitability: Ayala Corporation has shown a pretty strong financial performance over the last few years. In financial year 2016-17, its net income increased by 18.58% to reach ₱11.56 Billion while in the previous financial year i.e. 2015-16, it had recorded a growth of 10.8%. In fiscal 2017, it climbed ₱ 17.8 billion in sales revenue with a robust growth of approximately 30%. Ayala Corp has been declaring healthy dividend payout over the last 5 years with a minimum of 16% and a maximum of 27%. Ayala stood at 1216th position in Fortune Global 2000 for the year 2017. Ayala Corporation’s net income hiked seven percent in early 2018 to ₱16.1 billion year- on-year, riding on the wave of robust performance of its real estate, telecommunications, and power business sectors. AC Energy’s equity earnings contribution more than doubled in the first half of fiscal 2018. Solid performance across wind, geothermal and thermal sectors, boosted by demand for services elevated AC Energy’s earnings. Ayala Group’s balance sheet remained very strong with enough power to undertake investments and cover its dividend and debt obligations. As of June 2018, parent level cash stood at ₱15.7 billion while net debt stood at ₱93.5 billion.

2. Strong and diverse portfolio of the business units: Ayala Land Inc ($10 B market cap) in real estate, BPI ($7 B market cap) in financial services, Globe telecom ($4 B market cap) in telecommunications, Manila Water ($1.2 B market cap) in water utilities, AC Energy & AC Infra in power and transport, AC Industrials in industrial technologies, AC Health & AC Education in social infrastructure form a very strong and diverse portfolio base of business units of Ayala Corporation with each unit having many decades of business experience.
Diversification for any Company is essential to the long-term viability of the company. Of course it comes with its own set of risks, but it is great way to help regulate cash flow throughout the year, tried and test growth strategy to make more sales to existing and new customers and entering newer markets which otherwise would have been closed. Besides, spreading risk the organization gains efficiency by putting to use underutilized resources and competences that it cannot effectively close or sell. A well-diversified portfolio as in the case of Ayala Group, also helps boost market power, as it makes it increasingly equips it to cross-subsidize one business from the surpluses earned by another in a manner that competitors may fail to do.

3. Excellent corporate governance framework: Corporate governance at Ayala has been one of the pillars of strength for its sustained growth. Ayala abides by the principles of good governance, including transparency, integrity, accountability, and fairness. They maintain that effective corporate governance is essential to the accomplishment of strategic goals. Ayala Group’s corporate governance system includes a combination of internal and external mechanisms such as the structure of the board of directors and committees, oversight of management, and sound policies and controls. Ayala Corporation’s governance practices have been recognized several times in various awards and publications in the Philippines. Ayala was also named best among Philippine companies in the 2016 Corporate Governance Poll of Asiamoney. In 2016, at the Fund Managers Association of the Philippines Investors’ Forum, Ayala Corporation was also one of the business groups to receive the inaugural Institutional Investors’ Governance Awards which is given to publicly-listed companies. Ayala Corporation also aced the list of Finance Asia’s best Managed Companies, Most Committed to Corporate Governance 2017, for the third consecutive year in the poll conducted by FinanceAsia.

4. Strategies aligned towards sustainable development: The policies and strategies at Ayala Corporation have always been aligned towards sustainable development goals set by United Nations. Ayala contributes to the following sustainable goals like no poverty, zero hunger, good health & wellbeing, quality education, gender equality, affordable & clean energy, clean water & sanitation, decent work & economic growth, sustainable cities & communities, responsible consumption & production, etc. For example to promote good health and wellbeing, Generika (The Generika Ayala Lifesavers are a professional women's volleyball team owned by Actimed, Inc. in partnership with Ayala Corporation) provided affordable and quality medicines across 674 stores nationwide while Familydoc (A new chain of 3-in-1 primary care clinics by Ayala Healthcare Holdings) provided affordable primary medical care to 16000 patients through its six community-based branches. Another example was how Ayala reduced the effect on climate by promoting more usage of sustainable energy. BPI gave P86.3 Billion in loans for sustainable energy financing. 5 threatened plants and 20 threatened land animals were sighted and protected in El Nido Resorts and Lio Estate owned by Ayala Land.

Weakness

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Opportunity

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Threat

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Political

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Economic

1. Resilience to global economic slowdown in 2016: Slower economic recovery in 2016 weakened the net exports; however, increasing domestic demand pushed the GDP growth rate of Philippines to 6.8 percent. The consumption growth remained strong due to monetary policies which kept the interest rates low and supported healthy expansion in consumer lending. Ayala Corporation also reaped the benefits of consumption growth with a strong revenue growth and is expected to continue the same.

2. Growth prospects are subjected to certain downside risks: Looking from external front, increasing global interest rates could weaken the Philippine currency peso, and this could adversely affect capital inflows to the Philippines resulting in surge of domestic inflation. Global crude oil prices are expected to rise in 2018, which could also increase inflationary pressures. Hence, there are chances that Ayala Corporation may have to cope up to decrease in demand due to higher inflation rates, so proper mitigation strategy and implementation on this front becomes a necessity for the company.

Social

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Technological

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Legal

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Environmental

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