Weak peso brings costs, uncertainty, says Gokongwei

PHILIPPINE STAR/WALTER BOLLOZOS

THE PHILIPPINE peso’s recent weakness against the dollar will bring cost pressures and additional uncertainty to corporates, according to the top official of listed conglomerate JG Summit Holdings, Inc.

“As business people, we don’t like any abrupt changes. The weakening of the peso in the last few days is a little bit fast,” JG Summit President and Chief Executive Officer Lance Y. Gokongwei said at the sidelines of the BusinessWorld Economic Forum 2024 in Taguig City on Wednesday.

“The exchange rate moving down, of course, for a certain of our industries is negative. Definitely, anything abrupt creates more uncertainty and some cost pressures. A lot of the inputs we use are imported — fuel especially,” Mr. Gokongwei added.

The peso ended at P58.27 per dollar on Tuesday, which was its weakest close in over 18 months.

On Wednesday, the local unit rebounded by 21 centavos to P58.06 per dollar.

SUPPORT FOR PETROCHEMICAL INDUSTRYMeanwhile, Mr. Gokongwei said government support is needed to boost the operations of JG Summit’s petrochemical subsidiary JG Summit Olefins Corp. (JGSOC), which has been hampered by high oil prices and overcapacity. 

“We need to work with the government. We need to develop a manufacturing policy to support vital industries in the Philippines, including the petrochemical industry,” he said. 

“Petrochemicals are the building blocks essential to the manufacture of goods that we use in our daily lives, such as food packaging, clothes, electronic gadgets, vehicles, furniture, appliances, medicines, and a whole lot more. A stable and thriving domestic petrochemical industry will guarantee a steady supply of critical manufacturing ingredients to scale up our manufacturing competitiveness that, in turn, will generate more jobs and create prosperity,” Mr. Gokongwei added.

In January, JGSOC inaugurated a P150-billion expanded petrochemical facility at Batangas City.

JGSOC posted a wider net loss of P3.3 billion in the first quarter from P2.7 billion last year as a result of higher interest expenses, depreciation on new facilities, and foreign exchange losses.

According to Mr. Gokongwei, JGSOC’s operations have been affected by surging oil prices following tensions in Europe, as well as Chinese exports.

“I think we’re really facing double whammy of increasing input prices because of very high oil prices, partially driven by the war in Ukraine. But secondly, there’s rampant overcapacity, including exports out of China for petrochemicals,” he said.

“It’s the single largest investment we’ve made at P150 billion. We do need support and assistance from the government, particularly in looking at illegal dumping and other unfair trade measures,” Mr. Gokongwei added.

Asked on his projection for JGSOC’s recovery, Mr. Gokongwei did not provide a specific timeline but said they will work through the “very tough time” they’re currently experiencing.

“We will work through it. But it’s not going to be easy. It’s a long-term investment, as they say,” he said.

On the other hand, Mr. Gokongwei said Robinsons Land Corp. (RLC) is scheduled to open more properties, such as the five-storey upscale Opus Mall at Bridgetowne District, Quezon City in July.

He also noted the scheduled launch of GBF Towers 1 and 2 office buildings, both in Bridgetowne, as well as the progressive opening of NUSTAR Resort & Casino in Cebu by the third and fourth quarters.

Mr. Gokongwei also serves as RLC’s chairman, president, and CEO.

“We’re trying to grow across all fronts. We have various businesses spanning malls, offices, hotels, logistics, and destination estates,” he said.

On Wednesday, JG Summit fell by 1.2% or 40 centavos to P33.05 per share. — Revin Mikhael D. Ochave