Mar. 14, 2022 | Latest Industry Developments covering the week of Mar.

7-11, 2022

STORY OF THE WEEK:

Local fuel pump prices increased for the 10th straight week, and by the biggest yet for the year
Local oil firms implemented a big-time oil price hike last Tuesday, March 8, as Russia’s invasion of Ukraine sent world oil prices to new highs. Domestic
gasoline prices went up by at least +PHP3.60/L while diesel prices leaped by at least +PHP5.30/L, which brought the total price increase since the start
of the year to +PHP13.25/L for gasoline (still lower vs. +PHP17.10/L net increase in FY 2021) and +PHP17.50/L for diesel (higher vs. PHP13.75/L net
increase in FY 2021).

On the supply side, higher oil prices would imply higher cost of production, especially for businesses whose goods must be shipped from place to
place (such as agriculture and wholesale and retail trade) or that use fuel as a major input (such as the transportation industry). Higher costs of
production would mean lower profit margins for businesses. These extra costs could be passed on to consumers, pushing the prices up, and ultimately
leading to a decline in demand, especially for elastic (price-sensitive) goods. On the demand side, consumers will see a fall in discretionary income due
to higher transport costs, which ultimately dampens demand for goods and services.

Currently, the government is giving targeted fuel subsidies to public utility drivers and agricultural workers to mitigate the impact of higher oil prices to the
economy. The suspension of fuel excise taxes is also considered, which would cut the price of gasoline by PHP10/L and diesel by PHP6/L but in turn
would lower government revenue that is still recovering from the crippling impacts of the pandemic. There are also calls to amend the oil deregulation law
to give the government the power to intervene during oil price spikes, as well as calls to review the minimum wage.

INDUSTRY ROUNDUP:
RCBC Industry Assessment
As businesses recover from the economic fallout due to the COVID-19 pandemic, the table below provides a quick summary of the latest developments
per industry as well as our assessment on the effect/s of these developments to the recovery trajectory of industries.

Industry Current Latest Developments Assessment

Rating

Transportation Slow PLSA: Shipping costs may rise by as much as 25% ◉ Rising oil prices and shipping costs, along with
and Storage recovery disruptions in the global supply chain, brought by
1
  Philippine Liner Shipping Association (PLSA) said that
shipping costs may rise as much as 15%-25% as global
oil prices continue to skyrocket amid the Ukraine-Russia
conflict. Other operating expenses, aside from the vessel
cost, will also be affected.
 The industry is seeking fuel subsidies, the removal of
excise tax on oil, and reduction in charges imposed by
regulating agencies to soften the impact of the rising fuel
prices on shipping costs.
PHP15bn Manila port expansion starts
 ICTSI recently rolled out the expansion of its flagship
Manila International Container Terminal (MICT) with the
ongoing development of another berth (Berth 8).
 The construction of the new berth will allow MICT to
handle to handle the larger capacity ships and the
additional volume that comes with them.
DTI seeks immediate zero import tariff for e-vehicles
 Dept. of Trade and Industry (DTI) is pushing for the
immediate implementation to zero the 30% import tariff
on e-vehicles (EVs) to reduce dependency on fossil fuel
and to promote green environment.
CAMPI, TMA: Fewer vehicles sold in February
 Local automobile manufacturers saw their sales dip by -
7.3% year-on-year to 24,304 units in February after
selling fewer passenger cars.
Local cold chain industry to be developed
 Government agencies and InsightSCS Corp., a software
company specializing in logistics solutions supporting
end-to-end supply chain visibility, signed a memorandum
of understanding (MoU) to develop a cold chain
the Russia-Ukraine conflict could further slow down
recovery prospects for the shipping industry.
◉ Positive for the expansion of the industry. The
added capacity will allow the port to stay ahead of
demand and address the steadily increasing
volume, especially in the face of rising global trade.
◉ Efforts to decongest the port would greatly
benefit many industries, especially those that
import raw materials.
◉ Positive for the EV industry. Eliminating import
tariffs would lower prices, which could increase
their market share in the country.
◉ Positive for the power industry (electricity) in
terms of higher demand.
◉ Negative for manufacturers of vehicles that rely
on fuel in terms of lower market share.
◉ Negative for local oil companies due to less
dependency on fuel.
◉ Automotive industry is still adversely affected by
dampened consumer confidence due to the
pandemic.
◉ Positive for the expansion of the industry.
◉ Also positive for the agriculture industry,
especially producers and traders, in terms of
improved supply chain solutions.
2
 integrated supply chain solution in the Philippines.
 The project is expected to generate data on present and
future cold chain service gaps for agriculture and fishery
producers, retailers, end-buyers, and logistics and
delivery service providers as the basis for policy
formulation and investment promotion.

Accommodation Slow OWWA owes quarantine hotels PHP1.7bn ◉ Non-payment of OWWA to these hotels would
recovery further slow down the recovery of the industry.
 Most of these hotels are located in NCR.

Wholesale and Moderate Recovery of PH consumer goods market expected to be ◉ Negative for the recovery of the industry.
Retail Trade: -paced slower compared to that of other countries
Household and recovery  While the fast-moving consumer goods (FMCG) market Some insights from the article:
Consumer of other countries grew, the Philippine FMCG industry
Goods declined -4% year-on-year during the first nine months of  Local FMCG companies should consider
the changes to consumer behavior
2021, according to data and consulting company Kantar.
following the pandemic to boost the
 Food categories under breakfast and lunch, including
industry.
beverages, benefited the most from the shift to a work-
 E-commerce is here but there’s still room
from-home arrangement in other countries. The trend
to increase its share of the FMCG market
was not observed in the Philippines as beverages only
in the country. Companies that are able to
grew by 1% while dairy contracted by -11%. Moreover,
optimize traditional, modern and online
breakfast categories like total coffee, coffee creamer,
space to retain customers and attract new
cereal and oatmeal further declined in the last two years
ones can help drive the sector’s growth
since the pandemic started.
back to pre-pandemic numbers.
 During the height of quarantine restrictions, the
Philippines shared the same upward trend for e-
commerce activity as the other countries. From
September 2019 to September 2021, the total online
FMCG penetration increased from 5% to 7.2%. 1.8
million Filipino homes purchased in-home FMCG items
online at least once last year.

Financial and Moderate BSP pushes for digitalization in microfinance ◉ Positive for the development of the industry.
Insurance -paced  Microfinancing has a sizeable footprint in the country, ◉ Efforts to broaden the reach of financial services
Activities recovery and mobile apps are also helping improve digital loan and boosting the shift to online payments would
disbursements and online payments. also be beneficial to many industries.
 Over 144 banks engaged in microfinance services has
an estimated loan portfolio of PHP26bn, the 2,762
cooperatives in the country have a total of PHP288bn
while the 4,450 non-government microfinance firms have
a total loan portfolio of PHP50bn.
3
Manufacture of Fast Sardine manufacturers seek price increase
Food Products recovery  The Canned Sardines Association of the Philippines
would meet with DTI to discuss their plea for an increase
in the suggested retail price (SRP).
 The sector is stuck with the July 2021 SRP while
gasoline prices, crucial in catching fish using fishing
boats, have soared continuously the past weeks.
◉ Positive for the industry to retain profitability
amid rising input prices.
◉ Negative for the consumers. Rising food prices
would lead to a decline in discretionary income,
which ultimately lead to slower recovery in demand
for goods and services.

Food manufacturers back importation of refined sugar to ◉ Positive for food manufacturers in terms of
address deficiency steady supply.
 Philippine Chamber of Food Manufacturer: Due to the ◉ Negative for sugar farmers and refineries as
current local shortage of refined sugar that conforms with imported sugar brings in competition.
the specification and quality requirements of food
manufacturers particularly premium and bottlers’ refined
sugar, there is an urgent need for importation.
 Sugar Regulatory Administration (SRA) plans to import
some 200,000 metric tons of refined sugar this year.
 Refined sugar is used by food manufacturers which is
different from sugar consumed by households.

Disclaimer: The information, data, tables, views, analysis, and advice presented in this report are based on primary and secondary sources deemed reliable by RCBC and are prepared solely
for informational purposes. This report should not be deemed as providing advice, recommendations, and endorsements to purchase or sell any security or product. Neither RCBC nor any of
its subsidiaries, affiliates, directors, officers and employees makes any warranty or representation, express or implied, for the contents’ accuracy, compl eteness, or fairness or assumes any
legal liability or responsibility for any party’s use, or the results of the use, of any information in this report. Users should make their own verification and evaluation prior to making any
investment decision. Information is provided as of the date of the report and the contents are subject to change without prior notice. Any use, reproduction, disclosure, distribution,
dissemination, copying, or printing of this report without RCBC’s prior written consent or approval is strictly prohibited.