JG Summit Holdings, Inc.

Submitted to:
Prof. Glenndon C. Sobrejuanite
University of Mindanao, Davao City

In Partial Fulfillment of the Requirements in

FME 312 (3158) Treasury Management
1st Semester, S.Y 2021-2022

Submitted by:

Group A

Abaned, Cyrel

Baltazar, Dimple

Bongcales, Jeslie

Rodriguez, Julie Ann

Tima, Fritzie

October 2021
 INTRODUCTION

Holding company is a corporation who acts as a parent business entity that

controls interest of other companies. It does not manufacture, produce goods or
conduct services itself. Their purpose is to hold shares of other companies to
embodied corporate group. In the Philippines, the largest and most highly diversified
conglomerate is the JG Summit Holdings, Inc. Founded by John Robinson Lim
Gokongwei Jr. a Filipino business tycoon and philanthropist. He devoted much of his
life making the lives of every Filipinos better. Indeed, an inspiration for many around
the world. Moreover, JG Summit was started in 1957 when Universal Corn Products,
Inc. was established to operate a corn starch plant in Pasig. In 1990 they broadened
its enterprises as they operates in the manufacture and distribution of agro-industrial
products, and engages with real estate development. Eventually channelled other
resources and expanded into financial services, invested in telecommunications,
power distribution, air transportation, and petrochemicals. Providing goods and
services to the Filipinos, and a holding who lead the country to rise, and be
developed like, industrialist country. Helped millions of people, particularly,
entrepreneurs, to strive achieving outstanding life.

Currently, JG Summit Holdings possess an unconquerable character as it will

solidify its position among the conglomerates in the country, and will lead with an
established global presence. As they strive for growth with a resilient, passionate
and agile mind-set with focus on living out their purpose to provide Filipinos with
better lifestyle.
 THE TREASURY MANAGEMENT STRATEGIES OF THE COMPANY

Treasury management role is to manage the cash flow of the company as well
as optimize the company’s liquidity and mitigate its financial, operational, and
reputational risk. Creating a strategies and hedging tactics is their priority to sustain
their operational needs and to avoid unnecessary problem that may impact the
company.

The outbreak of COVID-19 had greatly affected the operation of many

businesses and companies. To continue support their operations as well as generate
revenue in this pandemic, the JG Summit Holding Inc. had developed different
strategies:

 Cost and Liquidity management- to sustain their operational and capital

expenditures, they implemented measure that focuses only on spending for
necessary operations. They manage their operation cost by reducing their
spending on unnecessary trainings, travel, and entertainment expenses.

 Operation and Consumer Safety- to continue their operation while ensuring

their consumers safety in serving their products and services, they created
digital solutions such as the RLC digital catalogues and virtual tours that
enable their clients to do online transactions. The Robinsons Mall’s personal
shopper and delivery service which enable their customers to shop safety in
their homes and the RBank sign-up app for their new and old clients for an
easy transaction. E-commerce and partnering in other social commerce like
the URC products on LazMall that leads to a more convenient of buying their
products at a reasonable price. The digital check in like the CEB that offers a
contactless flight that help minimize the face-to-face interaction of the
passengers and crew. They also manage the repatriation flights and their
cargo business to support the flow of their essential goods. If there is a
necessary for face-to-face transaction, they implement strict protocols such as
the implementation of thermal scanners, alcohol dispenser for sanitation and
proper distancing regulations.
 Leadership and People Development- by enhancing their leadership and
people development, they create a condition in where there is a proper
engagement of their employees as well as achieve a high performance. They
want to further develop their leadership and capabilities that can uphold
continuous improvement and integrity. With this strategy, it significantly
expanded the use of online learning and has accelerated the trend towards
remote employment. In this new normal, JGS continue to drive their
organizational culture as well as equip their people with skills and mind sets
that focus on adapting and building resiliency.

 Digital Transformation- to continue their operation as well as optimize core

growth and efficiency, JGS use innovative methods of working and
technology, and collaborating with ecosystem to produce value. Through
digitalization of the core, it helps the company to optimize the productivity and
pursue new business opportunities by adapting technologies.

 Customer Centricity- JG Summit understands that our employees' daily

experiences have a significant impact on their productivity and engagement,
which leads to organizational success. We believe that starting from within by
providing a fulfilling employee experience is critical as we strive to innovate
continuously to deliver a great customer experience. To achieve that goal,
we've established an Employee Experience department within Corporate
Human Resources, whose mission is to improve key touch points in the
employee journey by collecting continuous feedback, addressing employee
pain points, and driving efficient processes and systems to provide a more
fulfilling employee experience.

 Sustainability- The centrality for business resilience which companies that

integrated sustainability and transparency strategically into their business
operations, prior to the COVID-19 crisis have put an even stronger focus on it
now during the crisis. More importantly, they were much more agile in
responding to unexpected events. From the perspective, health, safety, and
 wellbeing became central to the resiliency and sustainability discussion in a
way that it has never occurred before.

HOW THESE STRATEGIES INCREASED THE COMPANY’S PROFITABILITY

The pandemic may have imposed a threat to the core businesses activities
and operations of JGS but it did not stop them specially their treasury management
in implementing strategies and improvements which greatly helped the conglomerate
company in managing its declines in the year 2020 and eventually increased its
profitability in the current year specifically in the first half of 2021. This crisis helped
the company improve its adaptability and agility by adopting a "How to win" and
"Where to play" strategies which focuses on the company's continuity in terms of its
operations and supply chain as well as ensure health and safety of the employees. It
also focuses on enhancing the availability of cash, reducing cost, and improves the
liquidity management of the company which are the main concerns and
responsibilities of the treasury management.

Aside from strategies that greatly improves the cash availability of the
company for operational purposes as well as strategies that improve the
performance of employees while ensuring health and safety which helps in
generating profit. The company is more focused on implementing strategies that will
improve the services provided by its core businesses and help the consumers in
dealing with the pandemic while ensuring to reach better profit that supports
operating and net income in the midst of crisis. Since most of their profits came from
their core businesses then it must be presented in order to clearly see the
improvements in its profitability after the strategies were incorporated. Here are the
holding company's core businesses and its profitability with the implemented
strategies:

 Universal Robina Corporation or URC - Due to the pandemic which imposed a

threat to consumers health, their buying patterns have changed into buying
products which has more nutritional benefits and provide convenience such
as prepared food or cooking which is offered at a reasonable price. In 2020,
 this pushed URC into creating a portfolio which offers products that caters the
categories for the increasing health and wellness demand of consumers.
Aside from that they have also engaged in partnerships with the E-commerce
and social commerce which enable them to expand their products availability
and relevance to its consumers by deploying a direct-to-customer selling
solution. During its 2020 implementation, they have suffered from a 1%
decline in its revenues compared to the same period of 2019 and ends the
year with a net sales amounted to Php 133.1 billion but was able to grow their
operating income by 7% amounted to Php 16.0 billion. Continuing its
operation in the first half of 2021, their revenues was able to increase by 2%
amounted to Php 68.5 billion compared to the first half of 2020 considering
that their international business presented a strong growth and its
commodities units showed great improvements. The treasury management
was able to increase its net income by 46% amounted to Php 8.5 billion.

 Robinsons Land Corporation or RLC - In 2020, they created a strategy that

showcases an interactive way of presenting its prime residential
developments by using virtual tours and digital catalogues. They made sure to
imposed high levels of safety and hygiene applied in all their properties
especially in their entry points and high touch areas. They also introduced
their customers a safety way to shop through their Rpersonal shoppers and
Rdelivery which enables them to buy their needs and wants even at home.
During its 2020 implementation, they have obtained a 17% decline in their
revenue which amounted to Php 25.40 billion, an EBITDA of Php 13.68 billion
which declined by 21%, and a net income with a 39% decline amounted to
Php 5.26 billion. Despite these declines, the treasury management continued
to have a positive outlook and still managed to have strong financial positions
with their total assets amounted to Php 215.2 billion and an amount of Php
102.7 billion in their company's shareholders equity and it also managed to
distribute cash dividends to its shareholders amounted to Php 2.6 billion. In
the first half of 2021, they were able to increase their revenues up to 55%
amounted to Php 25.6 billion considering that even with the pandemic; they
were able to impose growth in their hotels and malls. They were also able to
generate a 48% increase in their net income amounted to Php 5.45 billion and
 this was due to their innovative approach of enhanced customer service and
interactive way of showcasing hotel features which improved their
engagement on residential operation and property development as well as
increased the engagement of its customers in its hotels, malls, offices, and
industrials.

 Cebu Air, Inc. - The occurrence of pandemic interrupted the operations of

CEB due to the implementation of health and safety protocols with
consideration to the nature of its business that involves face to face
transactions specifically travelling. In order for them to continue its operations,
they introduced contactless flights as part of their strategy that reduces the
passengers and crew face to face interactions which aimed at helping the
consumers regain their confidence in travelling. They came up with this
strategy in order to improve their operational and financial performance which
immensely dropped in the year 2020 compared to year 2019. Despite the
improvements that they made, the company still obtained losses from its 2019
revenue amounted to Php 84.8 billion with an operating income amounted to
Php 12.6 billion and a net income of Php 9.1 billion dropped in the year 2020.
Their revenues declined by 73% amounted to Php 22.6 billion which resulted
an amount of Php 20.8 billion operating loss and an amount of Php 22.2
billion net loss after tax. In the first half of 2021, the company still suffered
from losses amounted to Php 13.8 billion. However, they have managed to
put considerable improvements in their cargo business and was able to
sustain the flow of essential goods. Also because of repatriation flights, they
have managed to fly on demand. This accounted for a quarter of their total
revenue which is 24% or an amount of Php 5.4 billion and during the first half
of 2021, its cargo business revenue showed an increase of 26.7% which
amounted to Php 2.815 billion from 2.221 billion obtained in the first half of the
previous year that was due to higher yield obtained from its cargo services
and an increase in its volumes carried by 3%. This showed potential of its
cargo business to generate more revenues for the business.
 JG Summit Petrochemicals Group- During the first quarter of 2020, the market
was deemed to be unfavourable since the industry in terms of crude oil and
naphtha experienced a drop in its global prices as well as the PE exports of
US surging into the ASEAN region. In addition to that, the local demand and
exports activity was greatly affected due to the pandemic and the strict
quarantines implemented worldwide. However, they resiliently continued to
perform their delivery commitments and manufacturing when their integrated
operations restarted in the early march of the year 2020. They improved their
operations which resulted to a higher full year rates of its plant utilization
which allowed them in the second half of 2020 to start receiving better
earnings. During its 2020 improvements, the company still reached a revenue
that was 27% lower than in year 2019 which amounted to Php 21.3 billion and
an EBITDA amounted to Php 451 million which declined by 16 % which is due
to the improved margins in the second half of the year 2020 and because of
strong polymers performance. But in the first half of 2021, it was able to
improve its revenue and increase it by 2.5 times which amounted to Php 18.1
billion which was due to their increased sales volume as well as higher selling
prices which also turned their net income positive with an amount of Php 329
million from its net loss in 2020 amounting to Php 2.7 billion.

 Robinsons Bank Corporation- The pandemic did not disrupt their operations
and still continued to deliver its banking services while ensuring welfare and
safety of its customers or clients and all Rbankers. They were quick to adapt
and turn the situation into an opportunity for them to accelerate their digital
initiatives included in their five year strategic plan which helped them in
making a good and positive financial performance. This strategy involves
customer centric initiatives wherein it includes a mobile app which is called
RBank digital and a solution with regards to cashless payment called Quick R
as well as banking agents which is called RBankMo that allows basic financial
services to be provided in its customers in a more convenient way. During its
2020 implementation, the bank was able to generate a net income that is 30%
higher than in 2019 which amounted to Php 935 million and was able to reach
total revenue that is 13% higher with a year on year basis amounted to Php
 9.2 billion. It was able to grow its total loans by 8.2% amounted to Php 86.8
billion due to the implementation of the five year strategic plan which
increased consumer loans. It was able to outperformed the 6.1% industry's
growth by its increased year on year total assets amounted to Php 151.2
billion or 15.4% and it was able to gain a 20.3% higher year on year total
deposits which amounted to Php 117.4 billion that was due to the support of
the development of CASA deposits which increased by 26.1%.

Generally, JG Summit Holdings revenues in the year 2020 was 27% lower
than the year 2019 which amounted to Php 221.6 billion and obtained a net income
of Php 450 million due to the pandemic. Considering the disruptions in its business
activities and operations to which its air transport business was the one which was
greatly affected due to the nature of its business and because of the implementation
of health and safety protocols as well as strict quarantines and social distancing
where it resulted to the declines in its core businesses revenues and net income.
However, the conglomerate company became more resilient and quickly adapted to
the current conditions in which its treasury management and all the involved
necessary authorities planned and implemented strategies which imposed
improvements that helped their core businesses recover from its declines and helped
in improving their cash management, liquidity management and reduce their cost
while providing better quality services to their customers in the midst of pandemic. In
the first half of 2021, the holdings company was able to show recovery and increase
its core profits by 19% which amounted to Php 1.7 billion. The considerable recovery
became more evident in its flow of core net income which amounted to Php 295
million in its quarter to quarter basis in the first quarter of the year 2021 and also
generated an increase in its second quarter by Php 1.4 billion. However, their air
transport business was not able to recover and it was still being challenged by the
on-going travels as well as imposed mobility restrictions. But the conglomerate
company believed that they will remained competitive as they have achieved a
stable revenue from its food and banking operations which supported their claim of
having a strong continued recovery as it presented that excluding their airline, their
core net income in the first half of 2021 was able to grow by 68% or an amount of
Php 11 billion in its year on year basis which is 24% higher compared to their core
profits in the first half of 2019 in which they only obtained an amount of Php 9 billion.
 REFLECTION

JG Summit Holdings, Inc. was established to provide better life for the
Filipinos, as it continues making products and services to the highest standards. As it
hold its title as the leading conglomerate, not just in the Philippines but as well as in
the Asia. As the company running over six decades, it contributes great impact in our
economy, as it gives progress for the country’s economic growth.

As a conglomerate company, various risks encounter and plan to take an

action as they conduct business separately and independently. Under JG Summit
Holdings, real estates, food manufacturing, hotels, property development, banking
institutions, air transportations and others maintained the stability of the company,
which in fact, the JG Summit core profits rise up to 19% and successfully maintained
the food and banking revenues, and continue to show excellent recovery in
industries that there were more severely hit by the first extended community
quarantine (ECQ) in 2Q last year, especially real estate and petrochemicals. The
strong volumes and higher margins by the use of cost and liquidity management and
other strategies, net income increase up to P1.7 billion for the first half of 2021
despite of pandemic.

Moreover, JG Summit Holdings, Inc. applied and used tactics of treasury

management of JG Summit Holdings, Inc. yielded good results where, JGS profits
grew at a quicker rate than the company's consolidated revenues, which grew a
higher percentage year over year up to P128.1 billion. As a matter of fact, JGS is a
great company, which is very confident that the group will be able to navigate the
challenges for the rest of the year and beyond, because of their diverse portfolio and
nimble efforts. That’s why, higher plant utilization rates were the primary driver of top
line growth. They continue to focus on answering their customers' requirements
through digitalization as well as cost-effective and sustainable operations by
employing the technique of client centricity. In addition, as a future treasurer this kind
of conglomerate company really affects our perspective because it helps us to find
which better company to serve with their better tactics that will help the company in
any circumstances for the efficiency, stability, and financial growth. In essence, the
company's core profitability improved as it recovered from its first full lockdown in the
second quarter of last year.

On the other hand, the role of treasury management in the financial

management is a part of financial management that deals with the planning and
control of a company's cash and funds. Financial management is a managerial
activity that deals with the management of a company's financial resources in order
to fulfil the company's overall goal. In the future, if we become a financial analyst, it
will not be hard for us to deal with situations concerning on financial decision making
related since the learnings that we can earn from this subject will help us how to
face, solve and deal with the situations.

In this activity, we learned how important treasury management is, in every

business because it allows a company to achieve its long-term goals. It helps the
company to manage all its financial affairs from accumulating enough funds to
support their financial and operational needs to creating strategies to mitigate the
risk that can affect the business operation. The treasury department also handles the
credit granting of a company to ensure that they can have a return of profit from it.
They ensure that there will be a strict collection of payments as well as implementing
a strict credit policy to its clients.

As a future treasurer, it is important to know every action that the company

will take. Ensuring that there is enough level of cash flows is one of their priorities,
because it is the one that help the company to continue its operation. I should also
ensure that the cash outflows will match with scheduled cash inflows so that the
company can sustain its short-term obligations.