Listed infrastructure multinational EEI Corpo. posted a net loss of -P701.12 million in the second quarter, primarily due to losses from its equity in associates and joint ventures, primarily its unit Al Rushaid Construction Co. Ltd., or ARCC.
Consolidated revenues rose by 25 percent from a year ago to P7.85 billion, but its gross profit shrank by 21 percent year-on-year to P515 million due to delays in materials, effects of bad weather, and license approvals.
Brokerage house and research firm Regina Capital Development Corp., or RCDC, said the growth in EEI’s topline was mainly driven by improving construction contracts.
“The company’s unworked portion of existing contracts is at P47.4 billion but expects a robust inflow of projects. The Build, Better, More Infrastructure Program is expected to boost construction services demand,” RCDC said.
It added that the construction sector experienced growth in gross fixed capital formation in 2021 and 2022, an indication of potential recovery despite the economic challenges.
However, the sector’s growth in the second quarter was below average, which RCDC said revealed economic risks.
The price index, which has been on a downtrend since October 2022, could be a potential growth source.
BBM’s main growth driver
The BBM program, which will continue to stimulate domestic construction demand, will also benefit the sector.
“Given the challenges posed by the slowed growth in gross capital formation for construction, as well as the impact of losses from equity in associates and joint ventures on EEI’s earnings, we are reducing our target to P5.30 per share, down from P7.50. This adjustment reflects the cautious outlook for the construction sector and the need for EEI to address its associated losses while also acknowledging potential future opportunities such as the government’s BBM infrastructure program. Hence, we are placing a “hold” recommendation on EEI.
RCDC cited the updates on the company that merited its recommendation.
EEI has continued with its reorganization. In a report to the stock market back in September 2023, its board approved the divestment of the company’s 60 percent interest in its subsidiary, BiotechJP Corp., a company engaged in the manufacture of food and therapeutic food products, as it focuses on its core business which is construction.
Real estate brand Filigree tapped EEI Corp. for the general construction works of its newest project, Two Botanika, in Alabang, Muntinlupa.
EEI’s unit, EEI Power Corp. is set to develop an electronic vehicle charging system through a new corporation after partnering with a cloud solution and service provider.
EEI Power said it would have a 40 percent stake in the new corporation that it would establish together with SysNet Integrators Inc.