Company stays vigilant regarding U.S. tariffs and worldwide economic conditions

Aboitiz Group Braced for Indirect Impacts of Trade Tensions

The Aboitiz Group, a major Philippine conglomerate, expects minor immediate repercussions from the new US tariffs on Philippine exports, but remains watchful of potential indirect effects as global tensions intensify.

At a briefing on April 28, 2025, Jose Emmanuel Hilado, chief financial officer of Aboitiz Equity Ventures (AEV), stated the Philippines' limited reliance on exports reduces the direct impact of the tariffs. However, Hilado warned that escalating tensions could create indirect consequences.

"AEV doesn't anticipate much immediate impact, but given the interconnected nature of the global economy, any escalation of tensions could trigger indirect effects," Hilado said.

AEV serves as the investment holding company for the Aboitiz Group. US President Donald Trump recently imposed a 17 percent tariff on Philippine goods heading to the US, under the "Liberation Day" policy.

Hilado mentioned several ways these risks might manifest, such as commodity price instability, supply chain disruptions, or currency exchange rate fluctuations. "We're closely monitoring these developments and assessing potential risks, but so far, there's no immediate cause for concern," he added.

Tristan Aboitiz, president and CEO of Aboitiz Food Group, initially focused on the possibility of higher raw material costs. Commodities like corn, soybeans, and wheat (predominantly produced in the US) could experience price fluctuations if sourced more frequently due to trade concessions, Aboitiz explained. Increased demand for these commodities could lead to temporary price surges.

However, Aboitiz highlighted that in the long term, global supply and demand dynamics, not tariffs alone, would shape commodity prices more significantly.

"My primary concern is whether this trade tension could contribute to a global economic slowdown, which would certainly affect consumer behavior in our target markets. A global recession would negatively impact demand for our products, while lower raw material prices could help offset some costs," he said.

Despite these concerns, Aboitiz did not expect the tariffs to significantly impact their consumer brands, as they primarily cater to local markets.

"It's still early to draw any conclusions about direct impacts, and at this stage, we're not seeing any immediate impacts on our operations," he added.

In terms of capital expenditures for 2025, AEV has allocated P105 billion, representing a 37 percent increase from 2024. The majority of this investment will go toward Aboitiz Power for its renewable energy pipeline and distribution business, followed by AboitizInfra Capital for economic estate expansion and tower acquisitions. The remainder will support Union Bank's digital infrastructure expansion and Aboitiz Foods' swine farm development and research farms.

The capital expenditures will be funded by a combination of loans and bonds, including the maturing AEV bond worth approximately P5 billion and a callable bond of about P9 billion.

"We'll allocate funds considering current interest rates, which are on a downward trend, but still subject to volatility. We'll prioritize the most cost-efficient options for us now, whether it's bonds or loans," Hilado concluded.

Indirect Implications for Aboitiz Group

Beyond direct export-related activities, escalating global trade tensions pose several indirect risks for the Aboitiz Group:

Commodity Price Volatility - Price fluctuations for fuels and raw materials tied to international markets could impact costs, primarily for AEV's power generation segment.
Supply Chain Disruptions - Foreign tensions may delay procurement or increase costs for imported equipment and materials required for AEV's operations and expansion projects.
Foreign Exchange Fluctuations - Weak peso or volatile exchange rates could affect debt servicing and dollar-denominated obligations, particularly for overseas investments totaling approximately 26% of AEV's 2024 revenue.
Investor Sentiment - Escalating tensions may dampen foreign investment inflows into Philippine infrastructure projects, indirectly impacting AEV's capital-raising abilities or joint ventures in energy and banking sectors.

The Aboitiz Group, however, emphasizes the resilience of its domestic market (74% of 2024 revenues) and prioritizes local expansion, notably in renewable energy, to counterbalance global risks. Its aggressive P105-billion 2025 capex allocation focuses on safeguarding operations through self-sustaining projects. Continuous monitoring of trade developments remains central to its risk assessment.

AEV's power generation segment may face commodity price volatility due to escalating global trade tensions, as the prices of fuels and raw materials tied to international markets could be affected.
Foreign tensions might cause supply chain disruptions for the Aboitiz Group, potentially delaying procurement or increasing costs for imported equipment and materials necessary for their operations and expansion projects.
Weak peso or volatile exchange rates resulting from global trade tensions could affect AEV's debt servicing and dollar-denominated obligations, particularly for overseas investments that account for approximately 26% of AEV's 2024 revenue.
Escalating trade tensions could negatively impact foreign investment inflows into Philippine infrastructure projects, indirectly affecting the Aboitiz Group's capital-raising abilities or joint ventures in energy and banking sectors.
Due to these indirect risks, the Aboitiz Group highlights the resilience of its domestic market, which makes up 74% of 2024 revenues, prioritizing local expansion, especially in renewable energy, to balance potential global risks.
However, the Aboitiz Group continues to monitor trade developments closely as they remain central to its risk assessment, and their aggressive P105-billion 2025 capex allocation focuses on safeguarding operations through self-sustaining projects.