Ayala Corp. unit seeks more capital amid forex losses


Posted at Jun 04 2008 06:48 PM | Updated as of Jun 05 2008 02:48 AM




Integrated Microelectronics Inc. (IMI), which is 68-percent owned by leading conglomerate Ayala Corp., is seeking additional capital from its shareholders to support its expansion plans after it incurred heavy losses from currency swings.


Year to date, IMI booked $23.2 million in realized losses after it hedged its peso expenses in 2007, when the local currency was appreciating against the US dollar.


The peso was Asia's best performing currency last year, gaining 19 percent against the greenback. However, at the start of 2008, the peso reversed its momentum.


IMI, whose functional currency is the dollar, has estimated further market-to-market losses of $10.3 million arising from existing hedging contracts.


"The board of directors of IMI has agreed to put in place a short-term program to correct such position by June 30.  This is an unfortunate turn of events but we believe that this step helps put an end to any risk exposure the company faces from its past position," said Ayala Corp. chief executive officer, Jaime Augusto Zobel de Ayala.


"Ayala has been committed to supporting IMI's initiatives and remains excited by its growth prospects. We are prepared to subscribe to more than our proportionate share in the equity call as part of our desire to support the company in its growth initiatives irrespective of this unfortunate currency position loss."


In a phone interview, Ayala Corp. chief financial officer Rufino Luis Manotok said IMI is looking to raise "slightly more than a billion pesos" in equity to fund its expansion overseas, "probably in North America and Europe where there are a lot of electronic companies it can service."


"IMI will also terminate some of its contracts with foreign banks and enter into a new set of contracts to cover its peso operating expenses," Manotok added.


IMI is a regional electronics manufacturing services provider that offers flexible solutions such as design and product development, process and product engineering, test development, logistics and manufacturing solutions for the computing, communications, consumer, automotive, industrial, and medical electronics segments.


The company runs factories in Laguna, Cebu, Cavite and a design office in Alabang. It has five plants in China and one plant each in Singapore, US and Japan.


IMI's revenues grew 15 percent in the first five months from the year-ago level due to higher sales volume and average selling prices to key customers.


Excluding its hedging losses, IMI's net income as of May 2008 improved by 48 percent year-on-year.


Ayala Corp. said its share of the realized and mark-to-market losses will be reflected in its second-quarter financial statements.