First, I am happy to note that after a very challenging 2018, the JG Summit Group once again emerged stronger and ended 2019 with strong operating results. This strong performance has also been well accepted by the capital markets with a sharp recovery in our share price and consequently made our stock the top performer in the Philippine Stock Exchange for 2019. The company’s resiliency is driven by the diversity of our portfolio and the disciplined approach on how we deployed capital over the past years as well as our prudence in spending. Over the past year, our profitability and margins grew faster than revenues amidst the backdrop of economic slowdown in both regional and global fronts. We saw uncertainties in trade policies and weaker investment growth dragging the expansion in the global economy. Closer to our home market, the delayed approval of the 2019 government budget, the public spending ban prior to the May elections, as well as the slower rate of increase in private investments and exports, resulted in a year-on-year deceleration in the Philippine economic growth. Nonetheless, lower inflation due to steady prices of food and energy, better labor market environment and stable level of remittances helped in the recovery of our country’s private consumption growth, benefiting JGS’ consumer-facing businesses.
In particular, the easing inflation, receding interest rates, improving liquidity and favorable consumer sentiment in the Philippines enabled the strong revenue growth from our Food, Airline, Real Estate and Banking businesses to outweigh the negative impact of the US-China trade tensions to our Petrochemical business. Beyond better customer perception and profitability, we are pleased with the increasing investor confidence in the company as JGS ended 2019 with the highest share price return among the top 30 companies in the Philippine Stock Exchange.
Since handing over the Chief Executive Officer (CEO) role to Lance Gokongwei last 2018, I have sustained my support as the Chairman of JG Summit by providing oversight, guidance and advice on the long-term growth strategies including digital transformation, innovation, expansion, mergers & acquisitions and capital allocation. For instance, I have been extending strategic counsel to JG Summit Petrochemicals Group (JGSPG) to ensure the success of its expansion projects that will allow us to move further downstream with new derivatives, and diversify into value-added polymers.
At the Board level, we made some changes in the composition of the Board Committees in 2019 to align with the best corporate governance practices in the country. I have passed on my chairmanship of the Corporate Governance and Board Risk Oversight Committees to independent directors, Mr. Jose Pardo and Mr. Renato De Guzman, respectively. Mr. Antonio Go, likewise an independent director, remains the chairman of our Audit Committee. Apart from appointing independent directors as Board Committee chairpersons, we have ensured that they constitute majority of each of the Board Committees.
In 2019, I also supported Lance as he embarked on an enterprise transformation journey where we revisited the conglomerate’s purpose, core values, overall vision and strategy, and defined the role of JG Summit as a parent company. Our governance structure has evolved as we have shifted greater decision-making and accountability to the Strategic Business Units (SBU) after the appointment of Chief Executive Officers and Chief Financial Officers. This has enabled JGS’ Executive Committee to focus on capital allocation in new verticals, group-wide strategy and portfolio roles as well as the selection and leadership development of top executives while observing balance between family and professional managers to ensure stewardship in the organization. Furthermore, from an operational and tactical annual business plan, the group’s strategy planning is now multi-year with clear vision on where to play and how to win.
In line with this, we have begun embedding a group-wide, inclusive and collaborative strategic planning framework across JGS. Long-term ambitions have been crafted in 2019 and we will monitor the group’s progress moving forward.
We are also re-imagining the Corporate Center as an entity that enables the SBUs in their business growth.
The series of strategic planning sessions we have undergone surfaced various synergistic opportunities within our ecosystem. We have entered into new businesses and partnerships in 2019 that will play an important role in generating additional value through revenue or cost efficiencies and productivity moving forward. We incorporated Data Analytics Ventures, Inc. to build a leading digital lifestyle rewards program and create a robust data infrastructure and analytics business to support the group; Digital Equity Ventures (DEV) which is JGS’ venture capital arm for Southeast Asian digital start-ups, whose technologies can be applied and tested within the JGS ecosystem; and Luzon International Premiere Airport Development Corporation which has started to operate and maintain Clark International Airport last August 2019. We have also formed DHL Summit Solutions, Inc. (DSSI), a joint venture with DHL Supply Chain, to provide the best-in-class transport and distribution solutions for Philippine-based and international businesses in the country.
The coming years are going to be exciting as we witness the journey of bringing JGS to new heights. I remember when Mr. John Gokongwei, Jr. entrusted the stewardship of the business to me as Chairman & CEO in early 2000s. JGS shifted into the age of globalization with Universal Robina Corporation’s (URC) push into multiple ASEAN markets and Cebu Air, Inc.’s (CEB) regional approach, and the age of acquisitions and partnerships with strategic alliances and joint ventures with strong players in their respective industries. And now, I passed on the baton to Lance Gokongwei as CEO. I am confident about JGS’ future under his leadership as we all chart a new chapter for the group.
5-year roadmaps have been put in place where we have defined the visions and goals of each of the businesses, and 2020 is the first year of realizing these. In general, we aim to strengthen our positions in our respective industries as well as grow sustainably. We will also continue to develop our emerging businesses & accelerate digitalization and new ways of working that will further unlock the value of the ecosystem synergies within the group.
Nonetheless, we will remain cautious of potential risks that could impact each of our businesses. We believe that the intense competition will continue to linger especially in URC while the potential approval of the proposed Corporate Income Tax and Incentive Rationalization Act (CITIRA) may affect office and warehouse demand for RLC. In addition, the volatility in commodity prices could swing both CEB and JGSPG’s profitability. Hence, we will maintain our focus on our core capabilities to protect and strengthen our competitive advantage, and we will undertake a more active risk management for the group.
In the global environment, one of the risks that remain apparent is the trade dispute between the US and China which could further impact worldwide trade dynamics. There are also geopolitical tensions and economic policy uncertainties that could influence the overall investor sentiment. On top of that, the new coronavirus disease (COVID-19) outbreak has become a global pandemic and has already disrupted many businesses around the world. Given the uncertainties, we, at JGS, are currently assessing the multifarious risks and corresponding impacts of the outbreak and the rapid spread of the virus on our overall financial condition and the operations of our subsidiaries. We remain focused on our key priorities in response to this situation such as protecting our employees’ health and safety; supporting our customers & communities; and strengthening our business continuity plan amidst a difficult backdrop.
With the disruption, we expect that the Philippines’ macroeconomic environment will be challenged in 2020. Economic growth will decelerate especially in the first half of the year as the country’s quarantine measures would negatively impact the domestic demand and key industries like tourism and trade. On the other hand, we believe that the Philippines will recover in 2021 driven by strong government spending and infrastructure investments. In addition, with the stable inflation rate, and proactive economic fiscal and monetary policies from the government, public spending & private consumption is expected to pivot back the economy back to its growth trajectory. This is valuable for JG Summit as we are exposed to approximately 80% of the average Filipino’s spending and a clear proxy of the Philippine economy.
While we acknowledge the risks that can affect our businesses in 2020, we are confident that the diversity of our portfolio, JGS’ strong leadership team and our disciplined financial management will help sustain the conglomerate’s growth and profitability.
In closing, I would like to express my gratitude to our board of directors, management, and JGS employees for getting us to where we are now, and to you, our shareholders for the trust and support over the years. I look forward to your continued confidence in JGS as we embark on the next phase of transformation and growth.