2020 was a very challenging year for each and every one of us given the unexpected global pandemic. This has brought significant disruptions in the way we live and has significantly impacted our business, the healthcare system and the economy.
Given this situation, parts of our country were placed under the Enhanced Community Quarantine (ECQ) last March 17, 2020, restricting individual mobility except for essential activities. This lasted up to May 31, 2020 especially for high-risk areas including Metro Manila. As a result, many businesses including ours shifted to a “work-from-home” set-up, some were forced to close down, and travel & tourism were halted. This was truly a headwind for our group especially for Cebu Air, Inc. (CEB), since all scheduled commercial flights had been grounded during this period. The strict social distancing measures likewise resulted in the temporary closure of some malls and hotels, including Robinsons Land Corporation’s (RLC). And although the impact was less, we also experienced some disruptions in Universal Robina Corporation’s (URC) supply chain and slight delays in JG Summit Petrochemicals Group’s (JGSPG) plant expansion.
Measures under the Bayanihan Law were also enacted in response to this health and economic crisis. Among others, the law provided financial subsidies to low-income households, lower interest rates for lending, grace period for consumer loans, etc. We, in the private sector, also actively partnered with the government on these initiatives in the true spirit of Bayanihan. We have prioritized the health and welfare of our employees and provided support to the communities where we operate. Eventually, quarantine restrictions were lowered to Modified General Community Quarantine (MGCQ) which led to partial reopening of the economy. Consequently, from double-digit declines in our gross domestic product (GDP) in the second quarter (2Q), the recession slowed and ended 2020 with a full year GDP contraction of 9.5%. Unemployment rates also softened in the last two quarters of the year, albeit still at elevated levels.
With this backdrop, JG Summit and its subsidiaries have set key immediate priorities to continue their operations and navigate the new normal.
URC is building a portfolio catering to the growing health and wellness categories as there is great demand for products that offer more nutrients and convenience at reasonable prices. URC has also deployed a direct-to-customer selling solution through E-commerce and social commerce partnerships to expand its availability and relevance to digitally-savvy consumers.
With online transactions becoming the new normal, RLC has developed an interactive way to showcase its prime residential developments through digital catalogs and virtual tours. It also introduced RPersonal Shopper and RDelivery, which allow customers to shop in the safety of their homes.
CEB took the lead in contactless flights, minimizing the face-to-face contact between passengers and crew in consideration of health and safety protocols. During the ECQ, CEB also managed to fly on demand for repatriation flights and to sustain the flow of essential goods through our cargo business.
Despite the ECQ, JGSPG was able to continue manufacturing and perform its delivery commitments upon restart of its integrated operations in early March 2020. Its operational improvements also led to higher full-year plant utilization rates and better earnings in the second half of 2020.
RBank accelerated its digitalization and customer-centric initiatives including RBank Digital, its mobile app, QuickR, a cashless payment solution, and RBankMo, banking agents that will provide basic financial services, among others.
To manage costs and liquidity, our group reduced our 2020 CAPEX spending by identifying projects and pre-delivery payments that may be deferred. Much of the deferments came from CEB, as we renegotiated payments and delivery schedules for new aircraft orders and postponed aircraft overhauls. At the Parent level, we also further strengthened our balance sheet by issuing 10-year US$600-million offshore bonds with a record low interest rate of 4.125% per annum, and by providing 5% stock dividends to our shareholders. We have also started the work to ensure that our airline business is provided enough runway to navigate the very challenging aviation sector via capital raising exercises.
The pandemic has clearly altered consumer behavior and affected economic activity in the country. Until we achieve herd immunity from the roll-out of COVID-19 vaccines, social distancing will still be a necessity, limiting mobility. As the full recovery of consumer confidence, employment, and propensity to spend might take longer than what we hope for, consumers will likely continue to reallocate their spending to prioritize safety & security which include food and beverages at home, savings, and medical products/ services.
Conversely, this new market scenario has also created new opportunities for businesses to rethink and change their operating models. Key to business success in the new normal is the ability to pivot quickly to the new demands of the market. We expect that major drivers for consumer purchase that we’ve seen in 2020 such as cleanliness, health & wellness, and stay-at-home activities will linger in 2021.
While getting back to pre-pandemic levels would be largely dependent on the successful rollout of the vaccines, I am confident that we can turn around the business as we continue to work together as an enterprise and set-up key strategic capabilities for the future.
