Macroeconomic and Industry Analysis

Macroeconomic Analysis

The Economy and the Demand Side

Since 2013, the Philippine economy has grown at rates surpassing the majority of its ASEAN neighbors.
In 2018, the Philippine economy grew at a robust 6.2%, establishing itself as one of the fastest growing
economies in Asia.

Over the first two quarters of 2019, the Philippines has seen a dip in its GDP growth to 5.6% in 1Q and
5.5% in 2Q, but it still remains one of the most rapidly growing economies in the region given its
resilient and sound economic fundamentals. The economy can be analyzed in two perspectives: the
demand side and the supply side of the economy.

On the demand side of the economy, household consumption continues to be a main driver of growth
at 75% of total GDP as of 1Q19. There are three factors that have been fueling private consumption:
first, the size of the population, growing at 1.6% p.a. at an estimated 108.4m in 2019; second, the
population’s high propensity to consume as reflected in its Consumer Confidence Index (Nielsen), one of
the highest in the world; finally, the inflow of personal remittances by overseas Filipino workers of
USD28.9b in 2018 which boosts domestic circulation of money.

Drivers of Private Consumption

Supply Side

On the supply side, there has been minimal change to the mix of GDP contribution by sector with service
contributing the bulk of total GDP at 56.6% as of 1Q19. A major contributor to this sector has been the
information technology and business process outsourcing (IT-BPO) industry which has spiked to
USD27.3b in 2018, growing at a compound annual growth rate of 25.3% since 2012. As a result, this
industry has significantly contributed to the increasing disposable income per capita, ultimately leading
to greater buying power.

Macroeconomic Risks

The country still has room for growth, especially if the government is able to deliver on their Build, Build,
Build program. As seen by the following table and chart, the Philippines is still behind its regional peers
according to the World Economic Forum (WEF). Specifically, the Philippines ranks 56th out of 137
according to the global competitiveness index published by the WEF based on certain criteria such as
infrastructure, innovation, etc.
Macroeconomic Fundamentals

Despite these risks, both local and international confidence have continued to be strong because of
sound macroeconomic fundamentals.

On the monetary side, inflation has slowed down, growing at a pace of 1.7% in August 2019. This is the
lowest since October 2016, when the inflation rate was 1.8%. The BSP expects September inflation to
settle between

0.6% to 1.4%, driven by lower rice and electricity prices. The inflation rate is lower than the
government’s target range of 2%-4%, which gives room for the Banko Sentral ng Pilipinas (BSP) to cut
interest rates. So far, the BSP has reduced benchmark interest rates by a total of 75bps this year.
Furthermore, the BSP has reduced 100bps in the banks’ reserve ratio requirement (“RRR”), which will
promote the increase in the amount of loans made to consumers and business in the economy.

On the fiscal side, the external debt remained at prudent levels, according to the BSP and interest
payments (Debt Service Burden) exhibit the country’s ability to service its loans. Currently, 80.1% of
external debt are medium to long-term in nature, meaning that foreign exchange requirements are well
spread out and manageable. Finally, the country’s increasing reliance on domestic financing indicates
that its exposure to external risks is decreasing. Domestic financing has more room to support the
growth in consumption as the country’s national debt to GDP ratio of 44.0% as of 1Q19. These factors
result to the Philippines’ wider fiscal space, allowing the government to provide resources where they
are deemed needed without jeopardizing the sustainability of its financial position or the stability of the
economy.

Overall, the Philippine economy has outperformed its neighbors since 2012. It has been fueled by
private consumption and the service sector. Economic risks have also been kept at bay because of strong
macroeconomic fundamentals both on the monetary side and on the fiscal side. The Philippines,
however, must remain optimistic for the coming years in which new government initiatives such as
Build, Build, Build and tax reforms can further support economic growth.

Industry Analysis

Market Summary:

Grocery stores and supermarkets are retail shops that primarily sell food. They also offer non-
perishable foods that are packaged in bottles, boxes, and cans; and they also sell goods used for daily
living, such as toiletries, cleaning materials, and etc. They are considered as part of the food retail
industry, which is an industry that has grossed $47.4 billion in 2018, and is expected to reach sales of
$50 billion by the end of 2019. Hypermarkets, convenience stores, and warehouse clubs have become
essential as they provide convenience and flexibility, which is especially sought after by those living in
urban areas. Modern markets are expanding in both urban and rural areas, and close to residential and
commercial communities. It is estimated that The Philippines could have the 5th largest supermarket
and grocery industry in the region by 2021, with domestic consumption being pushed by a strong
economy alongside a steadily-growing population.

Analysis of the industry:

BCG Matrix

The supermarkets and groceries in the Philippines are considered as cash cows. The market for
this industry is dominated by corporate giants who have already achieved economies of scale and have
comfortably cemented themselves in a mature industry which is expected to continue to grow.
SWOT Analysis

Strengths

 The Philippines is a consumption-driven economy with a strong preference for U.S. food,
beverage, and ingredient products.

 The Philippines is a mature and growing market for U.S. food, beverage and ingredient products
with export sales of $1.09 billion in 2018 and forecast to grow to $1.2 billion in 2019.

Weaknesses

 Philippine consumers can be highly price sensitive.

 Delivery/availability of products requires large inventories.

 Food retailers demand high slotting fees and year- round marketing support, placing a big
burden on new-to-market exporters.

 Availability of most imported products are concentrated only in Metro Manila and major key
cities.

Opportunities

 A steadily growing middle-class means more disposable income spent on high-value products.

 Proliferation of malls encourages further expansion of food retail establishments, leading to

more demand of imported food items.

 Fast pace of modern living leads to stronger demand for convenience foods.

 Demand for healthy and gourmet food is increasing.

 Growing middle class means more disposable income spent on high-value products.

Threats

 U.S. exporters face competition from tariff-free products from countries including New Zealand,
China, and Australia.

 The rise of online groceries provides an alternative to traditional grocery store shopping which
many deem to be more convenient and more appropriate for the busy lifestyles of those living
in the urban areas

PEST Analysis

Political
US Ambassador to the Philippines Sung Kim on Tuesday said American private companies will take part
in "major" infrastructure projects under the Philippines' "Build, Build, Build" program, which targets to
roll out a total of 75 projects until 2022. The participation of the US in the economic activities of the
Philippines may be interpreted a positive sign of the possibility of further US investment prospects into
the Philippines. This is very important, as the food retailing industry thrives on the products imported
from the US.

The Philippines is a member of the Association of Southeast Asian Nations (ASEAN), which promotes
mutual growth of member countries through free trade agreements and intergovernmental
organization. This association with ASEAN opens many doors to economic growth for The Philippines,
and is one of the factors for its strong economic growth in recent years.

Effect of TRAIN Law

- Etc (Wag kayo mahiya mag add)

Economic

*Very much interrelated with Macroeconomic Analysis. Kuha nalang tayo ng concepts from that part na
relevant sa Supermarket Industry

President Duterte recently initiated the “Build, Build, Build” (BBB) Program, which seeks to accelerate
infrastructure spending and develop industries that will yield robust growth, create jobs and improve
the lives of Filipinos. Public spending on infrastructure projects is targeted at P8 to 9 trillion from 2017
to 2022. If everything goes according to plan, it is estimated that the increase in the middle class
effected by the improved economic conditions will create more consumption of goods from the food
retailing industry due to the increased income.

Social

Growing demand for gourmet and healthy foods, frozen foodstuff, ready-to-cook food, processed
grocery items, and other food ingredients for home meal replacement are trending among Philippine
consumers. As a country with a strong preference for U.S. brands, Post expects greater opportunities in
the Philippines for U.S. high-value, consumer-oriented products in the coming years. With the growing
sophistication of the market brought by rising incomes, more U.S. products and brands will be
marketable.

Over the last five years, warehouse clubs have been expanding throughout the country, with their total
sales reaching a record $82 million in 2018. Represented by S&R Membership Shopping and Landers
Superstore, these two major warehouse clubs both opened new outlets in 2018. Aside from a wide
variety of food available, these stores also offer health and beauty products, home and outdoor items,
household appliances, toys and fashion, and pet supplies. Although these stores are similar in format
and size, Landers Superstore is deviating from the original warehouse club model as it also sells items in
smaller packs, like those found in supermarkets. This makes the store more accessible and affordable to
customers who require packaged food products and for families living in condominiums with limited
storage. Both stores sell almost 90 percent U.S.-made and branded products.

Technological

Online grocery retailing is getting more popular in the Philippines. In 2018, the food retailing sector saw
the rise of online grocery stores such as PushKart, Metromart, and Honestbee, and even the
participation of third party marketplaces such as Lazada and Shopee by their introducing of dedicated
platforms for online grocery sales.

Porter’s Five Forces

Intensity of Rivalry

The intensity of rivalry is strong in the grocery industry. The supermarket/grocery industry is an
industry wherein the goods sold are homogenous and nondiscretionary, which therefore provides
constant demand. *insert info about market share of big competitors such as SM and Robinson’s*.

Threat of New Entrants

The threat of new entrants is weak in the grocery industry. There are multiple factors
contributing to high entry barriers, including:

- High economies of scale

- Significant experience-based cost advantages

- High Capital requirements

- Limited access to distribution channels

Threat of Substitutes

The threat of substitutes is strong in the grocery industry. There are substitutes readily available
to customers with most of the threats coming from mass merchandisers, warehouse clubs, and food
subscriptions.

Bargaining Power of Suppliers

The bargaining power of suppliers is weak in the grocery industry. Grocery stores carry
commodities which are regulated by market prices, which if there is an oversupply, the prices decrease.

Bargaining Power of Buyers

The bargaining power of buyers is moderate in the grocery industry. Buyer demand is growing
slowly because the products mainly being consumed are nondiscretionary, so there is constant demand.
Buyer costs to switch brands are low because there are no barriers which hinder them from choosing to
make their purchases at alternative grocery stores. In fact, it is common knowledge that many
consumers do not buy from only one supermarket, and are more likely to purchase from multiple
supermarkets and groceries over a span of time in accordance with what is convenient for the
consumers. In addition to this, the fact that grocery stores carry the same goods is another factor as to
why customer costs to switch are so low. One way that grocery stores are attempting to maintain
customer loyalty is to release private label brands (such as goods baked by S&R which can only be found
in S&R grocery stores).

Analysis of competitors

Supervalue Inc. (SM)

Supervalue Inc. is a subsidiary of SM Investments Corp. which operates the SM Supermarket

stores. The SM Supermarket stores are the most recognizable modern food retail stores in the
Philippines, and this currently keeps Supervalue Inc. at the top of the food retail industry.

Strategic Approach

Strengths

 SM is a household name, and has malls and stores set up almost everywhere in the Philippines

 SM Supermarkets are integrated into each SM Mall, which makes

Weaknesses

Robinsons Supermarket

Robinsons Supermarket Corporation is one of the largest supermarket chains in the Philippines
today. Under the umbrella of Robinsons Retail Holdings, Inc., Robinsons Supermarket Corporation has
also proved to be a strong player in the food retail industry. It has three formats which include
Robinsons Selections, Robinsons Easymart & Robinsons Supermarket, each format aiming to capture
different demographics and customer preferences.

Strategic Approach

Robinsons Supermarket has create an image targeted towards niche markets and trends
without failing to offer the basic necessities and items that groceries and supermarkets are known for.
An example of how Robinsons uses such a strategy is its marketing strategy of promoting healthy food
and living, and implementing an operational approach which focuses on such a premise.

Strengths

 Strong branding when it comes to the healthy living trend

 Has achieved economies of scale

 

Weaknesses
 Company Overview

The Puregold Price Club, Inc. or “Puregold” was incorporated on September 8, 1998 and opened
its first Puregold hypermarket store in Mandaluyong City in December of the same year. In 2001, it
began its expansion by building 2 additional hypermarket stores in Manila and Paranaque. It also
launched its loyalty program, which was eventually renamed as "Tindahan ni Aling Puring" in 2004.

In 2008, Puregold was recognized by Reader's Digest Asia's as the Most Trusted Brand in
supermarket category. To expedite market coverage, a new format called "Puregold Jr. Supermarket"
was introduced in the 4th quarter of 2008. By mid-2009, the Company gained market leadership being
the second largest hypermarket and supermarket retailer in the Philippines in terms of net sales. By
2010, it was already operating 62 stores, and launched another format called, "Puregold Extra".

Puregold acquired another related retail company which was later called, "S&R Membership
Shopping", under the corporate name "Kareila Management Corporation", with 6 S&R Membership
Shopping Warehouses (patterned after the Costco and Sam's Club in the USA). Puregold also opened 31
new Puregold organic stores and acquired Gant Group of Companies known as "Parco supermarkets"
with 19 stores.

In 2013, Puregold acquired another supermarket chain, Company E Corporation, with15 stores
and opened 40 new stores. Company E and Gant Group of Companies later merged with Puregold.

In 2014, Puregold partnered with Lawson, Inc. and Lawson Asia Pacific Pte Ltd. under a joint
venture company called PG Lawson, Inc. to build and operate a chain of Lawson convenient stores.
However, in 2018, Puregold divested from the joint venture and sold to Lawson, Inc. all its share in PG
Lawson, Inc. By the end of 2018, Puregold was operating a total of 208 hypermarkets, 104 supermarkets,
29 extra, 13 minimarts, 16 S&R warehouse clubs, 38 S&R-QSRs, for a total of 408 stores in different
locations nationwide. Since the incorporation of Puregold, it has never been subjected to nor has been
involved in any bankruptcy, receivership or similar proceedings.

Puregold operates hypermarkets which are mostly located in major commercial centers and
near transportation hubs. The average net selling space of the Company's hypermarket is 2,000 to 2,500
square meters. It also has supermarket chain known as "Puregold Junior". The Company's supermarkets
are mostly located in residential areas and offer a higher proportion of food to non-food products vis-a-
vis the Company's hypermarkets. The average net selling space of the Puregold Junior supermarkets is
around 800 square meters.

The company has discounters "Puregold Extra" is the Company's small store format which offers
a more limited number of goods, comprising the Company's top-selling SKUs ranging from 3,000 to
5,000. The average net selling space of these stores is around 400 square meters.

Corporate Structure
 The complete corporate name and business name of the company is Puregold Price Club, Inc. Its
principal office address is No. 900 Romualdez St., Paco, Manila. It is a publicly-listed stock corporation
with authorized capital stocks of 3,000,000,000 with 1-peso par value.

Among the wholly-owned subsidiaries of Puregold are the Puregold Junior Supermarket, Inc.,
Kareila Management Corporation (KMC), Entenso Equities, Inc., Purepadala, Inc., and PPCI-Subic, Inc. as
of March 31, 2019. KMC is the operator of the S&R Membership Shopping. S&R is the biggest reseller of
imported quality products at very competitive prices. Puregold has 17 warehouses and 38 quick service
restaurants at present.

The Entenso Equities, Inc. wholly owned subsidiary of Puregold holding equity interests

in the following retail formats and brands:

A. Ayagold Retailers, Inc. is a joint venture with Ayala Land. It opened mall-based supermarkets
called “Merkado”
B. San Roque Supermarkets which operates 19 supermarkets.

Purepadala, Inc. Purepadala, Inc. is another wholly-owned subsidiary of Puregold. It was incorporated in
2018 mainly to operate the remittance operation of the Company.

The PPCI Subic, Inc. is operating one Puregold branch in Subic Bay, Olongapo City. It has 4,917.70 square
meters in selling area.

All subsidiaries are engaged in the same business as the Parent Company except for Entenso whose
primary purpose is to invest in, purchase, subscribe for, or otherwise acquire and own, hold, use,
develop, sell, assign, transfer, mortgage, pledge, exchange, or otherwise dispose real and personal
property of every kind of description.
 Value Chain Analysis

Porter’s Generic Strategy: Puregold employs a cost leadership strategy, offering a wide array of goods
from groceries, apparel, household accessories and furniture at very affordable prices.

Direct-to-store
Inbound Logistics delivery Direct-to-storeOutbound
Operations delivery Direct-to-store deliverySales
Logistics Marketing Service
Pri
Multiple Formats: Resellers Strong Satisfies
mar
advertising customers with
y Cross-dock - Hypermarkets
presence reliable on-time
Acti facilities - Warehouse
deliveries.
vitie Club Supermarkets are Has more promos
s - Supermarkets mostly located in than competitors
- Stock-keeping residential areas
Direct-to-store units Effective
“Aling Puring”
delivery customer service
program
program MARGIN

Business Infrastructure

Sup
port
Acti Human Resources Management
vitie
More than 30000 employees,
s
Technology

GCash QR scan, Cross-dock facilities

Procurement

Over 3,000 regular suppliers, maintains strong relationship with suppliers and trade partners
Financial Analysis

The external auditor of the company is R.G. Manabat & Co.

The Group’s comparative financial performance is presented below:

I. Results of Operations

For the period ended June 30, 2019, the Group earned a consolidated net income of P2,828
million at 4.0% net margin and a decrease of 4.8% from P2,971 million at 4.6% net margin in the
same period of 2018. Excluding the one-time gain on sale of investment in joint venture, core
consolidated net income grew by 8.4% or P219 million at 4.0% and 4.1% net margin in 2019 and
2018, respectively. This was principally driven by the continuous organic expansion of the
Group’s grocery retail outlets on the back of a sustained strong consumer demand. This has
been augmented by combined management strategies and programs to boost revenue
contributions from both the base stores as well as new stores and constant management effort
to maintain the operating expenses to its minimum.

Net Sales

For the period ended June 30, 2019, the Group posted a consolidated net sales of P71,136
million for an increase of P7,213 million or a growth of 11.3% compared to P63,923 million in
the same period of 2018. The full operation of new organic stores put up in 2018 boost the
increase in consolidated net sales in addition to robust like for like stores sales growth and
revenue contributions from new organic stores established during the first half of 2019

Gross Profit

For the period ended June 30, 2019, the Group realized an increase of 7.5% in consolidated
gross profit from P10,992 million in 2018 at 17.2% margin to P11,816 million at 16.6% margin in
the same period of 2019, driven by strong sales growth from new and old stores and sustained
continuing suppliers' support through additional trade discounts in the form of rebates and
conditional discounts granted during the period. The margin slightly decline during the year
accounting primarily to lower supplier support in relation to product cost.
Other Operating Income

Other operating income increased by P127 million or 9.3% from P1,364 million in the six months
of 2018 to P1,491 million in the same period of 2019. This is attributable to increase in concess
income, membership income and rent income driven mainly by new stores opened during the
year and full operation of new stores opened in 2018.

Gross Operating Income

Gross operating income for the first half of 2019 amounted to P13,306 million at a gross
operating margin of 18.7% which grew by 7.7% from P12,356 million at 19.3% margin in the
same period of 2018.

Operating Expenses

Operating expenses increased by P732 million or 9.4% from P7,782 million in the six-month
period ended June 30, 2018 to P8,514 million in the same period of 2019. The incremental
operating expenses were mainly attributable to depreciation expense as a result of adoption of
the new accounting standard, PFRS 16 – Leases. Taxes and licenses, utilities, advertising and
promotion, and manpower expenses increase as well principally related to the establishment
and operation of new organic stores.

Other Expense - net

Other expenses net of other income amounted to P795 million and P494 million for the six-
month periods ended June 30, 2019 and 2018, respectively. Interest income increased in June
2019 due to higher placement in short-term investment as compared to the same period of
2018. Interest expense increased as well as a result of adoption of the new accounting standard,
PFRS 16 – Leases.

Net Income

For the period ended June 30, 2019, the Group earned a consolidated net income of P2,828
million at 4.0% net margin and a decrease of 4.8% from P2,971 million at 4.6% net margin in the
same period of 2018. Core consolidated net income grew by 8.4% or P219 million at 4.0% and
4.1% net margin in 2019 and 2018, respectively. This was principally driven by the continuous
organic expansion of the Group’s grocery retail outlets on the back of a sustained strong
consumer demand. This has been augmented by combined management strategies and
programs to boost revenue contributions from both the base stores as well as new stores.
The Group’s consolidated statements of financial position as at June 30, 2019 and December 31, 2018
are presented below:
Working Capital

As at June 30, 2019 and December 31, 2018, the Group’s working capital stood at P23,437
million and P16,229 million, respectively while its current ratio improved to 3.77 as at June 2019
from 2.45 as at December 2018.

Current Assets

 As at June 30, 2019 and December 31, 2018, total current assets amounted to P31,910
million or 33.5% of total assets, and P36,438 million or 36.9% of total assets,
respectively, for a decrease of P4,529 million or 12.4% as at June 30, 2019.
 Cash and cash equivalents as at June 30, 2019 amounted to P8,840 million or 9.3% of
total assets and decreased by P1,847 million or 17.3% compared to previous year-end
balance.
 Decrease in the Group’s cash position was attributable mainly to the net settlement of
trade and non-trade payables, payment for cash dividend, partial settlement of loans
and capital expenditures for 2019 new organic stores.
 Receivables amounted to P2,264 million as at June 30, 2019 or 2.4% of total assets, with
a decrease of P2,526 million or 52.7% from P4,790 million in December 2018. The
decrease was due to collections made during the period, bulk of which came from the
high year end receivables.
 Merchandise inventory amounted to P19,296 million or 20.3% of total assets at the end
of June 2019. Total inventory decreased by P436 million or 2.2% principally due to
decline in S&R’s inventory balance coming from previous yearend seasonal
requirements. This was offset however by increase in Puregold stores stocking
requirements for existing and new operating stores.
 Investments in trading securities amounted to P37 million as at June 30, 2019 and
December 31, 2018.
 Prepaid expenses and other current assets amounted to P1,473 million and P1,193
million as at June 30, 2019 and December 31, 2018, respectively. The increase was
mainly due to advance payment of taxes.

Noncurrent Assets

 As at June 30, 2019 and December 31, 2018, total noncurrent assets amounted to
P63,332 million or 66.5% of total assets, and P62,376 million or 63.1% of total assets,
respectively, for an increase of P955 million or 1.5% as at June 30, 2019.
 Investments amounted to P611 million as at June 30, 2019 and December 31, 2018.
 Net book values of property and equipment increased by P537 million or
 2.8% from P19,489 million in December 2018 to P20,026 million in June 2019. The
increase was mainly due to additions made during the period intended for newly
established/operating stores.
  Right-of-use asset amounted to P20,446 million or 21.5% of total assets and P20,151
million or 20.4% of total assets as at June 30, 2019 and December 31, 2018, respectively.
 Deferred tax assets – net amounted to P370 million or 0.4% of total asset and P274
million or 0.3% of total assets as at June 30, 2019 and December 31, 2018, respectively,
for an increase of 34.9% or P96 million. The increase was due to recognition of deferred
tax in compliance with PFRS 16 – Leases.
 Intangibles amounted to P19,725 million as at June 30, 2019 and P19,736 million as at
December 31, 2018.
 Other noncurrent assets amounted P2,154 million as at June 30, 2019 and P2,115
million as at December 31, 2018.

Current Liabilities

 As at June 30, 2019 and December 31, 2018, total current liabilities amounted to P8,473
million or 8.9% of total assets, and P17,606 million or 17.8% of total assets, respectively,
for a decrease of P9,134 million or 51.9% as at June 30, 2019.
 Accounts payable and accrued expenses amounted to P6,687 million and P11,677
million as at June 30, 2019 and December 31, 2018, respectively, and decreased by
P4,989 million or 42.7% primarily due to settlement of trade and nontrade liabilities,
bulk of which came from the high year end payables.
 Short-term loans payable amounted to P919 million and P4,756 million as at June 30,
2019 and December 31, 2018, respectively, or a decrease of 80.8% or P3,843 million.
The decrease was due to settlement made by the Parent Company due to high interest
rates.
 Income tax payable decreased by P249 million from P794 million in December 2018 to
P546 million in June 2019 due to settlement of income tax liability from prior year
income and for the first quarter of 2019.
 Due to related parties, representing royalty fees, amounted to P28 million for the period
ended June 2019 and P43 million for the year ended December 2018. The decrease was
due to settlement of liability incurred as at December 2018.
 Other current liabilities decreased by P37 million or 11.0% from P336 million in
December 2018 to P299 million in June 2019. The decrease on the account was due to
redemption of gift certificates during the period.

Noncurrent Liabilities
  As at June 30, 2019 and December 31, 2018, total noncurrent liabilities amounted to
P26,872 million or 28.2% of total assets, and P27,627 million or 28.0% of total assets,
respectively, for a decrease of P755 million or 2.7% as at June 30, 2019.
 Lease liabilities amounted to P25,995 million or 27.3% of total assets and P25,308
million or 25.6% of total assets as at June 30, 2019 and December 31, 2018, respectively,
or an increase of P687 million or 2.7%.
 Lon-term debt – net of current maturities and debt issue costs amounted to P400
million and P1,840 million as at June 30, 2019 and December 31, 2018, respectively, for
a decrease of P1,440 million or 78.3%. The decrease was due to settlement made by the
Parent Company due to high interest rates.
 Retirement benefits liability amounted to P477 million and P478 million as at June 30,
2019 and December 31, 2018, respectively.

Equity

 As at June 30, 2019 and December 31, 2018, total equity amounted to P59,897 million
and P53,582 million, respectively, for an increase of P6,315 million or 11.8%.
 Capital stock amounted to P2,904 million and P2,800 million as at June 30, 2019 and
December 31, 2018, respectively, for an increase of P104 million or 3.7% due to top up
placement of stocks at P45 per share, made in the first quarter of 2019 .
 Additional paid in capital amounted to P25,362 million and P20,830 million as at June
30, 2019 and December 31, 2018, respectively, for an increase of P4,531 million or
21.8%. The increase was due to the excess of the selling price of new shares issued over
the par value of the stocks, net of direct expenses.
 Retained earnings amounted to P31,429 million and P29,749 million as at June 30, 2019
and December 31, 2018, respectively, or an increase of P1,680 million or 5.6% due to
income made during the period, net of dividend payments

Financial ratios include the following:

June 2019 December 2018

(as restated)
Current Ratio (1) 3.77:1 2.07:1
Asset to Equity Ratio (2) 1.59:1 1.84:1
Debt to Equity Ratio (3) 0.59:1 0.84:1
Debt to Total Assets Ratio (4) 0.37:1 0.46:1
Book Value per Share (5) P20.87 P19.38

Price Earnings Ratio (6) 22.67x 18.83x

 (1) Current Assets over Current Liabilities

(2) Total Assets over Total Equity

(3) Total Liabilities over Total Equity

(4) Total Liabilities over Total Assets

(5) Total Equity over Total Common Shares Outstanding

(6) Market Value per Share over Earnings per Share

(7) Net income after tax over Weighted Average Common Shares Outstanding

(8) Net income after tax over Average Total Assets

(9) Net income after tax over Average Total Equity

A brief summary of cash flows during the comparative periods is shown below:
For the six-month periods ended June 30
(in millions)
2019 2018 (as restated)
Net Cash provided by (used in) operating activities P2,818 (P1,617)
Net Cash provided by (used in) operating activities (1561) (1,224)
Net Cash provided by (used in) operating activities (3,104) (2,680)
Net decrease in cash and cash equivalents (P1,847) (P5,521)

 Net cash provided by operating activities for the six-month period ended June 30, 2019 amounting to P2,818 million were mainly attributable to
increase in cash generated from operations more specifically from collections of receivables.

 Net cash used in investing activities for the six-month period ended June 30, 2019 amounting to P1,561 million were utilized for the acquisition of
equipment, furniture & fixtures, construction of buildings and improvements on leased assets.

 Net cash used in financing activities for the six-month period ended June 30, 2019 amounting to P3,104 million pertain to net settlement of loans and
lease liabilities during the period.