Constitution guides Aboitiz conglomerate

The Aboitiz family which runs one of the largest and oldest conglomerates in the Philippines has drafted a constitution to ensure the sustainability of its wide range of businesses.

Jon Ramon Aboitiz, the 68-year-old chairman of publicly listed holding company Aboitiz Equity Ventures Inc., cites succession and loyalty as major factors behind the success of the business group, which now employs over 30,000 Filipinos.

“I think that succession is very important in a family [business]. First of all, the most important in a family corporation is that you have to build up rules and regulations for the family and the business. We have, for example, built a constitution. We have a family council. We have rules of engagement, who can join the family [business] because not every family member is entitled to work for the company. He has to try; he has to go through different processes,” Aboitiz says.

Aboitiz Equity Ventures Inc. chairman Jon Ramon Aboitiz
He says this helps, as people leaving the business happen many times. “If you have the constitution, if you have the understanding of the rules of engagement, then it makes things easier because it is very clear to everyone what are the dos and don’ts,” Aboitiz says during the Anvil Business Summit 2016 organized by the Association of Young Filipino-Chinese Entrepreneurs at Marriott Hotel Manila in Pasay City.

AEV is one of the fastest growing business groups in the country, with net income climbing 34 percent in the first half of 2016 to P10.5 billion from P7.8 billion a year ago.  AEV and Aboitiz and Company Inc., the private holding company established by Aboitiz patriarch Don Ramon, have stakes in various industries such as power generation and distribution, transportation, food and flour milling, banking, remittances, cement and infrastructure, construction, shipbuilding, real estate, tourism, aviation and water distribution.

Major subsidiaries include Aboitiz Power Corp., Visayan Electric Company Inc., Davao Light & Power Company Inc., Union Bank of the Philippines, Cebu City Savings Bank, PetNet Inc., Pilmico Foods Corp., Pilmico Animal Nutrition Corp., Aboitiz Land Inc., Republic Cement and Building Materials Inc., AEV Aviation Inc., Aboitiz Jebsen Group, Aboitiz Construction Group, Tsuneishi Heavy Industries (Cebu) Inc., AseaGas Corp. and Apo Agua Infrastructura Inc.

Aboitiz Power Corp., its energy unit, is one of the most active power players in the country and plays an important role in the economic growth of southern Philippines.

“Mindanao is going to have an excessive power [by] middle next year or early next year up to maybe 2025. There are so many plants that are being built now so it would just be normal if you move from a shortage, you get to an [average]. It’s always a matter of reaction. I think they’ll also get to a point in time to rehabilitate the big hydros that we have,” Aboitiz says.

“If you look at the Philippines now, Luzon is not going to have a problem. Right now, we have some minor problems but over the next 10 or 15 years, there are [more] plants to be built. Within Visayas, it’s the same way. So as a whole, with the issue of power shortages in the Philippines for the next 10 or 15 years, I don’t think there’s going to be a problem,” Aboitiz says.

Aboitiz Power started as a renewable energy producer in Davao in the 1970s when they would just let water pass into a turbine and return it, without leaving storage.

“Thirty-six percent of our power portfolio is renewable. And we expect to move our portfolio from 2,000 megawatts to 4,000 megawatts by 2020. And we expect that the renewable course will stay at about 36 percent to 38 percent [of the total],” Aboitiz says.

Aboitiz is optimistic about business prospects under the leadership of President Rodrigo Duterte.  Aboitiz says Duterte’s“vibrant personality” will not hurt investors’ confidence in the country.

“We are optimistic. I think many times people are asking me about our president, and my answer to them is always give him time. I think he’s a decisive person, and I think that over time we will see results,” Aboitiz says.

“I think if people would get to know how the president is, a lot of the things he says is not a personal thing,” says Aboitiz.

AEV’s roots go back to the 1800s when Aboitiz’s grandfather, the company’s patriarch, and family moved to the Philippines from Basque Country in Spain. Aboitiz says his grandfather is the type who “would get into any business.”

“We got into businesses that we knew nothing about like raising fish. We had these fish nets. We got into air cargo, we got into a number of other businesses that we didn’t know too much about,” he says.

The family reinvented the business 20 years ago and focused on industries it could excel in.  “We tried to focus on the businesses that we believe we can excel in. Over the last 20 to 25 years when we focused on our businesses, we basically focused on businesses which we felt would give us a long-term [turnaround] but most importantly that we knew how to run the business,” Aboitiz says.

Going public, or offering shares in the stock exchange, gave the conglomerate a good reputation and financial resources.

“When we went public, it really added to the professionalization of the group. Because before that, you can get [away] with things. You don’t have to make reports. But once you become a public corporation, you have responsibilities, and you have the transparency, and you need to make sure that your systems are all in order,” Aboitiz says.

“Stock markets’ prices of commodities and prices of shares of stock go up and down. That’s natural. At the end of the day if you have a strong vision of what you’re going to be doing and you show the results, the people will come back to you,” Aboitiz says.

AEV and Aboitiz Power stocks are among the best performers in the Philippine Stock Exchange in recent years.

Aboitiz says going public is “one of the best decisions we ever made because it truly transformed us into a more professional group of companies.”

Aboitiz says the group had its share of setbacks in business.  On such instances, Aboitiz says: “You pick yourself up and you learn from it because I guarantee [that] you learn from your mistakes.”

Topics: Aboitiz , Jon Ramon Aboitiz , Aboitiz Equity Ventures Inc.
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