DMCI posts FY23 net income of P24.7-B (down 21%)

DMCI [DMC 11.22, down 2.9%] [link] posted an FY23 consolidated net income of P24.7 billion, which was 21% lower than its FY22 net income of P31.2 billion. DMC attributed the drop in performance to the “high base effect” from FY22’s “soaring commodity prices”, and to the lower returns from the company’s various subsidiaries in the coal, nickel, and construction industries. DMC noted that while suffering a significant drop from its previous year, its FY23 performance was the second-highest in the company’s history. DMC said that it expects 2024 to be “challenging”: “slowing global economic growth” could impact the spot prices of coal and nickel; “elevated interest rates and high inventories” will limit real estate demand, and; returns from utilities (power and water) will remain suppressed until rates go lower to spur demand and inflation edges lower to normalize raw material prices. DMC also said that the growth in demand for office and commercial spaces will be “sluggish”, so it’s shifting attention to infra and industrial projects to chase better returns. 

MB bottom-line: DMC is one of the least interesting conglos to me, given how much of its performance flows as a natural consequence of what happens with its main subsidiary, Semirara Mining and Power [SCC 33.55, down 2.8%]. Since SCC itself is mostly just a passthrough of the current spot price of coal and electricity, and since those spot prices are not in themselves all that interesting to follow, you can see how consuming DMC content is something of an acquired taste. Of course I’m overstating it a bit, and I’m not saying that DMC isn’t a good investment or a bad company, just that following it as an analyst is not particularly interesting. That said, I have nothing but praise and appreciation for the management team’s transparency concerning its assessment of the coming year. It’s beneficial to an investor to read what the management team thinks will be the main challenges the company (and its various subsidiaries) will face in their respective industries. Not just some token “growth will be difficult while rates are high”, but a real effort to explain to investors their theory of the year ahead. This is actionable context, not only to calibrate your own expectations but to perhaps adjust your expectations as you notice shifts in the company’s stance or changes in some of the assumptions that it’s made. It takes a special management team to be this open and accountable. 

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