Corporate News: Provincial malls lift SM Prime Q2 profit

In a statement on Monday, the holding firm for the retail and property business of the country’s richest man Henry Sy, Sr. reported a net income of P7.79 billion, higher than the P6.75 billion it generated in the same period in 2016. The second quarter performance brings its first half income to P14.39 billion, a 14% uptick from the P12.59 billion posted in 2016’s January to June period.

The sustained earnings growth follows a 10% increase in SM Prime’s consolidated revenues, which stood at P43.25 billion against the P39.23 billion recorded in the first half of last year.

“SM Prime’s performance in the first half of the year reflects a more balanced revenue and income streams from our various businesses, including the growing contribution from our provincial operations. We are happy to report that our investments in the provinces are now bearing fruits, particularly in mall operations given that these account for more than half of our Philippine malls portfolio,” SM Prime President Jeffrey C. Lim said in a statement.

The bulk or 60% of the company’s first-half consolidated revenues came from its mall operations at P25.68 billion, which rose 10% year on year. Rental income from its mall operations went up 10% to P21.75 billion, as the company added 1.1 million square meters (sq.m.) of gross floor area (GFA) of retail space from its new and expanded malls from 2015 to 2017. Same-mall sales grew 7% as well. Consolidated mall operating income accordingly rose by 10% to P14.18 billion.

SM Prime currently has 63 shopping malls under its network in the Philippines with 7.8 million sq.m., and another seven in China totaling 1.3 million sq.m. The group has targeted to end the year with 65 malls in the country, including SM City Puerto Princesa in Palawan.

The residential arm of the company, which accounted for 32% of SM Prime’s consolidated revenues, saw a 5% increase in revenues to P13.91 billion for the first half. SM Development Corp. (SMDC) reported brisk sales in projects launched since 2014, posting a 22% growth in reservation sales to P27.55 billion. SMDC’s residential projects are concentrated in the Mall of Asia Complex.

“In the coming years, we are expecting a growing contribution from our residential group as we are launching more housing projects across the country,” Mr. Lim said.

Revenues from SM Prime’s other businesses, which include the leasing of office buildings and convention centers, surged 43% to P3.74 billion, primarily from the rental income from Five E-Com Center and Conrad Manila.

The company has six office buildings under its portfolio with a combined GFA of 383,000 sq.m., as well as six hotels under its Hotel and Convention Centers group comprised of more than 1,500 rooms, four convention centers and three trade halls.

The Sy-led firm will further add 320,000 sq.m. of office space under its network in 2018 and 2020, with the completion of Three E-Com and Four E-Com Centers, respectively.

This 2017, the company earmarked P50 billion for the development of more shopping malls and the expansion of its residential business. This forms part of SM Prime’s efforts to double its 2013 net income and revenues by 2018. Earnings in 2013 stood at P16.3 billion, while revenues reached P59.8 billion.

Shares in SM Prime were flat at P34 apiece at the close of the stock market on Monday. — Arra B. Francia

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