SM Prime profit hit by housing slump
SM Prime Holdings, Inc. reported a 5-percent decline in net income to P35.4 billion in the first nine months of the year from P37.2 billion a year earlier, as sluggish residential demand continued to weigh on earnings despite stronger mall and rental revenues.
The property giant’s earnings took a bigger hit in the third quarter, with net income falling 15 percent to P10.9 billion from P12.8 billion a year earlier, underscoring continued pressure on its residential business.
“Higher borrowing costs, elevated inflation and cautious consumer spending continued to weigh on residential demand. However, growth in our commercial and hospitality businesses helped keep revenues steady,” SM Prime President Jeffrey C. Lim said on Monday.
“Our focus on managing costs helped ease the pressure on earnings,” he added.
The company’s residential segment recorded a 21-percent revenue decline to P25.6 billion from P32.6 billion, reflecting slower revenue recognition and buyer backouts.
Overall real estate sales also plunged 23 percent to P24 billion from P31.2 billion, highlighting persistent weakness in the housing market.
Despite the residential slowdown, consolidated revenues remained nearly flat at P103.1 billion from P103.4 billion a year earlier, supported by higher recurring income from commercial properties.
Rental revenues climbed 8 percent to P66 billion from P61 billion, while other revenues, including leisure, entertainment, hotel dining and advertising, increased 17 percent to P13.1 billion.
SM Prime’s mall business remained its biggest revenue driver, accounting for 62 percent of consolidated revenues.
Mall revenues grew 10 percent to P63.7 billion from P58.2 billion, supported by additional leasable space, higher occupancy rates and sustained demand for dining and entertainment.
Office and warehouse revenues likewise increased 10 percent to P7.8 billion, while hospitality and convention revenues rose 7 percent to P6.4 billion on stronger hotel bookings and events demand.
For the third quarter alone, consolidated revenues declined 11 percent to P31.4 billion from P35.4 billion, even as mall revenues increased 12 percent to P21.9 billion.
Amid weaker residential sales, SM Prime trimmed capital expenditures by 25 percent to P44.4 billion from P59.3 billion, with spending largely directed toward ongoing mall and residential developments.
The company ended September with total assets of P1.1 trillion and cash and cash equivalents of P27.9 billion. Its net debt-to-equity ratio stood at 0.84 times, while interest coverage was at 7.3 times.