SM parent profits down in mall closures, bad loan protections

MANILA, Philippines — Mall closures early in the year and banking provisions set aside for soured loans hurt the Sy-led parent firm SM Investments Corp.’s profits in the first 9 months of the year. 

In a statement on Wednesday, SM Investments reported P15.2 billion in profits from January to September, down 54% year-on-year. Broken down, net income declined nearly across all business segments that cover banking, retail and property.

Despite the expected dismal financial performance, the Sy-led firm signaled some optimism that a recovery could be underway, although without citing any data. “We are encouraged by marked improvements in our results quarter-on-quarter as we saw renewed consumer activity,” Federic DyBuncio, president, was quoted as saying.

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“We remain watchful of underlying demand as we continue to face headwinds in the economy in areas such as employment and remittances,” he added.

Similar with other firms that suffered from 3-month lockdowns from March to June, SM Investments was hit hard by consumers getting told to stay home to prevent the spread of the coronavirus disease-2019 (COVID-19). Lockdowns that were enforced from March to June hurt business, and while restrictions had been eased down since then, a rebound seemed to be a long way. 

SM Investments’ mall business, which accounted for 41% of earnings as of September, was particularly in the front-line of the impact. SM Prime Holdings Inc., a subsidiary and the country’s largest mall operator, saw consolidated net income drop 48% year-on-year to P14.4 billion.

Consolidated revenues of SM Prime’s likewise shrink 29% in the same period to P60.7 billion, driven mainly by a 58% drop in mall revenues to P18.3 billion because of government-mandated deferral of rental payments. Income from the later were lower 52% year-on-year.

Low consumer demand was likewise reflected on the finance of SM Retail, which accounted for 9% of total earnings. The subsidiary posted retail net income of P2.2 billion, down 73% year-on-year in the first 9 months. Revenues went down 15% year-on-year.

There were some outliers though, specifically in food retail that rose 11%. The key here was operations by Alfamart Trading Philippines, whose local franchise as convenience store is held by SM, which saw revenues up 27% year-on-year.

The residential business also continued to grow and helped temper losses for the parent firm. SM Development Corp., the property arm of the company, increased revenues 7% year-on-year to P34.2 billion. 

On the banking segment, which accounts for majority of 51% of earnings, BDO Unibank Inc. suffered a 48% dip in profits to P16.6 billion due to tepid loan take-up and the bank’s conscious decision to set aside more funds to cover potential losses from unpaid credit.

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BDO’s performance, and impact on SM Investments’ balance sheet, was partly tempered higher net income from China Banking Corp., up 23% year-on-year, data showed.

From January to September, SM Investments increased total assets by 2.1% year-on-year to P1.2 trillion. Gearing ratio stood at 38% net debt to 62% equity. 

Shares at SM Investments closed up 2.21% to P996 apiece on Wednesday.

#realestateblogph | #realestateblogphpropertynews | #REBPH

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Article and Photo originally posted by Philippine Star last November 4, 2020 4:07pm and written by Ramon Royandoyan.

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