SM Prime posts P8.3B net income in Q1, down 5%

Sy-led SM Prime Holdings Inc. posted a consolidated net income of P8.3 billion in the first quarter of 2020, down 5% compared from P8.8 billion in the first quarter of 2019, on the back of economic disruption arising from the COVID-19 crisis.

Consolidated revenue from January to March totaled P25.8 billion, down 3% from P26.5 billion year-on-year.

“The company’s first quarter results reflect the business disruption impact of the quarantine measures implemented last March 16, which affected primarily our leasing businesses. The residential segment has still shown strong growth in the first three months, abating the effect of revenue losses in the malls segment,” SM Prime president Jeffrey Lim said.

“The balance between our recurring and developmental income streams sustains our healthy financial position during this pandemic,” Lim said.

SM Prime’s mall business, which accounted for 47% of the consolidated revenues, has temporarily closed operations since the implementation of the enhanced community quarantine (ECQ) due to COVID-19, except for stores that offer essential products and services.

The closure brought mall revenues down by 16% to P11.3 billion from P13.5 billion of the same period last year. Mall rental income was registered at P10.1 billion, down 12% lesser from last year’s P11.5 billion.

SM Prime noted that its China malls business, which reported closure in January 25 due to the spread of COVID-19 in the region, has now all seven malls running at 80% capacity, with foot traffic gradually going back to normal since its gradual reopening from February 10 to March 11 when lockdowns in China were being lifted.

Residential group led by SM Development Corp. (SMDC), which accounted for 44% of SM Prime’s consolidated revenues, recorded a 23% increase in revenue in the first quarter of 2020 to P11.4 billion from P9.3 billion in the same period last year. 

SMDC’s reservation sales in the first quarter of 2020 amounted to P24.8 billion.

With available inventory of 16,000 units, equivalent to 12 months of sales, SM Prime said it has enough supply to cushion the effect of construction delays in the residential projects due to the ECQ.

SM Prime’s other business segments reported a consolidated revenue of P2.2 billion in the first three months of the year.

The company’s office business segment continues to operate during ECQ with 90% of its tenants being business process outsourcing (BPO) offices, which were allowed by the Philippine’s Inter-Agency Task Force (IATF) to conduct business.

“SM Prime will maintain its budget of P80 billion capital expenditures for 2020 to focus on projects that will deliver sustainable returns in the long term.

"We believe that in crisis like this, flight to quality will be the driver for consumers and buyers, and SM has the solution and right product,” SM Prime chairman of the Board, Henry Sy Jr., said.

Meanwhile, SM Prime’s hotels, reported the closure of Taal Vista Hotel in Tagaytay City last January 15 to 28 due to period of intense unrest of Taal Volcano.

The company’s hotels remain operational during ECQ, with some catering to BPO employees and returning overseas Filipino workers who are affected by the community quarantine measures in the country.

Despite limited revenues, having waived P8.8 billion in mall rent from March 16 to May 15, 2020, the company said has sufficient cash flow to support necessary operating expenses.

On preparations for business resumption, Lim said, “We fully support the government in nation-building and pump priming the economy after the ECQ. Our topmost priority is still the safety of all our customers and people working under our developments. We ensure that proper safety measures are in place and will be implemented across all SM properties.” —LDF, GMA News