Mass housing developer 8990 Holdings Inc. posted a 26 percent decline in its net income to P808 million in the first quarter, due to delays in the processing of new project permits.
Also making a dent in the company’s profitability was the slower than expected sales for the same period.
In a statement, 8990 Holdings said its gross sales declined by 26 percent to P1.6 billion in the first quarter, due mainly to the soft sales of Urban Deca Homes Manila, and because of the stricter revenue recognition policies. The project also experienced construction delays given the tight labor supply.
As such, unrealized sales in the first quarter was estimated to have reached P2.08 billion, covering a total of 1,478 units, due to a combination of incomplete construction or actual take out from Home Development Mutual Fund (HMDF).
Non inclusion of sales
The company disclosed that it saw a slightly lower net profit margin of 46 percent in the first quarter, due to the non-inclusion of the sales from the Urban Deca Tower Edsa under the incentives program of the Board of Investments.
The units in the said project reportedly did not meet the minimum floor space requirement of 18 square meters.
Designed as a halfway house, each 13-sq m unit provides a temporary place for students and workers, whose primary residence are usually outside of Metro Manila.
The same development, the Urban Deca Tower has recently been awarded as the Best Urban Condo Development in Metro Manila by the prestigious Philippine Property Awards.
Strong recovery
Amid the set back in the first quarter, 8990 Holdings sees a strong recovery in the succeeding quarters as it expects 2017 to be a turnaround year for the company, which is currently focusing on cash generation.
In a briefing last February, 8990 Holdings president and CEO Januario Jesus Gregorio B. Atencio III, had said that “given an environment of stricter licensing and permits, coupled with the possibility of interest rates increasing in the short-term, the thrust for 2017 is generation of cash from increased take-out levels with HDMF, CTS Purchase of banks, securitization and issuance of preferred shares which will be used to pare down debts.”
In the first quarter, 8990 also booked a record P917 million worth of HDMF or Pag-Ibig take-out while BDO Unibank Inc. purchased 534 contract to sell (CTS) worth P507 million.
The mass housing developer is targeting to expand the HDMF take-out gross sales ratio to at least 70 percent by the end of the year from about 57 percent in the first quarter.
To achieve this, 8990 would identify other projects including Urban Deca Homes Manila and Urban Deca Tower EDSA to be fully placed under the HDMF take-out facility.
The mass developer booked a positive cash flow of P711 million in the first quarter driven by receivables liquidation activities such as HDMF take-out and CTS receivables purchased by banks. It expects HMDF take-outs to reach P7 billion and CTS receivables sold to banks to amount to P2 billion this year.
Currently, 8990 Holdings has a land bank of about 639 ha after it launched three projects. It is set to launch eight more this year, and has 14 ongoing projects nationwide.