Waiver of rental fees pulled down SM Prime income in H1 by 46%
Local property giant SM Prime Holdings Inc.’s first semester net profit dropped by 46 percent year-on-year to P10.4 billion due to the waiver of shopping mall rental fees and discounts given to tenants since the coronavirus (COVID-19) pandemic hit the country.
As SM Prime earlier booked a first quarter net profit of P8.3 billion, the latest report suggested that net profit had dwindled to around P2.1 billion in second quarter. Compared to the year-ago level, this marked an 80-percent slowdown.
“The first half of 2020 has been one of the most challenging periods we’ve faced as a company. With the government maintaining the implementation of quarantine protocols in most key areas in the Philippines where our businesses are, SM Prime is committed to sustaining its operations while adhering to the strict safety measures implemented by the government and continue providing convenience to our customers,” SM Prime Jeffrey Lim said on Tuesday.
SM Prime’s rental income from its Philippine malls fell by 44 percent year-on-year to P13.1 billion in the first half as mall revenues slid by 49 percent to P14.4 billion. The waiver of mall rental fees and discounts since the start of the quarantine measures in mid-March cost the company P11 billion as of end-June.
Six-month consolidated revenues amounted to P43.7 billion, 23 percent lower year-on-year.
The company’s residential business, led by SM Development Corp. (SMDC), recorded P23.7 billion worth of revenues in the first half, 11 percent higher year-on-year. Previously a second fiddle to the mall business, the residential segment now accounted for 54 percent of consolidated revenues.
As an indicator of future revenues from the residential segment depending on construction progresss, SMDC’s first semester reservation sales amounted to P42.4 billion, rising by 3 percent year-on-year despite the lockdown protocols during the period.
Construction works on the group’s new and latest residential projects have resumed, pursuant to national government’s safety protocols.
As a buffer against potential construction delays, SM Prime it still has an available inventory of 12,000 units as of end-June, from which it could unlock values in the future.
Meanwhile, SM Prime’s commercial properties grew revenues by 16 percent year-on-year to P2.5 billion in the first half, with operating income rising by 22 percent year-on-year to P2.2 billion. This segment has business process outsourcing (BPO) firms—which were allowed by the Philippine’s Inter-Agency Task Force to continue its operations throughout the quarantine period—as primary tenants.
The hotels and convention centers business segment contributed P1 billion to first half consolidated revenues despite limited operations. Conrad Manila, Park Inn Clark, Park Inn North Edsa and Park Inn Iloilo remained operational to cater to BPO employees and returning overseas Filipino workers/seafarers. INQ
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