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.
“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.
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.
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