Weak residential demand, high borrowing costs, elevated inflation, and cautious buyers, dragged down SM Prime Holdings Inc.’s earnings by 5 percent to P35.4 billion in the first nine months, offsetting stronger rental income and growth in its mall and hospitality businesses.
Consolidated revenues slipped 0.3 percent to P103.1 billion from P103.4 billion a year earlier, as an 8 percent increase in rental income to P66 billion was outweighed by a 23 percent contraction in real estate sales to P24 billion.
Other revenues, including leisure, entertainment, hotel dining, advertising, and sponsorship income, rose 17 percent to P13.1 billion.
“Higher borrowing costs, elevated inflation and cautious consumer spending continued to weigh on residential demand. However, growth in our commercial and hospitality businesses helped keep revenues steady,” SM Prime president Jeffrey C. Lim said.
“Our focus on managing costs helped ease the pressure on earnings.”
Malls remained the company’s biggest revenue contributor, accounting for 62 percent of consolidated revenues. Mall income increased 10 percent to P63.7 billion, supported by additional leasable space, higher occupancy, and demand for dining and experiential offerings.
Residential revenues, covering core, leisure, and premium developments, fell 21 percent to P25.6 billion amid slower revenue recognition and buyer cancellations.
The weakness in housing sales contrasted with continued growth in SM Prime’s commercial portfolio. Offices and warehouses generated P7.8 billion, up 10 percent on higher occupancy, while hospitality and meetings, incentives, conventions and exhibitions revenues rose 7 percent to P6.4 billion on increased bookings, higher average room rates, and stronger event demand.
Operating expenses and the cost of real estate sold remained broadly unchanged at P51.3 billion from P51.5 billion, reflecting efforts to contain costs as revenues softened.
The earnings decline accelerated in the third quarter, with net income dropping 15 percent to P10.9 billion as consolidated revenues fell 11 percent to P31.4 billion. Mall revenues nevertheless increased 12 percent to P21.9 billion, while residential revenues stood at P5 billion.
Capital expenditures fell 25 percent to P44.4 billion, mainly covering ongoing mall and residential developments.
SM Prime ended September with total assets of P1.1 trillion and cash and cash equivalents of P27.9 billion. Its net debt-to-equity ratio stood at 0.84 times, while interest coverage was 7.3 times.
The results underscore the widening gap between SM Prime’s recurring-income businesses and its residential operations, with leasing and hospitality providing a buffer against a housing market still struggling with high borrowing costs and cautious buyers.
