SM Prime posts 10% profit increase in first half

MANILA, Philippines - Shopping mall giant SM Prime Holdings Inc. reported a 10 percent growth in its first half net income to P3.8 billion, mainly driven by higher rental revenues.

Consolidated revenues reached P11.3 billion in the period January to June, up 17 percent from P9.6 billion a year ago. Of the total, rental revenues contributed the biggest share, growing 13 percent to P9.5 bilion from P8.4 billion a year earlier.

In the second quarter, SM Prime posted a net profit of P1.9 billion or 11 percent higher than the P1.7 million recorded the previous level. Revenues jumped 19 percent to P5.9 billion.

“The encouraging results delivered by SM Prime validate our positive sentiment on the economy, which is further bolstered by robust consumer spending. In that light, we look to the second half of the year with more optimism in executing our expansion plans. We aim to offer more avenues for high quality yet affordable products and services, for which the SM brand is known,” said Hans T. Sy, president of SM Prime.

The increase was also attributed to the continued strength of the consumer and remittance sectors and the added space resulting from the opening of new malls in 2009 namely, SM City Naga, SM City Rosario, and SM Center Las Piñas, together with SM City Tarlac, which opened last April.

In addition, expansion projects in SM North Edsa, SM City Fairview and SM City Rosales also contributed to rental revenue growth. The new malls and expansions in 2009 and 2010 added 340,000 square meters (sqm) to the company’s total gross floor area (GFA) and currently register an average occupancy rate of 94 percent.

Excluding new malls opened and expansions completed from 2008 to 2010, same store rental growth is at six percent.

In terms of gross revenues, the three malls in China contributed P600 million in the firt half or five percent of SM Prime’s total consolidated revenues. In terms of net income, these malls chipped in P100 million or three percent of total.

Rental revenue of the three China malls continued to grow at a hefty pace of 26 percent largely due to improvements in the average occupancy rate, lease renewals, and the opening of the SM Xiamen Lifestyle Center, which added 110,000 sqm of GFA to the Xiamen mall, for a total GFA of 0.6 million sqm. The average occupancy rate for the three malls in China is now at 87 percent.

Meanwhile, due to a marked increase in the number of blockbuster movies shown this year, cinema ticket sales from January to June 2010 surged 47 percent to P1.4 billion.

Operating expenses likewise inceased 18 percent to P5.3 billion due to an increase in administrative and depreciation expenses. Income from operations went up to P6 billion, up 17 percent.from P5.1 billion.

Following the opening of SM City Tarlac in April, SM Prime will launch later this year SM City Novaliches in Quezon City and SM City San Pablo and SM City Calamba, both of which are in the province of Laguna. The company is also set to open its fourth SM mall in mainland China, which will be located in the city of Suzhou. By year-end, the company is expected to have 40 malls in the Philippines, with an estimated total GFA of 4.7 million sqm.