Metro Pacific sheds, SM gains profits as pandemic lingers in Q1

MANILA, Philippines — Two conglomerates, Metro Pacific Investments Corp. and SM Investments Corp. (SM), painted starkly different pictures of financial performance in the first quarter amid the lingering pandemic.

Metro Pacific suffered a 26% annual decline in its quarterly net income to P2.5 billion. The company blamed this drop to “reduced toll road traffic, light rail services, and commercial and industrial demand for water and power.” 

More than half of Metro Pacific’s profits in the Philippine market came from energy investments, such as power distributor Manila Electric Co. (Meralco), followed by expressways, water utility, hospitals, and public transportation. 

“Navigating through a pandemic would have been even more challenging had it not been for the relative strength of our balance sheet,” Jose Ma. K. Lim, MPIC president and chief executive, was quoted as saying in a statement. 

All business segments saw declines that drove earnings down compared to the previous quarter. Hurt by cooler temperatures early in the year that minimized energy consumption, Meralco’s net income went down 15% to P5.1 billion. Energy sales alone dropped 4% quarter-on-quarter.

Similarly, Maynilad’s net income went down 7% in the same period to P1.2 billion also because of lower water consumption and payment of amortization for completed projects, such as sewage treatment plants in Pasay and Paranaque. 

In other businesses, Metro Pacific Tollways Corp., which owns and operates expressways, witnessed a steep 27% quarter-on-quarter drop in net income to P800 million after traffic volume due to lockdown restrictions that prevented vehicles from plying roads.

Meanwhile, Light Rail Manila Corp. still operated at a loss, albeit 47% narrower in the first quarter from the previous 3 months to P104 million even as daily commuters taking LRT Line 1, which it operates, dropped 68%.

Healthcare was the lone segment that experienced growth due partly to higher testing and COVID-19 admissions.  Metro Pacific hospitals reported a 6% quarterly increase in the first 3 months to P285 million, financial results showed. 

SM gets a boost from its banks

On the other hand, the Sy-led company’s quarterly consolidated net income hit P9.5 billion, up 5% from a year ago due to growth of its three core businesses. Profits from its banking arm alone made up 54% of its first-quarter earnings.

Broken down, the firm's retail sector booked 36% year-on-year increase in profits to P1.6 billion despite lower revenues because of what SM called “cost reductions” such as switching to energy lighting and refrigeration. 

SM’s local mall business saw a 10% quarterly growth to P5.9 billion in revenues as rental income creeped back to life with establishments reopening and going back to business after suffering the brunt of the crisis last year.

A branch of its property segment, SM Development Corp. saw its reservation sales spike by 31% year-on-year to P32.4 billion in this quarter. These fees are often non-refundable payments to companies to ‘reserve’ properties within a period of time. This, however, was not isolated to SM since other property companies reported massive reservation sales in 2020. 

But the biggest winner is SM’s banking segment led by BDO Unibank Inc. and China Banking Corp. The two banks saw their quarterly net incomes grow by 19% and 61% year-on-year respectively. 

Earnings went unhampered since service fees ensured a huge profit margin for SM’s financial institutions. This was especially the case for Chinabank which snagged a P3.6 billion “fee-based” income. 

Trading dipped at the Philippine Stock Exchange midweek as Metro Pacific shares closed at P4 apiece down by 2.44% from previous day. SM Investments shares dipped 0.94% to close at P951 per share.