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SM Prime profit slips 5% amid mall closures

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By Denise A. Valdez, Reporter

SM Prime Holdings, Inc.’s profit slipped by 5% dip in the first quarter, as its shopping malls in the Philippines and China were forced to close due to the coronavirus disease 2019 (COVID-19) outbreak.

In a statement Friday, the Sy-led property developer said its consolidated net income in the first three months of 2020 fell to P8.3 billion from P8.8 billion the same period last year.

Total revenues dropped 3% to P25.8 billion, as its mall business, which accounted for 47%, suffered due to enhanced community quarantine (ECQ) implemented in Luzon in mid-March.

Malls in the Philippines saw a 16% decline in revenues to P11.3 billion, as mall rental income fell 12% to P10.1 billion. SM Prime had limited the operations of its mall network in the country to essential stores starting mid-March.

The company earlier announced it will waive rent for all tenants in its shopping malls that are not able to operate during the ECQ period.

In China, the company operates seven malls which closed as early as January 25 due to the COVID-19 outbreak. They reopened starting February 10 and are now running at 80% capacity and slowly getting regular foot traffic.

SM Prime’s residential segment, operated by SM Development Corp. and comprising 44% of the company’s total revenues, posted a 23% growth in revenues to P11.4 billion. This was attributed to higher reservation sales amounting to P24.8 billion.

SM Prime also noted it has an inventory of 16,000 units -equivalent to 12 months of sales, making it sufficient to temper the expected construction delays in new projects due to the lockdown measures currently in place.

Other business segments added P2.2 billion in revenues, with operating income sliding 9% to P1.1 billion. This accounts for SM Prime’s office leasing segment, which continue to operate under quarantine as its tenants are mostly business process outsourcing companies. SM also operates hotels, including Taal Vista Hotel which was closed in late January due to the eruption of Taal Volcano.

“The company’s first quarter results reflect the business disruption impact of the quarantine measures implemented last March 16, which affected primarily our leasing businesses,” SM Prime President Jeffrey C. Lim said in the statement.

“The residential segment has still shown strong growth in the first three months, abating the effect of revenue losses in the malls segment. The balance between our recurring and developmental income streams sustains our healthy financial position during this pandemic,” he added.

Despite the economic decline brought by the pandemic, SM Prime said it is keeping its allocation for capital expenditures this year at P80 billion, which will focus on projects with sustainable returns in the long term.

“We believe that in crisis like this, flight to quality will be the driver for consumers and buyers, and SM has the solution and right product,” SM Prime Chairman Henry T. Sy, Jr. said.

Shares in SM Prime at the stock exchange shed P1.60 or 5.23% to P29 apiece on Friday.

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