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SM Prime posts 17% hike in profit

SM Seaside City Cebu, SM Prime's biggest mall in the Visayas and Mindanao (Photo from SM Seaside City Cebu Facebook)

SM Prime Holdings, Inc. (SM Prime) registered a consolidated net income growth of 17% to P32.2 billion in 2018 as revenues grew across all business segments and projects outside Metro Manila continue to make significant contributions.

Mall revenues increased by 11% with the opening of eight new and expanded malls “mostly in the developing areas of the Philippines” in 2018.

The developer aims to pursue its thrust to expand outside Metro Manila with the launch this year of four new malls - SM Center Dagupan, SM City Olongapo Central, SM City Butuan and SM Mindpro Citimall in Zamboanga.

In a statement issued Monday, February 11, SM Prime said its consolidated revenues grew by 14% to P104.1 billion in 2018 from P90.9 billion in 2017, while consolidated overall operating income improved by 19% to P48.3 billion in 2018 from P40.6 billion of the previous year.

SM Prime recorded a 16% increase in its net income for the last quarter of 2018 to P8.7 billion from P7.5 billion of the previous year. The company’s consolidated revenue in the fourth quarter grew by 13% to P29.5 billion from P26.2 billion in the same period in 2017.

“The successes and achievements we are reaping today are the hard work, strategy and partnerships we built five years ago when we consolidated all the key property companies of SM Group under SM Prime. Driven by our goal to deliver more innovative and sustainable lifestyle cities, SM Prime is aiming to sustain this growth trajectory in the coming years,” SM Prime President Jeffrey Lim said.

Mall Operations

SM Prime’s mall revenues rose by 11% to P59.3 billion in 2018 from P53.2 billion in 2017. Mall rental income grew by 11% to P50.5 billion from P45.3 billion of the previous year.

The increase in revenue was due to rising contribution of rentals from new and expanded malls that were launched mostly in the developing provincial areas of the Philippines from 2017 to 2018 such as SM CDO Downtown Premier, S Maison, SM City Puerto Princesa, SM Center Tuguegarao Downtown, SM City Urdaneta Central, SM City Telabastagan, SM City Legazpi and SM Center Ormoc. Same-mall-sales growth was at 8% across all mature malls.

SM Prime cinema and event ticket sales improved by 9% to P5.2 billion in 2018 from P4.8 billion in 2017. Revenues from amusement and merchandise sales also increased by 14% to P3.6 billion in 2018 from P3.1 billion in 2017.

The revenue growth came from additional outlets opened in new malls. Mall operating income improved by 13% to P32.2 billion in 2018 from P28.4 billion in 2017, while operating margin moved up to 54% in 2018 from 53% of the previous year.

SM Prime has 72 malls in the Philippines offering 8.3 million square meters (sqm) of gross floor area (GFA) and seven malls in China with 1.3 million sqm of GFA as of year-end 2018. The company is set to launch four new malls in 2019.

Residential developments

SM Prime’s residential group, led by SM Development Corporation (SMDC), reported a revenue growth of 22% to P36.5 billion in 2018 from P30 billion in 2017. Operating income improved by 38% to P12.3 billion from P8.9 billion.

The growth is due to higher construction accomplishments of projects launched in 2015 to 2017 namely Shore 2 Residences, Coast Residences, Shore 3 Residences and S Residences in Pasay City, Fame Residences in Mandaluyong City, and Spring Residences in Parañaque City.

Consolidated costs of real estate sales increased at lower rate of 17% to P17.8 billion in 2018 from P15.2 billion in 2017. This led to improved gross profit margin of 50% from 49%, and net income margin of 25% from 24%, in 2018 and 2017, respectively.

Reservation sales

SMDC’s reservation sales grew by 25% in terms of sales value to P72.3 billion in 2018 from P57.8 billion in 2017. In terms of unit sales, it increased by 23% to 21,157 from 17,259.

The strong sales take-up came from projects such as Shore 3 Residences in the Mall of Asia Complex, Pasay City, Fame Residences in Mandaluyong City and Bloom Residences in Parañaque City.

Notable contribution also came from some provincial projects such as Charm Residences in Cainta, Rizal, Hope Residences in Trece Martires, Cavite, Green 2 Residences in Dasmariñas, Cavite, Lane Residences in Davao, Park Residences in Sta. Rosa, Laguna, as well as some other Metro Manila projects such as Vine Residences, Trees Residences and Hill Residences in Quezon City, Red Residences in Makati City and Leaf Residences in Muntinlupa City.

SM Prime is scheduled to launch between 15,000 to 18,000 residential units this 2019 that include high-rise buildings, mid-rise buildings and single detached house and lot projects.

Other Business Segments

The rest of SM Prime’s businesses registered a combined revenue growth of 7% to P8.4 billion in 2018 from PHP7.9 billion of the previous year.

Combined operating income increased by 10% to P4 billion from P3.6 billion, while operating income margin improved to 47% from 46% in the same period being reviewed.

The Commercial Properties and the Hotels and Convention Centers business segments contributed a combined revenue growth of 18% in 2018. This is attributed to the opening of ThreeE-Com Center, FiveE-Com Center and Conrad Manila.

SM Prime has 11 office buildings with a combined GFA of 623,000 sqm, to date. The company is set to launch NU Tower in the Mall of Asia Complex, Pasay City this 2019, while the FourE-Com Center is scheduled by 2020. These projects will add a total GFA of almost 238,000 sqm in the company’s office portfolio.

The Hotels and Convention Centers currently has six hotels with over 1,500 rooms, four convention centers and three trade halls. The company’s Hotel Group is set to launch two new hotels this 2019 namely Park Inn by Radisson – Iloilo and Park Inn by Radisson – North EDSA. (Ventures Cebu/PR)

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