MANILA, Philippines – Henry Sy-led holding company SM Investments Corporation (SMIC) grew its net profit 13% to P10.9 billion in the first 6 months of 2012, from P9.6 billion in the same period last year.
The increase was attributed to their banking and property businesses on top of sustained performance of their core retail and mall operations.
Expansion has been fueling growth in the retail sector, which since January has added 14 new stores — two SM Department Stores, one SM Supermarket, 8 SM SaveMores, 3 SM Hypermarkets — to give it a total of 183 current stores.
SMIC owns Banco de Oro Unibank Inc. (BDO), the country’s largest lender by assets; SM Prime Holdings Inc., the country’s biggest mall operator and developer; the SM hypermarkets, supermarkets, department stores and SaveMore outlets under the retail group; and real estate developer SM Development Corp.
- Banking
The majority of the group’s earnings came from SM’s banking arm, BDO Unibank Inc, which raked in 15% more in revenue and net income. BDO’s net income reached P5.83 billion in first-half from P5.05 billion last year.
Banking has increased in importance for SMIC’s portfolio. It contributed 30.9% of earnings in the first half of the year, after only contributing 16.9% in 2008.
In a statement SM said BDO was optimistic about the country’s prospects and opportunities in banking after executing a landmark deal to raise P43.5 billion in core capital, part of the proceeds of which will go towards exercising an early redemption option on P10 billion of higher-cost Tier 2 debt in November 2012.
- Real estate
Though property development contributed 16.7% to the group’s net income — the smallest among the group’s 4 main businesses — it is the fastest growing sector for the SM group.
The sector has steadily brought in a greater percentage of net income, contributing 3% in 2008, 11% in 2009, 12.6% in 2010 and 15.2% in 2011.
Their unlisted real estate arm SM Land reported a sharp 59% revenue increase to P13.9 billion and a 37% jump in net income to P3.2 billion.
The majority of sales were through SM Land’s residential provider, SM Development Corporation (SMDC), which saw first-half home sales surge 85% to P19.8 billion. The number of units rose 72% to 8,007 from only 4,655 units during the same period last year.
More growth is expected on the back of new projects. SMDC president Rosaline Y. Qua said 5 projects are being planned along Roxas Boulevard, in Taguig, Quezon City, Mandaluyong and Parañaque.
“These are completely new developments that will add P37 billion in inventory to my pool though not everything will be launched this year. And that’s over 16,000 units,” Qua said.
- Retail operations
The core businesses of mall and retail operations held less weight in SM’s earnings portfolio. But the sectors are still a major workhorse for the group, bringing in more than half of total net income.
Retail operations accounted for 28.2% of the group’s net income. SM Retail reported a 7.8% increase in net profits during the period.
“Growth is really coming from expansion at this time. But for department stores, growth is low in second quarter because the base [we were coming from] is high,” said Jorge T. Mendiola, president of SM Department Stores.
Mendiola said same-store growth for department stores was between 7% and 8%. Same-store sales in Metro Manila for the food retail group, however, were flat, largely attributed to the “number of competitors.”
“In provincial areas we are growing,” adding that same store sales in provincial areas were 4% to 5%. He explained that 60% to 65% of SaveMores and Hypermakets are outside Metro Manila.
“We will be opening at least 15 more stores towards the end of the year,” said Mendiola. Since expansion is fueling growth, perhaps it comes as no surprise then that SM Retail will continue to open stores next year. “We’re looking at 25 to 30 stores,” he added.
- Mall operations
On the other hand, mall operations accounted for 24.2% of the group’s net income.
SM mall operations, which are handled by listed subsidiary SM Prime Holdings Inc, posted a 15% hike in net income, reaching P4.9 billion from P4.3 billion in the same period last year.
The increase was attributed to the opening of new malls and the improved performance of existing malls in the Philippines and China since same store sales grew 8%.
SM Prime has 45 malls in the Philippines and is scheduled to open SM City Lanang in Davao City before the end of 2012.
The group’s 4 malls in China posted a substantial 30% increase in revenue to P1.3 billion and contributed 9% to consolidated revenues.
With an average occupancy rate of 95%, SM China malls posted net income growth of 52% to P321 million and contributed 7% to SM Prime’s bottomline.
Beyond numbers
Beyond the numbers, SM said it would focus its attention on supporting victims of the spate of bad weather that hit many parts of Luzon last week.
Between August 7 and 11, the SM Foundation helped 44,200 families with relief bags, supported medical missions that served 12,600 patients in 18 areas and organized blood donations to help those who contracted severe cases of Dengue and needed blood transfusions.
“We’re showing you that we’re still hitting the numbers and we believe we’ll be able to continue with this trend and be able to sustain it. On top of that we’d like to be able to show you that we care for the community,” said SM Prime Holdings president Hans Sy. – Rappler.com
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