SM Delivers 14% growth in 2009 Earnings of Php16 billion Wednesday, March 3, 2010
Source: SM Investor Relations (03 March 2010. Pasay City, Philippines.) Philippine conglomerate SM Investments Corporation (SM) registered a 14% growth in net income of Php16.0 billion for full-year 2009, from Php14.0 billion in 2008. SM’s consolidated revenues, on the other hand, increased by 9% to Php160.1 billion from Php147.5 billion in 2008. EBITDA for the period grew 22% to Php34.2 billion, for an EBITDA margin of 21%, higher than the previous year’s 19%.
SM President Mr. Harley T. Sy said, “We are pleased to report that SM achieved its goals in 2009, in spite of the formidable challenges brought about by the spate of natural calamities in the country and the continued weakness in the global economy. We continue to learn from every crisis situation that it pays to stay very focused on our strengths and on our long-term plans for further expansion, keeping in mind the synergies we can tap among our different businesses to achieve greater financial and operational efficiency."
As expected, retail contributed the most to the year’s net income with a 35.3% contribution. This was followed by banking and shopping malls, contributing 27.6% and 26.1%, respectively. The emerging property group accounted for 11.0%.
SM Investments’ Net Income Profile, January to December 2009
RETAIL OPERATIONS
The retail group reported a full-year 2009 net income of Php4.4 billion, up 27.9% as its food and non-food businesses posted hefty gains. This translates to an average net margin of 3.6%, up from 3.0% the previous year. Total sales for the group grew 7.9% to Php123.9 billion, while EBITDA grew 17% to Php7.5 billion for an EBITDA margin of 6.1%.
Of total retail sales, the non-food group, which is composed of SM Department Stores, contributed 42.8%, while the food group, composed of SM Supermarkets, SM SaveMore stores, SM Hypermarkets, and Makro outlets, contributed 57.2%. In terms of net income, the non-food group contributed 30.1% of the total, while the food group brought in 69.9%.
The robust performance of SM Retail is due largely to the Department Stores’ more focused approach in merchandising fresh designs and renovations of existing stores that give them a more contemporary and upscale look and feel. The food group, on the other hand, focused on further improving its cost and operational efficiencies even as it continued to expand its SaveMore business, which opened 13 stores in 2009.
Overall, the retail group opened 24 stores, for a total number of 119 stores by the end of last year. These consist of 36 department stores; 26 supermarkets; 26 SaveMore branches; 19 hypermarkets; and 12 Makro outlets.
For 2010, the retail group plans to open another 15 to 18 stores with its planned capital expenditure of Php6.0 billion.
MALL OPERATIONS
SM Prime Holdings, Inc. (SM Prime)
SM Prime reported a consolidated net income of Php7.0 billion from January to December 2009, as compared to Php6.4 billion in 2008 for a growth of 10%. Revenues, on the other hand, grew 15% to Php20.5 billion in 2009, while EBITDA grew 14% to Php14.0 billion, for an EBITDA margin of 68%. These results include the operations of the three SM malls in China, which are located in the cities of Xiamen and Jinjiang in Southern China, and Chengdu in Central China.
Rental fees, which accounted for 86% of total revenues, reached Php17.7 billion, for a 15% increase year-on-year. Growth was driven mainly by new malls and the expansion of existing malls, although same store sales also grew 5%.
In 2009, SM Prime opened SM City Naga in Camarines Sur, SM Center Las Piñas in Metro Manila, and SM City Rosario in Cavite. It also expanded SM City Rosales in Pangasinan, SM City Fairview, and SM North EDSA through its Sky Garden. The Sky Garden further reinforced the dominant position of SM North EDSA as it emerged as the largest shopping mall in the Philippines.
Combined, the new malls and expansions in 2009 added 226,000 square meters (sqm) to the company’s total gross floor area (GFA), bringing it to 4.5 million sqm, for a 5% increase.
Operating expenses for full year 2009 increased 19%, to Php9.7 billion, largely due to expenses related to mall expansion. Income from operations posted a 12% growth from Php9.6 billion in 2008 to Php10.8 billion in 2009.
For 2010, SM Prime plans to open SM City Novaliches in Quezon City; SM City Tarlac; SM Supercenter Masinag in Antipolo City, Rizal; and SM City Calamba and SM Supercenter San Pablo, both of which will be in the province of Laguna. SM Prime is also scheduled to open SM Suzhou in the fourth quarter, its fourth mall in China, which is located in the province of Jiangsu. SM Suzhou will have a GFA of approximately 70,000 sqm.
By the end of 2010, SM Prime will have 41 malls in the Philippines, of which 16 are in Metro Manila, and the others are spread out nationwide. The 41 malls will have an estimated combined GFA of 4.8 million sqm by the end of the year.
BANKING AND FINANCIAL SERVICES
Banco De Oro Unibank, Inc. (BDO)
BDO posted an audited net income of Php6.1 billion for the full year 2009, driven by robust growth in operating income and a slower increase in operating costs. This was higher than the Php5.5 billion target for the year and represents an increase of 173% over the Php2.2 billion income registered in 2008.
BDO’s operating income was generated from core businesses, leading to reduced reliance on volatile trading income. Net interest income increased 33% to Php30.6 billion in 2009, given a larger level of earning assets and improved margins.
Net interest income was driven by the 20% expansion in gross customer loans to Php472.7 billion, and growth in low-cost deposits. Loan demand was sustained across all market segments, while low-cost deposit growth was fueled by additional branch redeployments. Total non-interest income grew 13%, while fee-based service income, exclusive of trading income and one-time gains, grew 12%.
Its non-performing loan (NPL) ratio dipped to 3.2% from 4% as of the 4th quarter of 2008. The bank took early steps to adjust its risk management processes even before the onset of the financial crisis in 2008.
For this year, BDO hopes to do well by leveraging on its operating scale and maintaining good growth in its core businesses amid a more favorable operating environment.
With a strengthened business franchise across most business lines, BDO maintained its industry leadership in terms of total assets, customer loans, deposits, and trust assets under management.
China Banking Corporation (CHIB)
China Bank reported a net income of Php4.0 billion for 2009 (unaudited, parent only), a hefty 42.5% increase over the Php2.8 billion income recorded for the same period last year. This strong income performance enhanced the bank's return on equity, which reached 15.5% in 2009, from 12% in 2008, and return on assets, which stood at 1.8%, from 1.5%, still among the highest in the industry.
The significant growth in profits was driven by a 17.8% increase in total revenues to Php16.7 billion and better interest margins, which improved to 4.1% in 2009 from 3.8% in 2008. Fee-based revenues grew by 80.9% from Php2.0 billion to Php3.6 billion.
With stronger revenues, China Bank's cost efficiency ratio improved to 57.7% from 60% and even as its 2009 operating expenses grew by 32.7% to Php6.7 billion as the bank carried out its expansion program, opening 32 branches, 27 for the main bank and five for ChinaBank Savings, and continued making significant investments in new ATMs and technologies. China Bank (including China Bank Savings) ended 2009 with 247 branches and 380 ATMs.
The Bank's hefty income growth was underpinned by marked improvements in its balance sheet. Total resources stood at Php230.8 billion, up 11.3% from 2008. CASA deposits continued to build up in 2009, growing by 26.7% to Php58.6 billion. Total deposits expanded by 11.5% to Php191.7 billion with a healthy CASA to total peso deposits ratio of 42% from 34.7%.
The 10% growth in average loans combined with the 33% growth in investment securities drove the increase in net interest revenues, despite the fact that outstanding gross loans at Php101.7 billion was slightly lower than the Php104.4 billion recorded in 2008. Tighter monitoring of loans quality led to a drop in NPLs by Php1.5 billion and an NPL ratio of only 4.1% in 2009 from 5.2% in 2008.
China Bank's financial position remains solid with total capital funds of Php27.5 billion; up by Php1.9 billion from the 2008 level, translating to a capital adequacy ratio of 12.3%, still one of the strongest in the industry.
REAL ESTATE AND PROPERTY DEVELOPMENT
Revenues from real estate operations for full-year 2009 increased 50% to Php9.4 billion, while net income grew 37% to Php2.2 billion.
Contributions largely came from SM’s residential arm, SM Development Corporation, followed by the leasing activities of the commercial properties group, and the resort projects of Costa del Hamilo (Hamilo), SM’s tourism vehicle, which is developing the Pico de Loro Cove project in Nasugbu, Batangas.
As of year-end, the Pico de Loro’s Jacana condominiums were completed and transferred to its owners. Myna is 72% complete while Miranda and the Carola, which were launched in November 2008, are 8% and 9% complete, respectively. Jacana’s units are 92% sold; while pre-sales in Myna is 90%. Those of Miranda and Carola are 46% and 16% pre-sold, respectively. The beach club is now fully operational, with the country club expected to be launched in the second half of 2010.
SM Development Corporation (SMDC)
SMDC reported a consolidated net income of Php1.8 billion, growing 31-fold from just Php56.8 million in 2008. Of the total, net income from real estate operations amounted to Php1.5 billion, for a 36% increase from Php1.1 billion during the same period last year. Consolidated revenues reached Php5.3 billion, 73% higher than that of last year. EBITDA amounted to Php2.1 billion, for an EBITDA margin of 40%.
Realized revenues from real estate operations in 2009 jumped 73% to Php5.3 billion from Php3.1 billion in 2008. This marked improvement was a result of intensified sales activities, a host of new projects, on time construction and completion of projects, and keener cost control efforts. A more stable financial market also allowed the company to gainfully divest much of its equity portfolio.
For the whole of 2009, SMDC pre-sold 4,892 residential units worth approximately Php10.5 billion. Compared to the same period in 2008, the number of units pre-sold increased by 133%.
By end 2009, SMDC had a roster of 12 projects from only seven in 2008. The new projects launched in the second half of 2009 were the Princeton Residences along Aurora Boulevard in Quezon City; Jazz Residences near Jupiter Road in Makati City; the Sun Residences right beside the Mabuhay (formerly Welcome) Rotonda near the Quezon Avenue boundary of Quezon City and Manila; the Light Residences near Pioneer Street in Mandaluyong City; and the Wind Residences along the Emilio Aguinaldo Highway in Tagaytay City. These projects, which will have fully furnished units, are experiencing brisk market uptake.
The other ongoing projects of SMDC are the following: Chateau Elysee, a mid-rise condominium project in Parañaque City, which has completed five of its six clusters; Berkeley Residences in Katipunan Road, Quezon City, which is 63% complete; Grass Residences beside SM City North Edsa, which is 58% complete with its Tower 1; Sea Residences near the Mall of Asia Complex in Pasay City, which is 38% complete with Phase 1; and Field Residences in Sucat, Parañaque, which is 95% complete with its Tower 1. Both Mezza Residences, which is just across SM City Sta. Mesa and Lindenwood Residences, a residential subdivision in Muntinlupa City, are 100% complete.
-End-
For further information, please contact:
Ms. Corazon P. Guidote
Vice President for Investor Relations
SM Investments Corporation
Email: cppg@sminvestments.com
Tel. 857-0117
