SM Investments net profit up 15.6% to P14 billion in 2008

MANILA, Philippines - SM Investments Corp. (SMIC), the flagship investment holding firm of the SM Group of Companies of retail tycoon Henry Sy, sustained a steady growth last year as its net income went up 15.6 percent amid a global economic downturn that has resulted in increased costs of doing business.

In a financial report filed with securities regulators, SMIC said its net earnings rose to P14 billion on the back of a 19-percent growth in revenues, boosted by strong retail sales.

SMIC’s extraordinary gains from the sale of its shares in San Miguel Corp., which raised P27 billion, has more than compensated for the mark-to-market losses incurred by the group in its trading positions as a result of the global financial crisis.

Excluding the extraordinary items, SMIC’s net recurring income went up 11 percent to P11.6 billion. Operating income amounted to P21.7 billion, resulting in an operating margin of 15 percent.

Retail sales expanded 17 percent to P114.8 billion while sales from real estate operations jumped 91 percent.

 “We are pleased to report that amid a very challenging environment in 2008 on account of the global financial crisis, SM managed to perform within expectations, supported largely by the strong performance of our retail and property groups,” SM president Harley T. Sy said.

The retail group composed of SM Supermarkets, SaveMore stores, SM Hypermarkets and Makro, posted net earnings of P3.4 billion, up 24 percent from a year earlier. 

The retail and mall businesses accounted for 40 percent and 36 percent, respectively, of SMIC’s total net income. The banks contributed 16 percent, while real estate put in eight percent. 

The non-food group, mainly SM Department Stores, rallied in the second half as consumer confidence got a strong lift from the sudden decline in gasoline prices, easing inflation and a weaker peso. 

With the opening of 11 stores more last year, the retail group now has a total of 97 stores consisting of 33 department stores, 37 supermarkets, 13 of which are SaveMore branches; 13 hypermarkets; and 14 Makro outlets.

Jose T. Sio, executive vice president and chief finance officer of SMIC, said the company continues to have a strong balance sheet with net debt-to-equity ratio as of end-2008 at a low of 18 percent and a cash balance of P47.7 billion.

“This reflects the strength of SM’s financial position which will allow it not only to weather the current financial turmoil, but to benefit from valuable opportunities arising from the crisis which, in turn, will help the company emerge as a stronger business when the global economy recovers,” he said.

For 2009, the SM retail group plans to open two new SM Supermarkets, 14 SaveMore branches, four SM Hypermarkets and two SM Department Stores.

SM’s mall operations subsidiary, SM Prime Holdings Inc., reported a seven percent rise in net profit to P6.4 billion as gross revenues increased 12 percent to P17.8 billion.

Among the new malls to open this year include SM City Naga in Camarines Sur, SM City Rosario in Cavite, SM City Pamplona in Las Piñas and the Sky Garden at SM City North Edsa. The company is also set to expand SM City Rosales in Pangasinan.

SM Prime expects to end the year with a total of 36 malls nationwide and three malls in China, with an estimated gross floor area of 4.9 million square meters.

Meanwhile, SMIC’s banking unit BDO Unibank Inc., emerged as the country’s largest bank with total resources growing 30 percent to P802 billion. This was supported by very strong growth in deposits, up 43 percent to P636.8 billion.