Philippines: DMCI Holdings H1 Net Income Drops 5%


Diversified engineering conglomerate DMCI Holdings, Inc. (PSE: DMC) posted a 5 percent dip in profitability in the first half of 2016. From P6.6 billion, its consolidated net income slid to P6.2 billion due to lower contributions from its real estate, nickel mining and water businesses.

“Since last year, we have been anticipating an earnings slowdown in DMCI Homes because of the deferred recognition of revenues from its completed high-rise projects. The expiration of Maynilad’s income tax holiday in 2015 also affected our bottom line,” DMCI Holdings Chairman and President Isidro A. Consunji said in a disclosure to the Philippine Stock Exchange.

Depressed nickel prices and reduced shipments converged to bring down the performance of DMCI Mining Corporation during the first six months.

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“For the second half of the year, we expect even weaker results from DMCI Mining because of the suspended operations of its mining units in Palawan and Zambales,” Consunji added.

Excluding the one-time gain on sale of 10% stake in Subic Water, the core net income of DMCI Holdings declined 7 percent to P6.1 billion from P6.6 billion last year.

Robust Growth

Net income contributions from Semirara Mining and Power Corporation jumped 34 percent to P3.6 billion compared to P2.7 billion as a result of higher coal exports and additional revenue from its new plant, Southwest Luzon Power Corporation.

DMCI booked a 19 percent increase in net earnings during the first half of the year, from P333 million to P397 million as cost overruns for a power plant project were fully recognized in 2015.

Off-grid energy supplier DMCI Power Corporation contributed P241 million in net earnings, a 12 percent upswing from P215 million, buoyed by the commercial operations of its 15MW power facility in Calapan, Oriental Mindoro.

Marked Decline

DMCI Homes contributed P708 million in earnings, a 59% fall from the previous year. Although it registered higher sales and reservations during the first six months, its deferred recording of accounting revenues pulled down its overall profitability.

Contrary to local industry practice, DMCI Homes realizes sales only when the unit is fully completed and at least 15 percent of the contract price has been collected. In 2015, the company shifted to developing more high-rise projects, which normally takes around 3 years to complete.

“We expect income recognition to rebound by 2018. This is really just a timing issue for DMCI Homes,” said Consunji.

Net income contributions from Maynilad contracted 4 percent from P1.15 billion to P1.1 billion. Higher billed volume (4%) and a 5 percent increase in average effective tariff muted the impact of its income tax holiday expiration.

Attributable net income from DMCI Mining plunged 87 percent from P454 million to P57 million while contribution from DMCI Holdings and other investments dropped 19 percent to P42 million compared to P52 million during the same period last year due to reduced interest in Subic Water. –