Enjoying continued support from its loyal consumer base, shopping mall giant SM Prime Holdings, Inc. reported a 10-percent growth in net income in the first half of the year amid a difficult business environment.

In a statement, SM Prime said consolidated net earnings reached P3.18 billion in the six months ending June this year from P2.9 billion the same period a year ago, mainly due to a steady revenue growth of nine percent. In the second quarter alone, the company posted a net profit of P1.6 billion, up 14 percent from P1.4 billion the previous year.

Revenues rose to P4.4 billion while EBITDA (earnings before interest, taxes, depreciation and amortization) increased nine percent to P5.9 billion for an EBITDA margin of 70 percent.

The income growth was also boosted by the inclusion of three SM malls in China into the financial books of SM Prime. The SM China malls located in the cities of Xiamen, Jinjiang in Southern China, and Chengdu in Central China, contributed P370 million in revenues 4% of total consolidated operating revenues.

According to SM Prime, the rental revenue grew 25 percent and seven percent, respectively. Average occupancy level was at 88 percent as against 81 percent in 2007.

Without the China malls, SM Prime’s net income in the first half grew by 8% to P3.1 billion on revenues of P8 billion.

“We are satisfied with the company’s first-half results. In spite of a much tougher operating environment brought about by global challenges, we still managed to grow and move forward,” said SM Prime President Mr. Hans T. Sy.

Sy said he is confident the company can sustain its profitability for the rest of the year as it expects to open new malls in Marikina, Rosales, and Baliuag to bring its total gross leasable space to 4.6 million square meters.

SM Prime said lease operations remain its main driver of revenue growth, rising 11 percent from P6.4 billion to P7.2 billion, mainly due to the addition of three new malls and the expansion of SM City Pampanga, SM City Cebu, and Mall of Asia which brought up the average occupancy rate to 91 percent.

Cinema ticket sales, however, decreased by 9% to Php0.9 billion from Php1.0 billion. The decline was attributed to the lack of blockbuster movies shown during the first half of 2008, in contrast to the same period last year.

Operating expenses during the first six months of 2008 increased by only 6%, to Php3.8 billion from Php3.6 billion, due largely to effective cost saving initiatives implemented in all SM malls. Likewise, income from operations rose to Php4.6 billion, up 10% from Php4.2 billion.

Interest and dividend income decreased significantly by 62 percent due to the maturity of high-yield time deposit instruments in the last quarter of 2007 and the early redemption of preferred shares in the second half of 2007. the proceeds from these investments were used to prepay maturing short-term loans and a portion of long-term debt.

SM Prime said investment properties and shopping mall under construction went up six percent on ongoing mall projects such as marikina, Rosales, Baliuag, and Naga, and the expansion of existing malls – Fairview, Megamall, and Xiamen. These projects are all scheduled to open up between 2008 up to 2009.

Long-term debt increased mainly due to a P3-billion long-term facility availed in June 2008 for capital expansion.