SM Prime Holdings, Inc. — the Philippines' largest mall operator and one of Southeast Asia's biggest integrated property developers — reported that its second-quarter consolidated net income edged up to P12.9 billion from P12.8 billion in the same period last year, as revenue growth was partially offset by higher costs.

Revenue for the April-to-June quarter climbed 9% to P38.4 billion from P35.3 billion, the company said in a statement issued on Monday. However, costs and expenses during the period rose nearly 9% to P19 billion from P17.5 billion, primarily driven by increased construction costs — a pressure point for Philippine developers as building material prices and wage rates have trended higher alongside national infrastructure push.

For the first half of the year, the property developer posted consolidated net income of P24.5 billion, essentially flat compared with the same period a year earlier, as escalating operating and construction expenses counterbalanced revenue gains. The results illustrate how inflationary cost pressures are compressing margins even as consumer-facing segments like retail and hospitality continue to recover from pandemic-era disruptions.

Consolidated revenue for January through June grew 5% to P71.7 billion from P68 billion a year earlier.

Rental income from malls, offices, hospitality, and meetings, incentives, conferences and exhibitions (MICE) activities accounted for 61% of total revenue. Real estate sales contributed 27%, while cinemas, food and beverage, amusement, and other businesses comprised the remaining 12%.

Total costs and expenses for the first half increased nearly 6% to P35.6 billion from P33.6 billion, driven mainly by higher depreciation and amortization, fixed operating costs, and construction-related expenses.

Mall revenue rose 8% to P41.8 billion from P38.6 billion, buoyed by improved occupancy, stronger tenant sales, and enhanced operating efficiency.

"Our focus on tenant relationships, customer experience and cost management supported our performance," SM Prime President Jeffrey C. Lim said.

"Despite challenging market conditions, commercial demand remained resilient across our portfolio," he added.

Residential revenue, which encompasses the company's core, leisure, and premium projects, dipped 1% to P20.6 billion from P20.9 billion, mainly due to lower revenue recognition from sales recorded in the previous year. The modest decline comes as the Philippine residential market navigates elevated borrowing costs, with the central bank's policy rate remaining at multi-year highs through the period.

Hotel and convention center revenue grew 8% to P4.4 billion from P4.1 billion, aided by increased bookings and higher average daily room rates, reflecting the ongoing recovery in Philippine tourism and corporate events activity.

Office and warehouse revenue increased 9% to P5 billion from P4.6 billion as demand for office space improved.

As of end-June, SM Prime held total assets of approximately P1.1 trillion. Capital expenditures for the first six months declined 18% to P30.7 billion from P37.3 billion in the comparable period last year.

On Monday, SM Prime shares gained 0.55% to close at P18.30 each.

— Alexandria Grace C. Magno