Diversified engineering conglomerate DMCI Holdings, Inc. (PSE: DMC) ended the first half of 2017 with P7.6 billion in core profits, up 21 percent from P6.3 billion during the same period last year.

The growth was driven by the improved earnings contributions of Semirara Mining and Power Corporation (SMPC), DMCI Homes and D.M. Consunji, Inc. (DMCI).

Including a one-time gain of P111 million for the partial divestment of its stake in Subic Water in March 2016, net income of DMCI Holdings improved 19 percent from P6.4 billion to P7.6 billion.

“We had a very good first half. Our performance in the second half will likely be more modest due to the higher strip ratio of SMPC compared to the first half,” said DMCI Holdings Chairman and President Isidro A. Consunji.

“Majority of the new DMCI Homes projects are also scheduled for launch in the second half. However, we can only recognize revenues from these new projects once the collected payments reach our revenue recognition threshold. But I think we are on track to achieve our full year target of double-digit growth,” added Consunji.

Strong Performance

The consolidated net income of SMPC in the first semester climbed 24 percent year-on-year from P6.4 billion to P7.9 billion.

The 4 percent dip in coal sales volume was offset by the 28 percent upsurge in average coal prices. Energy generation increased by 12 percent which was boosted by a 12 percent uptick in electricity prices.

In effect, SMPC’s first half net income contribution to DMCI Holdings jumped 24 percent to P4.5 billion from P3.6 billion the previous year.

Net income share from DMCI Homes surged 78 percent from P909 million to P1.6 billion due to higher sales and reservations and change in accounting policy from completed contract method to percentage of completion (POC) method.

First half sales and reservations of DMCI Homes increased 44 percent year-on-year from 3,749 residential units to 5,396 residential units due to the launch of bigger projects this year.

The real estate firm shifted to the POC method in June 2017 to align with current accounting practice in the industry.

Under the POC method, real estate sales and related costs are recognized as profit or loss based on the progress of the development while the real estate unit is being constructed. Previously, DMCI Homes recognized sales only when the unit is fully completed.

Net income contributions from construction arm DMCI increased 25% from P397 million to P497 million due to higher percentage of completion on ongoing projects and lower construction costs among its business units.

Performance Slowdown

Off-grid energy supplier DMCI Power recorded a 5 percent slip in first half earnings contributions from P241 million to P228 million, mainly due to the expiration of its income tax holiday for its Masbate operations.

Despite its protracted mining suspension, DMCI Mining stayed profitable due to the increase in average selling price of nickel. This allowed the nickel firm to contribute P54 million to the Parent—5 percent less than the P57 million recorded during the same period last year.

Affiliate Maynilad posted a 31 percent drop in equity income contributions from P1.1 billion to P759 million, as delays in the implementation of the rate rebasing tariff continued to put a downward pressure on its earnings.

Parent and other income stood at P27 million during the first half, a 36 percent decline from P42 million during the same period last year because of the full period effect of the sale of the 10% stake in Subic Water.