Losses widen a bit with adoption of tougher accounting rules
LUCIO TAN-led Eton Properties Philippines has reported a bigger net loss for both the first half and the second quarter because of tougher accounting standards, which do not allow real estate firms to recognize money from buyers of projects still on the "pre-selling" stage.
The company expects this kind of performance to continue in the second half.
Eton Properties posted a net loss of P66.92 million from April to June, a 5.61% increase. First-half results showed a net loss of P140.24 million or a 24% increase from last year, due to the adoption of the Philippine Accounting Standard (PAS) 18.
Under PAS 18, revenue from "pre-completion" contracts cannot be recognized until the project is completed. Collections received from buyers are recorded as "deposits from customers," shown in the liabilities section of the balance sheet.
"Even if all of our pre-selling projects have sold very well, no revenue was recognized during the second quarter as construction has just started," Danilo E. Ignacio, president and chief operating officer of Eton, told BusinessWorld.
"[The] company is expected to register [a] loss this year until substantial construction can be done," he further said.
As of June, Eton Properties had P1.42 billion in deposits from customers.
"The company will be adopting the percentage-of-completion [method] in recognizing revenue during the commencement of construction," it said.
Aside from the tougher accounting standard, the higher net loss could also be attributed to the increase in selling expenses, which rose by 55% to P111.25 million because of more advertising and marketing activities, the company said.
Still, the company remains bullish on its residential projects.
Mr. Ignacio earlier said Eton Properties remains upbeat due to the strong sales of its residential condominium projects and strong interest from business process outsourcing (BPO) companies awaiting the completion of its office buildings.
Four of Eton Properties’ high-rise residential towers are scheduled for construction this quarter — the 39-storey Eton Residences Greenbelt and Eton Baypark Manila, both of which have been sold out; the One Archers Place on Taft Avenue which is already 76% sold, and the Eton Emerald Loft in Makati which is over 50% sold.
Its first BPO office, Eton Cyberpod Centris in Quezon City, meanwhile, is scheduled for completion by yearend while the three-building BPO complex Eton Cyberpod Corinthian in Ortigas began concrete-pouring activities last July.
Aside from these, the company is also preparing the launch of leisure development projects and is looking at Cebu, Batangas and Laguna as possible sites.
Anchor Land optimistic
Meanwhile, listed real estate developer Anchor Land Holdings, Inc. expects the second half to be even better after posting a ninefold hike in profit for the first half.
The company recorded P110.99 million in net income from January to June "on continued appreciation of its projects," specifically the 33-storey Mayfair Tower and the 39-storey Mandarin Square Tower on United Nations Avenue and Binondo, Manila, respectively.
"We are looking forward to the second half especially from the sales of our SoleMare Parksuites. We are very optimistic as sales [are] very strong," Vice-Chairman of Anchor Land Steve Li told BusinessWorld.
Although the company remains cautious on expansion, Mr. Li said some projects have been lined up for next year.
The company had said profits would reach P250 million this year or a 2.5% increase while revenues were expected to more than double to P1.02 billion.
Mall tycoon Henry Sy, Sr. has a 10% stake in Anchor Land, which went public late last year.
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