Brazil's Iguatemi 1st-qtr profit drops even as mall sales pick up

SAO PAULO, May 7 (Reuters) - Iguatemi Empresa de Shopping Centers SA, one of Brazil’s largest mall operators, reported a 4.6 percent drop in quarterly earnings on Tuesday, as improved operational results were eclipsed by higher financial expenses and taxes.

In a securities filing, the company said its first-quarter net income fell to 55.45 million reais ($13.90 million) from 58.1 million reais a year earlier.

Earnings before interest, taxes, depreciation and amortization (EBITDA) grew by 2.9 percent to 129.4 million reais. Total sales by stores based in the company’s malls hit 3.1 billion reais, up 5.4 percent from a year ago.

“Sales were positive in the first quarter, despite calendar effects, and we also started the second quarter off right,” Chief Financial Officer Cristina Betts said in an interview.

Same-store sales rose 3.1 percent compared with 1.1 percent growth in the first three months of 2018. Same-store rent increased 6.4 percent compared with a 2.8 percent rise a year ago.

Iguatemi’s quarterly net revenue grew by 2.7 percent to 172.99 million reais.

“We remain focused on changing the mix by replacing some of the merchants to improve our malls performance”, Betts said, adding that debt reduction is another goal for 2019.

At the end of March, Iguatemi had a net debt/EBITDA ratio of 2.61 compared with 2.84 in the first quarter of 2018.

The upscale mall operator plans capital spending of 150 million to 200 million reais this year compared with 170.7 million reais in 2018.

“Our strategy is to strengthen our assets. ... The next growth cycle will not only be about greenfields (new projects),” Betts said, adding that the company is considering expanding existing malls, as well as boosting its stakes in its existing portfolio of 16 malls, two premium outlets and four commercial towers.

Another major project under way is the Iguatemi 365 e-commerce platform, which has already been tested internally, she said.

Iguatemi shares traded at the Sao Paulo stock market have fallen 8 percent so far this year, after accumulating gains for three consecutive years.

On April 29, rival Multiplan posted a decline in first-quarter net income, reflecting a still-sluggish Brazilian economy. ($1 = 3.9890 Brazilian reais) (Reporting by Gabriela Mello Editing by Leslie Adler)