New taxes and lower spending from high-rollers in Malaysia have sent Genting BHD’s 2016 first quarter profit crashing by 79 percent year-on-year.
Despite achieving an overall high volume of business, Genting BHD said in a disclosure to the Bursa Malaysia on Tuesday that its profit dropped from RM620.1million ($152 million) to RM 130.8 million ($31.9 million). Its earnings before interest, taxation, depreciation and amortization (EBITDA) also dropped by 27 percent year-to-year to RM444.3 million ($108.9 million).
Genting attributed the revenue slump to foreign exchange losses of RM 138.8 million ($34.02 million) on the company’s U.S. dollar denominated assets as a result of the strengthening Malaysian ringgit against the greenback in the first quarter of 2016.
Company earnings, according to Genting, were also hit by a goods and services tax introduced in Malaysia in April 2015, as well as the lack of one-off gains that had boosted last year’s performance.
“While the operational performance of the group grew this quarter, the strengthening of the Malaysian ringgit against the U.S. dollar resulted in significant foreign exchange losses on the group’s U.S.-dollar denominated assets,” Genting BHD stated. “This, along with higher depreciation and amortization charges, led to the drop in the group’s net profit.”
The Genting group’s revenue, however, rose 7.6% to RM4.7 billion ($1.15 billion) in the quarter from a year ago, due to higher income from its casino operations in the UK and its hospitality business in the United States.
Malaysia’s sole casino operator pointed out that casino business in the UK posted a RM 173.2 million ($42.46 million) profit from its premium players, saying that the favorable foreign exchange movement of the British pound against the Malaysian ringgit has also contributed to higher revenue from UK.
On the other hand, revenue from the leisure and hospitality business in the United States and Bahamas increased to RM 36.6 million ($8.97 million) due mainly to a higher volume of business from the operations of Resorts World Casino New York City and a stronger U.S. dollar against the ringgit.
Genting is the holding company of a group that includes five listed entities in Malaysia, Singapore and Hong Kong. Its affiliates are Genting Malaysia, Genting Singapore, Genting Hong Kong and Genting Plantations.
While the casino and entertainment firm takes a cautious stance amid the prevailing global economic uncertainty, Genting said its outlook for the industry and international tourism remains positive in the long term.
Genting announced its plan to ramp up spending as part of the Genting Integrated Tourism Plan, which aims to upgrade the Resorts World Genting complex. The company said new attractions and facilities included in the plan, such as the 20th Century Fox theme park, would begin opening “from the second half of 2016.” The total capital investment is now estimated at RM10.38 billion ($2.54 billion) from the original RM5 billion ($1.23 billion) announced in 2013.