LV Sands profit falls because gamblers win more
Las Vegas Sands Corp. said today its second quarter profit fell as its casinos played unlucky in Asia and Las Vegas.
Net revenue increased 10.1 percent to $2.6 billion compared to 2011's second quarter, thanks in part to the addition of gaming capacity in Macau. But the quarterly profit fell from $367.6 million, or 45 cents per share, to $240.6 million, or 29 cents per share.
In Las Vegas, the Venetian and Palazzo resorts were busy hosting gamblers and conventioneers. The amount wagered on table games increased 2.9 percent to $434.6 million, slot machine volume increased 8.2 percent to $445.1 million, and the hotels generated an average daily room rate of $205, up from $200.
But because of a decline in occupancy of 2.6 percentage points to 86.2 percent, daily revenue per available room in Las Vegas slipped $1 to $176.
Net revenue in Las Vegas overall fell 1.6 percent to $327.3 million, mainly because casino table games won less from players. They won 16.5 percent of money wagered, down from 20 percent during the year-ago quarter.
Declines in table game win percentages also were reported at key Las Vegas Sands properties in Macau and Singapore.
Besides the unlucky play by the casinos, Las Vegas Sands said its profit fell because of higher legal expenses, likely related in part to a Las Vegas lawsuit filed by fired Macau CEO Steven Jacobs and a related U.S. government probe into Sands’ compliance with a U.S. law barring bribes to foreign officials.
On top of that, the company posted a non-cash impairment loss of $100.8 million to write off its investment in two land parcels in Macau it’s no longer developing.
Executives told analysts during a conference call that the unlucky play by the casinos during the quarter reduced property-level EBITDA companwide by $87.9 million, including $12.5 million in Las Vegas.
They were quick to point out that this was a reversal from the first quarter, when the casinos played luckier than usual, boosting EBITDA companywide by $71.8 million.
“What we gained in the first quarter we lost in the second quarter,” President Michael Leven said.
EBITDA is a key gaming industry performance measure meaning earnings before interest, taxes, depreciation and amortization.
The company said it’s confident in the Las Vegas market, which struggled during the recession. Las Vegas Sands said it saw increases in high-end bacarrat play in Las Vegas during the second quarter.
“Las Vegas is stable and we are investing in our properties for the future,” with high-end Asian players expected to be a growth market for the company in Las Vegas, the company said in its earnings presentation.
“Group room business and pricing is picking up for 2013 (in Las Vegas). We are renovating 1,000 rooms in our Venezia Tower (at the Venetian), remodeling and redesigning the gaming floor at the Venetian and introducing new entertainment offerings in the fall,” Leven said.
Such capital spending totaled $38.3 million in Las Vegas alone during the quarter, the company said.
With the company’s strong balance sheet and its cash reserves of $3.5 billion, Chairman and CEO Sheldon Adelson said he continues to look at expansion opportunities in Japan, South Korea, Vietnam, Canada and Europe.
Adelson said that given what he considers to be the company’s bargain stock price, he may propose that the company buy back some of its shares. Prior to today’s earnings announcement, Sands stock closed at $37.51, well off its 52-week high of $62.09.
Asked if they were concerned about the government of Singapore potentially further restricting casino visits by Singaporean citizens struggling with financial problems, executives said they were not and that growth in tourism to Singapore and its casinos should continue.
“We don’t want to take money from poor people,” Adelson said.