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Howard Stutz
 

Casino openings cut into Sands profits

31 July 2008

LAS VEGAS, Nevada -- Two casinos that weren't around a year ago helped send the quarterly revenues for Las Vegas Sands Corp. soaring more than 81 percent higher during the three-month period that ended June 30.

But costs associated with opening the Venetian Macau last August and the Palazzo in January, along with additional corporate expenses as the company expands its footprint globally, propelled the casino operator to a quarterly loss.

Las Vegas Sands said late Wednesday it had a net loss of $8.8 million, or 2 cents a share, in the second quarter. A year ago, the company reported net income of $34.4 million, or 10 cents a share. Analysts surveyed by Thomson Reuters forecasted earnings of 12 cents a share for the company.

Las Vegas Sands said its revenues were $1.11 billion, an increase of 81.4 percent compared with $612.9 million in the same quarter of 2007.

Still, Las Vegas Sands President Bill Weidner told investors the company was moving forward with an aggressive development pipeline in Macau and is holding its own on the Strip despite a challenging economic environment.

"The fundamentals of our company have not changed," Weidner said. "The market has been soft in Las Vegas, but we have had a very good July."

During a conference call with analysts to discuss earnings, Weidner said table game volume and slot machine play are up at The Venetian and the Palazzo during July compared with preceding months.

Weidner said that while the market is down, Las Vegas Sands is working toward a more efficient operating infrastructure within the Venetian-Palazzo complex, which encompasses more than 7,100 hotel rooms and two casinos that total more than 200,000 square feet.

The two resorts employ 8,100 workers, including 4,000 that were hired for the Palazzo in December and January. Weidner said during the conference call the company was hopeful it could trim 1,500 workers by attrition, but not through layoffs.

Las Vegas Sands spokesman Ron Reese said after the conference call, the 1,500 jobs figure largely includes positions the company had budgeted for and were either not filled or won't be filled.

"When the Las Vegas and the U.S. consumer economy returns like we know it will, we will have a high-quality product that awaits them," Weidner said.

In Las Vegas, cash flow at The Venetian and Palazzo during the second quarter grew 28.1 percent to $106.6 million. However, operating income fell 26.2 percent, which was attributable to the opening of the Palazzo.

With the Palazzo coming online, hotel revenues were $142.4 million, an increase of 52.6 percent, while casino revenues were $126.5 million, a jump of 32.5 percent.

The Venetian Macau, which will celebrate its first anniversary on Aug. 28, had casino revenues of $415.6 million and hotel revenues of $46.5 million. Weidner said the company is focusing on three areas to improve the 3,000-room hotel-casino's performance: better management of the resort's high-end play, increased customer volume through the company's expanded high-speed ferry service and better cost controls. Still, to date, more than 20 million have visited the resort since it opened.

The Sands Macau saw its casino revenues decrease almost 30 percent from the same quarter a year ago, mainly because of competition on the Macau peninsula from the newly opened MGM Grand Macau and the expanded Wynn Macau.

The company said it will open its second project on the Cotai Strip, the Four Seasons Macau, which is adjacent to The Venetian, on Aug. 28.

The company said its development activities remained strong with capital expenditures totaling $966.8 million. In 2009, Las Vegas Sands expects to open four hotel-casinos on the Cotai Strip, its $675 million Sands Bethlehem project in Pennsylvania and the $4 billion Marina Bay Sands in Singapore.

Las Vegas Sands announced earnings after trading on the New York Stock Exchange closed Wednesday. Shares in the company finished up $3.79, or 8.61 percent, to close at $47.82.

In after-hours trading, shares fell $1.83 or 3.8 percent with about 500,000 shares traded by 6 p.m. local time.