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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Las Vegas Sands posts third-quarter loss

2 November 2007

LAS VEGAS, Nevada -- The Venetian Macau opened to capacity-busting crowds, but the sheer number of guests didn't translate into profits for Las Vegas Sands Corp.

Preopening expenses related to the $2.4 billion resort, along with development costs at other properties, drove Las Vegas Sands Corp. to an operating loss of $48.5 million and a net loss of 14 cents a share in the third quarter that ended Sept. 30. Gaming analysts polled by Thomson Financial expected earnings of 31 cents a share.

During a contentious conference call with gaming analysts following Thursday's earnings release, Las Vegas Sands executives said gamblers at the massive Venetian Macau casino on the Cotai Strip were luckier than normal and the property is still dealing with efficiencies in its operations. Executives said gamblers were also winners at The Venetian on the Strip.

"We got shellacked," Las Vegas Sands President Bill Weidner said. "It is what it is."

Added company Chairman Sheldon Adelson, "That's the nature of the business. We just didn't have a good quarter and that's the end of it."

Adelson was confident, however, that The Venetian Macau, which has 3,000 hotel rooms and a 546,000-square-foot casino, will find its footing.

"We're firing on all cylinders and we're getting to where we need to be," Adelson said in response to an analyst's question. "I just have one comment for my competitors. Bigger is better."

Wall Street, however, didn't react favorably to the Las Vegas Sands announcement, which came after the stock market closed. Shares in the company fell more than 16 percent, or more than $20, in after-hours trading as of 5 p.m. local time on the New York Stock Exchange on a day in which the company's shares closed at $125.30, down $7.78 or 5.85 percent.

In the same quarter a year ago, Las Vegas Sands reported operating income of $97.3 million and earnings per share of 27 cents.

Quarterly revenue climbed 19.5 percent to $660.9 million from $553.2 million.

The company said preopening costs totaled $75.9 million and included the run-up to The Venetian Macau's unveiling. Other costs involved preopening expenses for the $1.8 billion Palazzo, which opens Dec. 20, and development costs in Singapore at the under-construction Marina Bay Sands and a casino-entertainment complex in Pennsylvania.

Las Vegas Sands officials spent most of the conference call discussing The Venetian Macau, which generated casino revenues of $131 million and hotel revenues of $12 million during the 34 days it was open in the quarter.

Through its first 65 days of operation, nearly 3.9 million visitors packed the resort, which has more than 10.5 million square feet of public space. The Venetian Macau opened Aug. 28 and the company estimated that it attracted 114,000 guests in its first 24 hours.

The Venetian Macau is the first of more than two dozen hotel-casinos being developed on Macau's Cotai Strip, which Weidner said was transforming the Chinese gaming market.

"We welcomed nearly 2 million people in our first 34 days of operation, and another 1.9 million visitors in the month of October," Weidner said. "These new visitors and first time customers will allow us to drive increases in both gaming and nongaming revenue and operating income yield per visitor, from the unprecedented array of business and consumer services available at Asia's first integrated destination resort."

In Las Vegas, Sands executives said table game win percentage at The Venetian was 14.7 percent in the quarter, compared with 23.4 percent in the same quarter a year ago. The figure drove total casino revenues to $83.1 million, a decrease of 6.9 percent compared with $89.3 million in the third quarter of 2006.

Still, Weidner said increases in casino volume bode well for the property.

"Although our quarterly results were negatively impacted by a lower than normal hold percentage, the benefits of our targeted capital investments have continued to contribute to growth," Weidner said.