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Okada Manila delays, Wynn Resorts litigation lead to Universal profit slump

Thursday, 15 February 2018 06:48
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Japan’s Universal Entertainment Corporation has recorded a net loss of ¥13.43 billion (US$125.4 million) for the nine months to 31 December 2017, a significant decline from its previously announced forecast due to construction expenses at Okada Manila, sluggish pachinko and pachislot sales and ongoing litigation against Wynn Resorts.

Universal announced in May 2017 that it anticipated a profit of between ¥15.8 billion and ¥20.9 billion for its revised financial year (1 April to 31 December). Sales for the period of ¥68.55 billion (US$640 million) also came in well below the previously forecast range of between ¥101 billion and ¥115.8 billion.

The company cited a number of factors for the discrepancy, among them ongoing expenses related to completion of its new Philippines integrated resort Okada Manila, which recorded an operating loss of ¥9.02 billion despite sales increasing to ¥16.05 billion.

“The company has been unable to absorb personnel expenses and other fixed costs due to lower than expected revenues owing to the delay in construction, resulting in negative operating income,” Universal explained.

Despite the loss, Universal said it expects Okada Manila to “grow to become the second core business alongside the pachislot and pachinko business in 2018, resulting in a substantial change in the composition of consolidated sales.”

It added that the completion of the property in the coming months would reduce costs and significantly increase revenue, particularly via the launch of full-scale operations in the VIP segment.

“Okada Manila is located in the Entertainment City special economic zone of the Philippines, which is positioned as a hub for the entire Asian region,” the company said. “This casino and resort, which is one of the largest in the world, benefits from a favorable business environment that includes reduced casino and other taxes.

“The company believes this property can attract large numbers of people and generate substantial sales and earnings. Everyone involved with this project has a strong commitment to ensuring that guests have the best possible experience as expressed by the Okada Manila motto ‘Discover Extraordinary’.”

In the pachislot and pachinko business, Universal pointed to sluggish sales industry-wide coming from ongoing restrictions to potential payouts, while litigation against Wynn Resorts in the US continues to prove costly ahead of its upcoming trial in April.

Universal filed a lawsuit in 2012 seeking to reclaim 24.55 million shares after the Wynn board forcibly redeemed Universal’s shares worth almost US$2.8 billion and issued a promissory note for just US$1.9 billion. Wynn claimed at the time that Universal founder and then Wynn Resorts board member Kazuo Okada put Wynn’s gaming license in jeopardy amid allegations he provided improper hospitality at Wynn properties to Philippine gaming officials to the tune of US$110,000.

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