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Plunge in Macau revenue leads to lower profits for Wynn Resorts

4 Feb 2015

By Howard Stutz
LAS VEGAS -- Macau, which has driven profits for Wynn Resorts, Limited since 2006, caused a steep decline in the company's fourth-quarter earnings.

Las Vegas-based Wynn said Tuesday revenue from its two Macau casinos dipped 32 percent in the quarter that ended Dec. 31. Coupled with a 5.8 percent drop in revenue at its two Las Vegas resorts, Wynn reported net income of $109.3 million, or $1.07 per share, in the quarter. A year earlier, the company had a net income of $213.9 million, or $2.10 per share.

Wynn's net revenue for the quarter was $1.14 billion, down 25.1 percent from $1.52 billion in the same quarter a year ago. In Macau, revenue fell to $761.2 million, compared with $1.12 billion a year ago.

"Our results in Macau didn't surprise anybody," Wynn Resorts Chairman Steve Wynn said at the outset of the company's fourth-quarter earnings call.

Macau has seen eight consecutive months of revenue declines, including a record-setting 30.4 percent drop in December. The market saw a 17.4 percent gaming revenue decline in January, but Wynn told analysts on the call his casinos actually increased results during the month.

A government-mandated crackdown on corruption and a weakening Mainland China economy have sliced into Macau's business since last summer.

Wynn spent much of the conference call answering questions about China and Macau. He said some of the high-end retail operations at Wynn Macacu and Encore experienced declines in sales during the quarter.

"China remains a big question mark," Wynn said. "We have more questions than answers."

In Macau, Wynn Resorts said cash flow from its two Macau casinos fell 35.5 percent in the quarter while high-end tables revenue declined 39.9 percent.

Wynn said on the conference call the $4.1 billion Wynn Palace, a 1,700-room resort on Macau's Cotai Strip region, fell behind schedule because of issues with the building company and may miss its planned Chinese New Year 2016 opening. The opening is now planed for the first half of 2016.

Wynn also updated information on the company's $1.6 billion development in Everett, Mass., just outside Boston. He said the company purchased the 33-acre site along the Mystic River and has completed designs for the hotel-casino.

"Along with the Palace, they are the best work this company has ever done," Wynn said.

Last month, the city of Boston sued the Massachusetts Gaming Commission over awarding Wynn a license for the Boston area. The company has not addressed the lawsuit, but Wynn Tuesday defended his company's efforts in Everett.

"We worked hard for the right to operate in Massachusetts," Wynn said. "We will be one of the top five employers in the state and the project will have the largest construction budget in the recent history of Massachusetts. We're delighted to have that position."

In Las Vegas, the overall decline in revenue during the quarter was blamed on gaming. Room revenue grew 6.3 percent and the average daily room rate was up 5.9 percent. Revenue per available room grew 7.2 percent. Restaurant revenue increased 5.3 percent while entertainment and retail revenue climbed less than 1 percent.

Wynn told analysts the 2014 cash flow in Las Vegas of $515.2 million "was a record" for any American-based casino company. For all of 2014, Wynn Resorts net revenue declined 3.3 percent to $5.43 billion.

During the conference call, Wynn said he was encouraged by development across from his company's Strip resorts. He expects Malaysia-based Genting Malaysia Berhad will build the $4 billion Resorts World Las Vegas. He also expects Australian billionaire James Packer to build "a $2 billion facility" on the site of the former New Frontier.

"He's hired people of quality and experience," Wynn said of former Wynn Las Vegas President Andrew Pascal and former Wynn and SLS Las Vegas executive Rob Oseland.

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