Emaar’s Dubai Bank Write-Off Sends Profits Tumbling

Emaar’s Dubai Bank Write-Off Sends Profits Tumbling

Some mixed news for Emaar properties, one of Dubai’s — state owned — master developers. That is, mixed news, not in a share of good and bad news, but rather in the fact that the bad news was tinged with goodness.

The company posted a 69 per cent decline in net profits for the second quarter of this year, which is obviously not good news. However, the decline was largely put down to the equity-hit the company took for writing off its 30 per cent stake in Dubai Bank, which was taken over by the government earlier in the year. This is being reported as good for the company, because it removes a “corporate distraction” and absolves the firm of any further calls for equity injection. In short: allowing the developer to concentrate on development.

According to the report the net profits of the UAE’s largest developer by market value fell from Dh802 million in the second quarter of 2010 to Dh250 million in the second quarter of 2011. First half profits fell 57% from Dh 1.56 billion last year to Dh671 million this year. During the same period fell by more than 50% from Dh0.26 in the first half of 2010, to Dh0.11 in the first half of 2011.

emaar-avenue-dubai

Despite the stark-looking figures, analysts and bankers are generally happy with the company’s performance.

Saud Masoud, senior analyst, real estate and construction, Rasmala Investment Bank, said, overall, Emaar had a “relatively solid” quarter relative to Rasmala’s expectations as the company beat its revenue estimates by “six per cent”, and proforma earnings came in line at “Dh0.07 per share”.

Chet Riley, executive director at Nomura, said: “Emaar largely met with consensus expectations. With the ‘sale’ of Dubai Bank, Emaar rids itself of another corporate distraction. While this resulted in an equity hit, it completely absolves the company from any further calls for equity injections.”

Also a factor in Emaar’s decline was the fact that it handed over fewer units than it has been doing. In the second quarter of 2011 the firm handed over 244 units, this is compared to 612 units in Q2 2010, and also less than the 270 handed over in Q1 2011. This is also bad news in the sense that high figures on what developers like Emaar are handing over are necessary to keep up confidence in a market shattered by failures to complete.

Emaar Properties’ chairman, Mohammad Al Abbar, said in a statement that Emaar is now embarking on a new phase of growth with a “core management team in place” to roll out a five-year corporate strategic action plan for driving long-term value creation.