45% fall in Emaar Q1 profits underlines challenges ahead
Posted on 25 April 2011 with no comments from readers
Emaar Properties, the largest developer in the Arab world, reported a 45 per cent fall in profits in the first quarter to $115 million on revenues down from $785 million to $540 million, underlining the challenges that remain in its local and regional markets.
First quarter results included some revenues from the handover of offices in Syria, a country where popular unrest is now destablizing business activity. The group also has a large project in Cairo where the government was overthrown in a revolution last month.
Strong asset base
Chairman Mohamed Alabbar promised to ‘explore growth opportunities in key emerging markets, where our emphasis will be to create dynamic socio-economic growth engines like Downtown Dubai that create jobs, support ancillary industries and meet lifestyle aspirations’.
But Emaar has been supported by its Dubai operations. Income from its shopping centres, malls and hotels accounted for around a quarter of revenues in Q1, leaving the company less vulnerable to fluctuations in the real estate cycle.
The huge Dubai Mall next to the Burj Khalifa, the world’s tallest building, is very popular, and the Address hotels ran at 87 per cent occupancy, although occupancy of the flagship Armani hotel was not stated and doubtless much lower.
It was a lower number of property handovers that brought profits down in Q1, with unit completions down from 1,300 in the same months a year ago to 270.
Write-offs
Emaar has continued to make massive write-offs during the property slump with almost a billion dollar provision against John Laing Homes in the US in 2009, and provisions last year for losses on stakes in Amlak Finance and Dubai Bank.
However, with substantial developments in Saudi Arabia, Egypt, Syria and Turkey as well as being the largest foreign land owner in India, Emaar remains an asset-rich, low debt group with considerable recovery potential.
Mohammed Alabbar is also the best of the best to guide Emaar through these difficult times in the region, and could yet spot more opportunities in Dubai. Only another big downswing in the global economy would really impact on Emaar, unless regional instability becomes very much worse.
