Business | Markets
Emaar Properties' profits decline 54 per cent
Emaar Properties, the largest developer in the Middle East, on Thursday revealed a 54 per cent decline in profits in 2008, mainly caused by a crushing loss of Dh1.77 billion in the fourth quarter.
- By Suzanne Fenton, Staff Reporter
- Published: 15:06 February 12, 2009
- Image Credit: Gulf News archive
- Emaar Properties took a beating in the fourth quarter of 2008, recording devastating losses of 202 per cent.
Dubai: A Dh1.77 billion writedown in its US subsidiary John Laing Homes in the fourth quarter pulled down market mover Emaar Properties' net profits by 54 per cent to Dh3.05 billion last year, the developer said in a statement.
Emaar, developer of the world's tallest tower, Burj Dubai, decided to write down its investment in John Laing Homes by Dh1.77 billion in the fourth quarter.
Emaar acquired John Laing Homes back in 2005 when the sub-prime crisis first hit the US. The company took a beating in the fourth quarter of 2008, recording disastrous losses of 202 per cent, its results show.
In the last quarter of 2007, the company had a net profit of Dh1.74 billion. In the last quarter of 2008, this figure had plunged to a loss of Dh1.77 billion, resulting in a 202 per cent loss.
Emaar released its 2008 financial results just after the stockmarket closed yesterday so the real impact won't be felt until Sunday, when it reopens.
Shares in the company fell 0.50 per cent yesterday, closing at Dh2.
However, industry experts say this is good as people have the weekend to think about the issue and do not immediately react to the news.
Emaar recorded annual net operating profit of Dh5.58 billion in 2008 a 15 per cent decline from Dh6.56 billion net operating profits in 2007.
Revenue for the fourth quarter fell to Dh3.49 billion from Dh5.14 billion the year before. Revenue for the year fell 10 per cent to Dh16.01 billion from Dh17.86 billion in 2007.
Although analysts had forecast a decline, Emaar has done better than expected. "The results have exceeded expectations. In a market which has more or less stopped in the UAE, from a transactional point of view, and given the write downs in the US, still to make a profit, down just 10 per cent, is very good," Nicholas Maclean, managing director of CB Richard Ellis, told Gulf News.
The important thing is that Emaar is still looking at future investments by going overseas, which is "absolutely the thing to do", Maclean added.
Emaar is concentrating on completing all projects which have commenced construction and have put new projects on hold.
Explaining the decline in profits, Emaar said, it recorded a profit of Dh0.924 billion prior to considering the inventory write down in the fourth quarter and recorded a profit of Dh6.662 billion for the year prior to considering the total inventory write down during 2008.
"The lower revenue of Dh3.49 billion and operating profit of Dh0.924 billion for the fourth-quarter (October to December) 2008 (prior to considering the impact of inventory write down) has resulted in lower overall results for the year 2008. This is primarily due to slowing down of the real estate market in Dubai resulting from the current state of the global financial climate," it said.
Mohammad Al Abbar, chairman of Emaar Properties, said the company will "continuously strive" to maximise shareholder value in 2009, through expansion into other countries and new businesses including shopping malls, hospitality and leisure and education.
Emaar blamed the decline on massive write-downs in the US. The company recorded Dh6.56 billion in net profits at the end of 2007 and Dh3.1 billion in net profits at the end of 2008. "Emaar's primary focus in the last quarter of 2008 was to mitigate the negative impact of the global financial crisis by facing up to the new economic realities and identifying innovative strategies to sustain businesses in an unprecedented downturn," Al Abbar said.
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