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Abu Dhabi Sorouh Reports 79% Drop in Second-Quarter Net, Missing Estimates
Sorouh Real Estate PJSC, the builder of Abu Dhabi’s Sun and Sky towers, said second-quarter profit fell 79 percent, missing estimates, after land sales evaporated.
Net income declined to 30.8 million dirhams ($8.4 million) from 148.3 million dirhams a year earlier, the company said in a statement today. Analysts predicted a profit of 68 million dirhams, according to three estimates compiled by Bloomberg. Revenue dropped to 81 percent to 190 million dirhams.
Property prices in Abu Dhabi slid by more than 30 percent from their peak in mid-2008, according to Jones Lang LaSalle Inc. estimates. High mortgage rates remain the biggest obstacle to a housing recovery in the emirate, Sorouh Managing Director Abubaker Seddiq Al Khouri said in April.
“This a disappointing set of results based on what they have done in the past,” said Chet Riley, a Dubai-based analyst at Nomura Holdings Inc. “Sorouh is in a better position than some of their competitors since they have deliveries coming off right now and you will see revenue being booked and cash flows coming in the third and fourth quarter.”
Sorouh, Abu Dhabi’s second-biggest developer by market value, will hand over keys to 400 to 500 homes in the next three quarters and more than 1,000 units in the Sky and Sun towers will be delivered by the second quarter of next year, Chief Operating Officer Gurjit Singh said today on a conference call.
The developer is holding off on land sales until prices rise, Chief Financial Officer Richard Amos said on the call. The outlook for values is unlikely to change this year, so land sales may be curbed “for the foreseeable future,” Riley said.
Homes, Offices
Sorouh and Aldar Properties PJSC, the emirates biggest developer, are leading a construction drive in the United Arab Emirates’ capital. Sorouh is building thousands of homes, offices and retail spaces around canals and parks on Abu Dhabi’s Al Reem and Lulu islands.
A 2.35 billion-dirham four-year loan facility will be used to finance the construction of Shams Gate and other developments in Abu Dhabi, the company said. Sorouh has 1.64 billion dirhams of cash and won’t need any more funding for at least a year, Amos said.
A key issue for Sorouh during the second half of 2010 will be how much money it generates from completing apartments at the Sun and Sky Towers, Riley said. Deliveries at the towers should generate 600 million to 700 million dirhams, assuming a relatively low default rate, he said.
Sorouh won government contracts valued at more than 2 billion dirhams to build 1,000 homes for United Arab Emirates nationals, it said July 1.
Sorouh fell 2.2 percent to 1.77 dirhams in Abu Dhabi at 12:04 p.m. local time, giving the company a market value of 4.64 billion dirhams. The shares have declined 28 percent this year.
To contact the reporter on this story: Zainab Fattah in Dubai on zfattah@bloomberg.net Arif Sharif in Dubai at asharif2@bloomberg.net
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