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Dubai's Emaar Q1 profit hit by US housing slowdown

DUBAI (Reuters) - Dubai-based Emaar Properties (EMAR.DU), the largest Arab real-estate developer by market value, reported its slowest rate of profit-growth in the first quarter in at least two years as the U.S. housing market cooled.

The earnings missed even the smallest profit-forecast of four analysts polled by Reuters last month.

Net income in the three months to March 31 rose 13.3 percent to 1.72 billion dirhams ($468.5 million), or 0.28 dirhams per share, compared with 1.52 billion dirhams, or 0.25 dirhams per share, in the year-earlier period, Emaar said.

Compared with the fourth quarter, revenue fell almost 30 percent. Cost of revenue tripled to 1.98 billion dirhams.

Emaar said in an income statement revenue for the first quarter of 2007 was lower than the fourth quarter of 2006 due to a drop in sales by John Laing Homes, USA.

Emaar bought U.S. homebuilder John Laing Homes for $1.05 billion in June at a time when the market for new homes was struggling. Annualized sales of new homes in the United States fell in February for a second straight month, to their lowest level since 2000.

"We were expecting margins to be lower in Q1 compared to Q1, 06, and they came in even lower than that," said Roy Cherry, an analyst at Dubai-based Shuaa Capital investment bank. "We have estimated no contribution from U.S. operations."

The sales of single-family homes declined 3.9 percent in February to an annual rate of 848,000, from an annual rate of 882,000 in January, according to U.S. government data last month. Sales in 2000 were 793,000.

Profit margins in the first quarter fell to 44 percent, compared with 66 percent in the three months to March 31, 2006, Cherry said. Shuaa had expected 48 percent in the first quarter.

Dubai is the second-largest member of the oil exporting UAE federation and the first Gulf Arab emirate to open its real estate market to foreign investment, triggering a property boom.

The average of the four analysts polled by Reuters was for profit of 1.88 billion dirhams. The lowest was 1.8 billion dirhams by Deutsche Bank.

Shares of Emaar fell 1.75 percent on Sunday. The stock was down 6.56 percent this year at Thursday's close.

"The results are definitely below what the market expected," said Mohammed Yasin, managing director at Emirates Securities, a brokerage in the United Arab Emirates. "This explains some of the reluctance of the shares to move up in the last few weeks."

Revenue at the company, 90 percent of which is generated in the United Arab Emirates, soared 74 percent to 3.9 billion dirhams, spurred by sales at its $20 billion Burj Dubai, it said. Burj Dubai will be the tallest building in the world when it is completed next year, Emaar has said.

Dubai's government took a majority stake in Emaar in March by exchanging land for $7.6 billion worth of stock.

The deal could increase Emaar's land holdings in Dubai by 55 percent, giving the developer more room to expand at home until foreign projects start generating profit, analysts have said.

Earnings from foreign operations may contribute more to profit next year, Mohamed Alabbar, the company's chairman was quoted as saying in the statement.

Emaar last year started selling properties in India, Pakistan and Egypt, three of the 14 countries in which it is developing residential, leisure and other projects worth $60 billion.




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