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.