Sorouh says profit plunges to Dh20m

Dubai: Sorouh Real Estate announced an 86.8 per cent drop in net profit for the second quarter of this year to Dh20 million compared to Dh151 million in the second quarter of 2009.

* Sorouh, which has more than Dh70 billion worth of projects planned or under development in the UAE, said it had Dh1 billion of investment in income-generating projects in the first half of this year and Dh2.35 billion secured to fund further construction. * Image Credit: Abdul Rahman/Gulf News

The profit was mainly attributed to rental income from its investment portfolio rather than to sales.

Net profit for the first half of this year fell 45.9 per cent to Dh152 million compared to Dh281 million during the same period last year.

Nomura research analysts Chet Riley and Sunrita Bhowmik said: “Net profit was largely driven by rental and associate income and partially the sale of 11 units in Golf Gardens 2″.

“Sorouh also posted a provision of Dh50 million, which we did not account for. This suggests a degree of market deterioration,” the pair said in a statement.

“Sorouh has announced it will not sell land at current levels so we expect profitability to be contained to just rental, leasing and unit sales for the remainder of the year — as we see little prospects of improvement in Abu Dhabi land prices over 2010.”

Revenues for the second quarter of this year fell 80.6 per cent to Dh190 million, down from Dh978 million in the same period last year.

Revenues fell 52.7 per cent for the first half year of this year to Dh621 million, down from Dh1.31 billion in the first half of last year.

Financing facility

Nomura stated: “Sorouh missed our Dh430 million revenue expectation by a lot. We had forecast the revenue risk to the downside in the eventuality that Sorouh could not maintain its quarterly run of ‘smoothing transactions [land sales, joint venture sales/exits etc]. In the previous quarter, revenues were boosted by a Dh216 million land plot sale in Shams Abu Dhabi”.

Earnings per share for the first half 2010 were Dh0.06 compared to Dh0.10 in same period last year.

Sorouh, which has more than Dh70 billion worth of projects planned or under development in the UAE, said it had Dh1 billion of investment in income-generating projects in the first half of 2010 and Dh2.35 billion secured to fund further construction.

Sorouh Real Estate CFO Richard Amos told Gulf News: “A lot of good progress has been made in the first half of the year particularly Dh1 billion of additional investment in our projects; securing Dh2.35 billion of new financing facilities and improving the quality of our earnings through growth of our property investment portfolio”.

The recent signing of a Dh2.35 billion, four-year finance facility, has resulted in almost Dh2 billion of free incremental cash and facilities being available to Sorouh.

These funds would finance Shams Gate and other developments.

Sorouh Managing Director Abu Bakr Seddiqi Al Khouri said: “Our new financing facility significantly strengthens our liquidity position, leaving the business well funded to advance our major developments in Abu Dhabi. Our cash position will be further improved as we deliver Sun & Sky in coming months”.

Sorouh shares closed 2.76 per cent lower to Dh1.73 on the Abu Dhabi exchange yesterday.