Sorouh Q1 profit drops 65% as sales decline

Sorouh Real Estate, Abu Dhabi's second-biggest publicly traded property developer, said first-quarter profit declined 65 per cent as the global financial crisis reduced the company's sales by almost half. Net income fell to Dh125.45 million, or 5 fils a share, from Dh361.47m, or 14 fils, a year earlier, the company said yesterday in a statement to the Abu Dhabi exchange. Revenue dropped to Dh335.6m from Dh623.7m. The results "reflect the decision to sell less land, which is currently not reflective of its intrinsic value," the company said. "Sorouh expects to see gradual quarter-on-quarter improvement as the company starts to realise unit sales on the handover of Golf Gardens 1 and an increase in recurring income from rental developments". The worst financial crisis since the 1930s has weakened the property market in Persian Gulf states as banks curtailed mortgage lending and speculators sold assets. Aldar Properties, Abu Dhabi's largest real estate developer, said Monday its quarterly profit fell 35 per cent as sales slipped. "We expect real estate prices in Abu Dhabi to decline 55 per cent by 2010 from their peak in September," said Ahmed Badr, an analyst at Credit Suisse Group AG in Dubai with an "outperform" rating on Sorouh. Net income was about 10 per cent less than Bahr forecast. Sorouh jumped 2.54 per cent yesterday to close at Dh2.42 in Abu Dhabi trading. The shares have dropped 42 per cent in six months, while the Bloomberg World Real Estate Index has climbed 13 per cent. Abu Dhabi plans to spend $500bn by 2030 on developments including the world's first Ferrari-branded theme park to become less dependent on oil revenue. Sorouh had Dh5.9bn of cash at the end of the first quarter, while its total bank borrowings amounted to Dh160.5m, giving a debt-to-equity ratio of 2.79 per cent. All projects that Sorouh started in Abu Dhabi are on schedule, the company said. Abu Dhabi is likely to be the best performing real estate market in the Middle East and North Africa in the next one to two years, according to a survey by consulting firm Jones Lang LaSalle published on April 15. Oil wealth and a lack of housing make the emirate the most attractive investment market in the region, Jones Land said. Sorouh, set up in June 2005, has more than Dh70bn of projects under way, including Shams Abu Dhabi on Reem Island, a self-contained community for 55,000 residents, and The Gate District, a cluster of eight towers at the island entrance offering residential, office and retail space. Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here .