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Deyaar Income Plunges 69pc on Property Slump
DUBAI - Deyaar Development PJSC, which put a quarter of its projects in Dubai on hold, reported a 69 per cent decline in profit in the second quarter because of a slump in property prices in the emirate.
Net income fell to Dh75.4 million ($20.5 million), the company said in an e-mailed statement on Sunday. That compares with a profit of Dh245 million a year earlier, according to Bloomberg data. Deyaar did not provide earnings per share.
The results are “pretty much in line with expectations,” said Bobby Sarkar, an analyst at Al Mal Capital PSC in Dubai. “They were affected by the downturn and unable to sell units.”
Dubai’s property market was hurt more than others by the global financial crisis. Home prices have tumbled by about 50 per cent from their peak and may drop a further 20 per cent this year, Deutsche Bank AG said last month. The collapse followed a construction boom that created thousands of homes just as demand began to evaporate because of the worldwide economic recession.
“While the global financial crisis continued to impact the company’s financial performance during the period, Deyaar performed strongly to move forward with its 2009 business strategy,” Chief Executive Officer Markus Giebel said in the statement.
The Dubai-based developer is on course to hand over seven projects this year. It has delivered five projects during the second quarter, including one in Lebanon, the statement said. The company maintains “a positive operational cash flow” and has “sufficient liquidity for the future,” the statement added.
Last week, Giebel had said categorically that while the Dubai government was looking at consolidation opportunities in the emirate’s real estate sector, his company was not exploring a merger with Union Properties.In a move to boost shareholder value despite a slump in property prices, Giebel said that the company expects to close a Dh500 million ($136.2 million) distressed debt fund by year-end. The fund is intended to clean up balance sheets of developers by buying distressed debts including its own. Deyaar will start raising funds in the next two weeks and should complete the task by the end of the year, he said.
Giebel had also said he expects the customer default rate to be in the “high single digits” as soon as plans allowing struggling home buyers to delay payments are discontinued.
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