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Sorouh’s First-Quarter Net Profit Down by 64 Per Cent
ABU DHABI — Sorouh Real Estate, Abu Dhabi’s second-largest developer by number of projects, registered a 64 per cent year-on-year decline in its first-quarter net profit to Dh130.4 million.
The result was a fraction of the Dh361.5 million Sorouh earned for the same period last year and came in below analysts’ expectations. However, its first-quarter profit was nearly triple the Dh45.9 million that it earned in the previous, October-December quarter.
Analysts estimated that Sorouh would earn a first-quarter net profit of Dh286.6 million, said Sana Kapadia, senior vice-president of equity research at investment bank EFG-Hermes in Dubai. The actual earnings reflect an increasing contribution from rental and other recurring income streams, she said.
Sorouh’s revenues in the first quarter were Dh335.6 million, down 47 per cent from the Dh623.7 it generated a year ago. First-quarter revenues were 27 per cent lower than the corresponding Dh532.6 million figure for the fourth quarter of 2008.
“The revenues are below Investment bank EFG-Hermes’ forecast of Dh790.4 million due to lower contribution from land sales,” Kapadia said.
Sorouh said it was focusing on long-term profitability and would therefore retain more property for development and subsequent sale and lease, in spite of any possible short-term impact on its income. The first-quarter results “reflect the decision to sell less land, which is currently not reflective of its intrinsic value,” the company said.
Sorouh said it expects to see a gradual improvement in profits this year as it starts to sell units of its Golf Gardens 1 project and boost income from its rental developments of Sas Al Nakhl, Khalidiya Village and Al Oyoun Village.
“The business is in good financial health thanks to our cash conservation and cost management initiatives. This, combined with Abu Dhabi’s strong market fundamentals, makes us well-placed to capitalise on our position when markets recover,” said Abubaker Siddiq Al Khouri, the firm’s managing director. The developer’s net assets for the first quarter slipped to Dh5.7 billion, against Dh5.9 billion in 2008. It retains Dh5.9 billion of cash, while cash collection continued to be strong during the first quarter, at Dh732 against Dh893 million last year, Sorouh said in a statement.
Its total bank borrowings were Dh160.5 million, for a debt-to-equity ratio of 2.79 per cent. This excludes outstanding asset-backed Sukuk Certificates that Sorouh issued in the third quarter of 2008.
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