Abu Dhabi's Aldar Properties, set to come together in a state-backed merger with Sorouh Real Estate, reported lower quarterly earnings on Tuesday in a fresh indication of continued weakness in the UAE capital's property sector.
Abu Dhabi's largest developer and builder of the Formula One race track, Aldar said on Tuesday that both its quarterly revenue and net profit fell by more than half.
The company said its quarterly profit plunged to Dh154.3 million from Dh478.2 million last year, while its revenue for the quarter slumped to Dh1.6 billion compared to Dh3.6 billion in the first quarter of 2012.
Sorouh, which will delist from the Abu Dhabi bourse in June and merge with Aldar, reported a quarterly profit rise of 21.6 per cent largely due to reversal of contingencies on some completed projects.
Its revenue in the three months to March 31 fell by more than a third to Dh632.2 million. The shares of Aldar and Sorouh were down 3.3 per cent and 1.6 per cent respectively on the Abu Dhabi bourse at 0615 GMT.
"The market is seeing continuous supply (of properties) but it is controlled and managed in phases to help the market absorb the supply," said Sorouh's chief operating officer Gurjit Singh.
The company is on track to deliver 7,000 units by end of 2014. Developers in Abu Dhabi are struggling to emerge from the property market collapse in 2009, when prices dropped by nearly 50 per cent from its peak in 2008.
Aldar was rescued with government aid of over $10 billion. In return, it sold assets to the government including the Ferrari World Theme Park.
In a state-backed move to consolidate, the two developers decided to merge operations in March to create a real estate entity with assets in excess of $13 billion.
Sorouh, the smaller company among the two, on Tuesday reported a profit of Dh101.6 million compared with Dh83.6 million during the same period in 2012.
This was largely due to other income of Dh36.6 million, which the company said was a reversal of contingencies on certain completed projects, said its top official.
“This is a very solid start to the year. In line with our strategy, the business is generating a significant amount of recurring revenues from its investment portfolio. National Housing also continues to be an important contributor," remarked its managing director Abubaker Seddiq Al Khouri.
"Integration work in preparation for our merger with Aldar is also progressing well and we expect the merger to complete in June this year," he stated.
“Substantial progress is being made on our large portfolio of developments as we move closer to delivering around 7,000 units between now and the end of 2014," he added.
Al Khouri pointed out that the property industry was now entering the next phase of its evolution as it showed signs of genuine and sustainable recovery.
"Government investment aimed at economic diversification, such as Abu Dhabi's five-year $90 billion capital spending programme targeting areas such as infrastructure, industry, tourism, education and health-care, will create real end-user demand for property in the coming years and help balance supply and demand," said the top official
Sorouh's revenue for the quarter dropped 35 per cent to Dh632.2 million, he added.-Reuters and TradeArabia News Service