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Dubai real estate firm Drake & Scull Q4 earnings beat forecast

Emaar Properties and DAMAC Properties had posted poor fourth-quarter results

Beating analysts’ forecasts, Dubai’s Drake & Scull (DSI) reported a jump in its fourth-quarter net profit on Sunday (February 14) despite a slowdown in the regional construction sector.

The contractor made a net profit of AED14.7 million in the three months to December 31, compared with a profit of AED3.8m in the same period a year earlier.

The earnings were in contrast to the projection of an analyst at SICO Bahrain who had forecast the developer would make a quarterly net loss of AED38.6m.

Its revenue jumped 27 per cent during the quarter to AED1.4 billion, compared with AED1.1bn in the year-earlier period.

However, the company made a net loss of AED936.7m for 2015, compared with a net profit of AED100.7m reported for the previous fiscal year.

The real estate firm attributed the full-year loss to one-off provisions in Q3 when it posted its first quarterly loss after being forced to make AED984m in provisions relating to arbitration and legal cases in the UAE and Saudi Arabia.

“In the midst of a prolonged slowdown in the regional construction sector, DSI continued to execute its projects on schedule and reported revenue of AED1.4bn in Q4 2015 compared to AED1.1bn reported for the same period last year,” it said in a statement to the Dubai stock exchange.

“Despite the current challenging market conditions, the underlying long-term growth outlook for the regional industry presents promising opportunities for DSI, particularly in the UAE,” it added.

Shares in the company were 6.5 per cent up in the opening minutes.

Another 2008?

Last week, developers Emaar Properties and DAMAC Properties had posted poor quarterly results stoking fears that Dubai’s real estate sector was heading for a crash similar to that in 2008.

Emaar’s net profit was dropped from AED1.03bn in the fourth quarter, compared with AED1.05bn a year earlier, while DAMAC’s net earnings during the same period fell 12 per cent to AED844m from AED959.3m in 2014.

“The Dubai real estate market is at a consolidation point in the cycle and the rapid growth witnessed in 2012-2014 is now behind us,” said Hussain Sajwani, Chairman of DAMAC.

He stressed that the current environment is very different from that of 2008 as stakeholders, such as government, developers, providers of capital and investors, have learnt their lessons from the earlier property crisis.

Sajwani expects that the total supply in Dubai will fall short by 10,000 new units in 2016 and this shortage will act as the “cornerstone of the market resilience” to “drive the market back into positive-pricing growth territory in the second half of the year or early 2017.”

– With inputs from Reuters