Emaar Operating Profit Dropped 15 Per Cent In 2008

Emaar Properties PJSC announced on Thursday that its operating profit dropped 15 per cent to Dh5.578 billion in 2008 mostly due to an inventory writedown in the US and a fourth-quarter loss. Emaar’s annual revenue dropped 10 per cent to Dh16.015 billion from Dh17.869 billion in 2007, when it recorded net operating profits of Dh6.575 billion. “Earnings per share for the year relating to profit from operating activities in 2008 was Dh0.92 compared to Dh1.08 in the previous financial year,” the company said in a statement issued after the close of the market 
on Thursday. Emaar, which lost 85 per cent of its market value in 2008, said fourth-quarter loss was Dh1.77 billion compared with a profit of Dh1.74 billion in 2007. The company, the region’s largest property develoepr by market capitalisation, also said it had put new projects/launches on hold to assist in reducing the real estate property supply in Dubai while concentrating on completing all the projects, which have 
commenced construction. The new launches in 2009 will be dependent on the review of the demand and supply situation at various income segment levels,” it said. The primary focus of Emaar in the last quarter of the year was to mitigate the negative impact of the global financial crisis by facing up to the new economic realities and identifying innovative strategies to sustain businesses in an unprecedented downturn. We have placed emphasis on optimising resource use efficiency and maximising productivity, and will continue to build on our strategy of business segmentation and geographic expansion,” Mohamed Alabbar, Chairman, Emaar Properties, said.

Our expansion into other countries and new businesses including shopping malls, hospitality & leisure and education gained traction in 2008. We are thankful to our shareholders, who placed their unwavering trust in our efforts to maintain long-term sustainability,” he added. Following the policy of conservative accounting, the company recorded an inventory writedown of Dh0.919 billion in the fourth quarter of 2008, relating to real estate inventory in J L Homes, US, where the economy is facing an unprecedented economic crisis,” Emaar statement said. Emaar said it recorded a profit of Dh0.924 billion prior to considering the US inventory writedown and recorded a profit of Dh6.662 billion for the year prior to considering the total inventory write down ?during 2008. The lower revenue of Dh3.495 billion and operating profit of Dh0.924 billion for the fourth-quarter 2008 (prior to considering the impact of inventory writedown) has resulted in lower overall results for the year 2008. This is primarily due to slowing down of the real estate market in Dubai resulting from the current state of the global 
financial climate. The developer of several iconic projects, including Burj Dubai, the world’s tallest tower, said it decided to write down its investment in J L Homes by a total of Dh1.773 billion during the fourth quarter in order to be conservative in accounting for such ?an investment. This has resulted in the complete goodwill amount of Dh2.523 billion relating to J L Homes having been written off during 2008. Alabbar said that Emaar’s strategic growth objectives have been complemented by the initiatives of the Dubai Government under the leadership of His Highness Shaikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai. Rising up to face the economic concerns and boost market confidence, His Highness Shaikh Mohammed initiated several measures including the setting up of The Advisory Council, a high-level committee that will evaluate and recommend policies for economic growth. The Dubai Government is also focused on encouraging public spending and infrastructure development, which will in turn boost the property sector in the coming months.

Revisiting the project pipeline is a natural response to the new economic realities. We have also been negotiating with our partners to rationalise the project cost benefiting our shareholders and customers, added Alabbar. He said Emaar marked year 2008 with several milestones in its growth including the opening of The Dubai Mall, one of the world’s largest shopping and entertainment destinations, and The Address, Downtown Burj Dubai, the first hotel brand to be owned and 
operated by Emaar. Emaar also opened the Dubai Marina Mall and Dubai Marina Yacht Club, further additions to the company’s shopping malls and hospitality and leisure portfolio. This year, Emaar will open two hotels — The Address, Dubai Mall and The Address, Dubai Marina. The emphasis on our new businesses also highlights our commitment to create integrated, self-sustaining neighbourhoods that energise the economy, said Alabbar. Our varied projects have created several hundred direct and indirect jobs, thus assisting the economy during a crucial phase. International property consultant CB Richard Ellis said it sees more upside for Emaar which has turned out better-than-expected results amid the property slump in the UAE. It said Emaar’s thrust to diversify its market and look for new opportunities in the region will put it in a very good position once the global economy recovers. “Emaar turned out extremely good results considering where the market is at the moment. Its plan to expand externally is a very good plan,” said Nicholas Maclean, managing director of CB Richard Ellis Middle East. There are plenty of sellers in the market willing to sell at low prices and the buyer who goes into this situation before the rest of the market recovers will be in very good shape, said Maclean.