DUBAI - Dubai Investments Co., which reported a 46 per cent drop in quarterly profits on Thursday, sees weaker 2009 profits and another tough year ahead as the Gulf property slump hammers the UAE firm’s main segment, its Chief Executive Officer said.
Khalid bin Kalban said the holding company would sacrifice profitability to keep a good liquidity position, both to protect itself against defaults by mortgage owners and to be ready
“In 2009, we are not going to reach 2008 profits but we believe we will end up making a profit around Dh1.1 to 1.2 billion more or less. This is a conservative estimate,” he told Reuters. “We believe 2010 will be another difficult year. We still haven’t detected many positive signs in the market.” The firm, which invests in real estate and industrial and chemical projects, saw profits drop to Dh296.4 million ($80.69 million) in the second quarter to June 30, down 46.4 per cent from 553 million last year. Developers in the UAE have been hit hard since the global financial crisis ended a six-year construction boom last year, leading to cancelled projects and a slump in prices.
Kalban blamed the lack of property sales in the second quarter on project delays caused by the downturn. “We hope by the third quarter this will change because we have assurance that 50 per cent of the property will be handed over,” he said. “(That) 50 per cent means we will take some profit from those projects soon. “We are looking surely at end of August and expect to make Dh120 million from this hopefully in the third quarter.” Kalban said he was assuming “worst-case scenarios” on defaults from buyers who had mortgages with a pair of troubled Islamic lenders — Amlak and Tamweel — which are being restructured
by the government.
To underpin its property segment, Dubai Investments is eyeing acquisitions in existing projects and firms, rather than beginning new developments itself. Dubai Investments, which derives most of its revenue from the United Arab Emirates and other Gulf countries, has operations in the investment, manufacturing, dairy production and real estate sectors.
Kalban added the company was looking at opening offices in China and India this year to serve growing demand for its manufacturing products and compensate for the Gulf slowdown.
“We are seeing 60 per cent of exports outside and 40 per cent for UAE market. This helped us sustain a level of profitability,” he said. “We are aiming to have 70 per cent for exports and 30 per cent for the UAE market.”