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Union Properties Posts Fourth Quarter Loss as Economic Crisis Bites
DUBAI - Dubai-based Union Properties made a fourth-quarter loss due to lower land sales and provisions after the former emirate’s property sector was hit by the global financial crisis.
The firm said it took a Dh500 million ($136.1 million) provision against potential loss on contracting activity but said it was on schedule to deliver current projects.
Full-year net profit rose 12 per cent on the year to Dh763.1 million after provisions, the company said in a statement without giving quarterly figures.
The company made a loss of Dh37.6 million ($10.32 million) in the fourth quarter, according to calculations based on previous earnings reports.
“We think it was prudent to take a provision on its contracted-related activities since this signifies that the company is watchful of likely non-payment and potential losses given that the construction sector is in slowdown mode currently,” said Sana Kapadia, vice-president, equity research at EFG-Hermes in Dubai.
Officials at Union Properties were not immediately available for comment when contacted by Reuters.
Dubai’s once-booming real estate sector has been affected by the financial crisis as property prices fall, projects are slowed or halted and jobs are lost.
Morgan Stanley said in a report this month Dubai property prices had fallen by an average of 25 per cent since their peak in September and that some $263 billion worth of projects in the UAE had been delayed or cancelled.
Land sales made up a smaller share of total revenue in 2008, while contracting work made up a larger share.
“The decrease in land sales increased the contribution of contracting and other operating activities in the revenue mix for 2008, which drove the overall 2008 margin to drop compared to 2007,” it said. Contracting activities continued to be the main contributor to revenues, the firm said.
Revenues for the year rose 24 pervcent to Dh3.64 billion, it said.
The handover of properties in MotorCity and the DIFC was on schedule to start in 2009, it added.
The issuance of Dh2.5 billion of non-convertible bonds will depend on market conditions, Union Properties said.
The issuance was approved by shareholders in January.
The firm said in December it planned to issue convertible bonds to strategic investors as securing project financing from banks becomes difficult during the global financial crisis.
Union Properties’ board proposed the distribution of 10 per cent bonus shares, the company said in a
separate statement.
Profit for the fourth quarter 2007 was Dh213 million.
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