Profit for Aldar falls 79.5%

Profits of Aldar Properties fell 79.5 per cent, to Dh253.5 million, as compared to last year; and now it has decided to hold back the sale of land.

It has been for the second quarter that no sale of land has been reported by the company due to the "challenging market conditions."

Profit of Dh1.1 billion has been reported by the company in the first half, against Dh2.6 billion last year.

The company said: "Aldar is in negotiations relating to the sale of land plots but the challenging market conditions have extended the negotiation period. However, Aldar maintains its long-term view regarding the Abu Dhabi real estate sector, which is clearly demonstrated by not rushing to complete any sale that undervalues its assets."

The fall in the profits was as expected as the cost of land dropped in Abu Dhabi since last September. In the second quarter of 2008, the company reported sale of land of Dh1.2 billion, which had formed 78 per cent of its revenues.

According to Mal Capital Analyst, Bobby Sarkar, land prices fell from nearly Dh600 per square foot, from September last, to Dh200, which made Aldar and Sorouh, the main property developers, to hold further developments till the market improves.

Sarkar said: "Aldar's results are weak, but it's not something that investors were not expecting. Aldar remains one of the best capitalised companies in the market. With Dh13 billion of cash on hand, they have enough to sustain operations through the next 12 to 18 months."

According to Sarkar, the drop in profits is likely due to a drop in revaluation gains, which were responsible for Dh920 million of company's revenue in the first quarter.

Revaluation gains were from the income from land that was given free of cost for development by the Abu Dhabi Government to Aldar, which thereafter sold it at a profit, after development. According to the rough estimates, Aldar holds about 50 million square metres of such land.

Sarkar hopes that the results of UAE property developers would improve from the beginning of the next quarter as they are to make key projects available.