Emaar Properties PSJC, the Middle East’s largest home builder, Thursday posted a fourth-quarter net loss of 1.77 billion United Arab Emirates dirhams ($482 million) because of a U.S. write-down, and the company put new projects in Dubai on hold amid a property slump in the emirate.
Before the write-down, fourth-quarter net profit was 924 million dirhams, compared with a profit of 1.74 billion dirhams a year earlier, the company said in an emailed statement to Zawya Dow Jones.
Full-year profit dropped 54% to 3.06 billion dirhams from 6.58 billion dirhams a year earlier. Revenue declined 10% to 16.02 billion dirhams, Emaar said.
Emaar wrote down 1.77 billion dirhams in goodwill in its John Laing Homes unit amid the financial crisis, and a further 919 million dirhams in properties owned by the company during the quarter. Emaar, which is about 30%-owned by Dubai’s ruling Maktoum family, bought John Laing Homes, one of the largest home builders in the U.S., for $1.05 billion in 2006 in an effort to diversify its business from Middle East real estate.
Emaar, which has projects in countries such as India, Turkey, Syria, Saudi Arabia and Morocco, said it is putting future real-estate projects on hold to stem the oversupply of units in Dubai. The company said it will concentrate on completing all construction projects that are under way.
“Revisiting the project pipeline is a natural response to the new economic realities. We have also been negotiating with our partners to rationalize the project cost benefiting our shareholders and customers,” said Emaar Chairman Mohamed Ali Alabbar, who also heads an economic task force set up to revive Dubai’s financial vitality.
Dubai’s once-booming property market has slowed in recent months and home financing has evaporated, affecting Emaar’s sales and property prices. Home builders in the U.S., where John Laing Homes is based, also are struggling in the credit crisis, triggered by defaults on subprime mortgages.
Emaar’s results fell far below analysts’ expectations. Credit Suisse had forecast that Emaar would post a fourth-quarter net profit of 855 million dirhams and a full-year profit of 5.7 billion dirhams, while investment bank Prime Emirates predicted that Emaar’s fourth-quarter profit would be 2.1 billion dirhams.
“Investors will not react positively to this, despite the fact that the company has done the right thing by writing down its U.S. assets,” said Ayman El Saheb, director of operations at Darahem Financial Brokerage.
Emaar shares closed down 0.5% at two dirhams on the Dubai Financial Market Thursday. Shares in Emaar, the largest publicly traded property company in the Middle East, have plunged more than 80% since the start of last year. Real-estate companies have been among the biggest losers on the region’s stock markets in recent months.
In Dubai, Emaar’s project portfolio includes the Burj Dubai, planned to be the world’s tallest building, which is to open later this year.