Dubai developer Damac sees 94% drop in profit

View from Damac hills overlooking Trump golf course and club. Such prestige projects have not prevented a large drop in Damac’s profits. (Shutterstock)
Updated 15 May 2019

Dubai developer Damac sees 94% drop in profit

DUBAI: The Dubai-listed property developer Damac Properties reported a 94 percent drop in first-quarter net profit on Wednesday, its smallest since going public in 2015.
Damac, owner and operator of the only Trump-branded golf club in the Middle East, said its net profit in the first three months of the year fell to 31.1 million dirhams ($8.47 million) from 483.9 million dirhams in the same period a year earlier.
That compared with a forecast of 270 million dirhams by EFG Hermes.
Revenue fell 53 percent to 896.4 million dirhams.
Damac shares fell 2.2 percent in afternoon trade, reversing early gains. The stock is down nearly 40 percent this year compared to a 2.3 percent gain in the Dubai index.
Dubai property prices have fallen since a mid-2014 peak, hurt by weaker oil prices and muted sales.

 

S&P Global Ratings expects the downturn to continue this year, with residential property prices falling another 5-10 percent due to a continued gap between supply and demand, before steadying in 2020.
Analysts warned the company was likely to continue facing challenges in the coming months with strong competition and the need to conserve additional cash for debt repayments.
The company’s off-plan sales — for properties not yet completed — looked weaker than those of its main rival, Emaar Development, said Ayub Ansari, an analyst at Bahrain’s SICO. That indicated the competitor’s growing dominance in the Dubai off-plan market, he said.
The company reported booked sales of 1.2 billion dirhams ($327 million) in the first quarter of 2019, down 26 percent from a year earlier.
Damac pointed to debt payments in tough market conditions — it paid back $272 million in sukuk, or Islamic bonds, in April and $125 million in September last year — as a sign of its health.
“In a period of six months, amid difficult market conditions, we paid back $400 million of debt ... That is a strong statement,” said Amr Aboushaban, Damac’s head of investor relations.
The company had 1.8 billion dirhams in free cash at the end of the first quarter.
Damac did not pay a dividend in 2018 to keep cash for its debt repayment and an analyst warned the property firm could continue with the same policy in the coming year.
“We see zero catalysts for Damac over the next 3 years, as the company will likely reserve all cash to repay its 2022/23 sukuk,” Mohamad Haidar, an analyst at Arqaam Capital said in a note. “We expect Damac not to pay dividends until all sukuks are repaid.”
As of the end of March, the company had around 4.3 billion dirhams in outstanding sukuk and 693 million dirhams in bank debt.

FASTFACTS

$327 m

Damac’s booked property sales in the first quarter of 2019, down 26 percent from a year earlier.


Oil falls below $57 on virus impact and OPEC+ delay

Updated 19 February 2020

Oil falls below $57 on virus impact and OPEC+ delay

  • Contagion ‘is spooking market players,’ analysts say after Asian shares fall and Apple issues warning

LONDON: Oil fell below $57 a barrel on Tuesday, pressured by concerns over the impact on crude demand from the coronavirus outbreak in China and a lack of further action by OPEC and its allies to support the market.

Forecasters including the International Energy Agency (IEA) have cut 2020 oil demand estimates because of the virus. Though new cases in mainland China have dipped, global experts say it is too early to judge if the outbreak is being contained.

Brent crude was down 82 cents at $56.85 a barrel in mid-afternoon trade after rallying in the previous five sessions. US West Texas Intermediate crude fell 70 cents to $51.35.

“Risk aversion has returned to the markets,” said Commerzbank analyst Carsten Fritsch.

“OPEC+ has shown no sign yet of reacting to the virus-related slump in demand by making additional production cuts.”

The virus is having a wider impact on companies and financial markets. Asian shares fell and Wall Street was poised to retreat on Tuesday after Apple said it would miss quarterly revenue guidance owing to weakened demand in China.

“This has spooked market players and triggered a sharp pullback in risk assets,” said Tamas Varga of oil broker PVM.

The IEA last week said that first-quarter oil demand is likely to fall by 435,000 barrels per day (bpd) from the same period last year in the first quarterly decline since the financial crisis in 2009.

The Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, have been considering further production cuts to tighten supply and support prices.

The group, known as OPEC+, has a pact to cut oil output by 1.7 million bpd until the end of March.

The next OPEC+ meeting next month is set to consider an advisory panel’s recommendation to cut supply by a further 600,000 bpd. Talks on holding an earlier meeting in February appear to have made no progress, OPEC sources said.

As well as OPEC+ voluntary curbs, support for prices has come from involuntary losses in Libya, where output has collapsed since Jan. 18 because of a blockade of ports and oilfields.