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Concerns over the real estate and construction sector could spike again after two listed blue-chip companies — Arabtec and Union Properties — revealed sharp erosion in their first quarter numbers this week. In the case of Arabtec, the market was not expecting it to record a loss, let alone a steep one.
Arabtec was hit by the sharp rise in direct costs, which in the first quarter weighed in at Dh1.93 billion against the Dh1.5 billion a year ago. Plus, the revenue gain was quite marginal, at Dh1.79 billion compared with Dh1.78 in the first quarter of 2014.
Earlier this week, Union Properties recorded an 84 per cent drop in first quarter net profits.
In a statement, Arabtec said there was significant pressure being imposed by the economic and political situation in the region, apart from concerns that were specific to the industry. On the latter, it said the biggest concern was the “low returns from commercial positions … on its projects”.
“This has prompted developers to reprioritize projects and control costs, in addition to the negative implications on the spending levels in the region as a result of lower oil prices, which all in turn had adversely affected the Company’s profits,” the statement added.
A lot will depend on how retail investors take stock of the two results. Or would they look for solace from the generally upbeat numbers put out by the other listed developers such as Emaar and Damac, and even par for the course one from Deyaar. Among unlisted real estate companies, Nakheel too had recently issued robust set of first quarter numbers. Abu Dhabi’s Aldar Properties has just posted positive results for its first quarter performance.
Source: Manoj Nair. Associate Editor, gulfnews.com