Dar Al Arkan, Saudi Arabia biggest property company by assets, is struggling with its core business - land sales.
The company reported a 31.8 per cent drop in net income for the second quarter, posting a profit of 297.8 million riyals compared with 437m riyals in the same period last year. Analysts expected net income closer to 320m riyals.
Earnings per share for the first six months of the year fell to 0.53 riyals compared with 0.77 riyals a share last year.
The company blamed the fall on "lower sales, given the company seeks to enhance the gross profit margin of its land bank".
This is no small matter for the company. Land sales represent about 73 per cent of its revenue, according to a recent report by Global Investment House.
The company is saddled with 7.8 billion riyals of debt, making it difficult to fund any new developments without selling land.
"We believe that the land sales model is unsustainable and has already started decreasing in terms of volume," Credit Suisse said in a report in February, when it dropped its target price for the company from 14.77 riyals a share to 10.10 riyals.
Dar Al Arkan closed at 7.50 riyals on Wednesday, down from a high of 10.10 riyals on January 24.
Analysts generally like the company, primarily because of the growth potential in Saudi Arabia's property market.
The kingdom will need 1.2 million new homes by 2014 to satisfy demand, Global Investment House noted.
Holding out for higher margins on land sales is producing results, the company said this week. Net income was up 9 per cent in the second quarter from the first quarter, in part because of higher margins on sales.
But valuing land in Saudi Arabia is difficult, with restrictions and bureaucratic complications affecting how any property can be used, analysts note.
This week's results were the sixth straight quarter of declining net income for Dar Al Arkan - never the type of trend investors want to see.
