Profits rise 15% for Abu Dhabi chilled water company Tabreed

Tabreed reports 15 per cent rise in profits despite slip in sales

National Cooling Company shrugged off a fall in topline revenues to record a 15 per cent rise in profit for 2013, thanks to increasing capacity in the UAE and the wider Arabian Gulf.
The Abu Dhabi company, commonly known as Tabreed, reported profits of Dh272.4 million for the year, equivalent to earnings per share (EPS) of eight fils.
The increase in profits came despite a 2 per cent fall in group revenues during the year to Dh1.1 billion, attributable to the company's decision to gradually phase out its non-core value chain business unit.
Revenue from the company's core chilled water business increased by 4 per cent on the year. The business unit reported a profit of Dh347.8m, a 6 per cent increase on 2012.
Tabreed further reduced its debt burden in line with its 2011 recapitalisation plan, as net financing costs fell 19 per cent to Dh143.6m.
The recapitalisation plan came after the company's high-value district cooling plants were left without the expected number of paying tenants following the collapse of Dubai property prices, leading to a fall in income and soaring debts.
Tabreed's total connected capacity grew to 839,000 refrigerated tonnes at the end of 2013, up from 767,000 a year earlier.
The company recorded major new connections in the UAE that included the Yas Mall and the World Trade Center Mall in Abu Dhabi, together with new connections with Saudi Aramco and in Qatar.
Tabreed declined to comment on its further international expansion plans and its targets for non-UAE revenues.
The bulk of the company's business is likely to remain in the UAE in the near future, said Maria Elena Ponceca, a senior analyst with Al Ramz Securities.
However international revenue streams in markets such as Qatar and Saudi Arabia may become increasingly important.
"It's assumed that increased revenues from the wider GCC will offset the loss of revenue from their value chain business," she said.
Analysts remain wary about the impact on EPS of the company's Dh1.13 billion convertible bond to Mubadala, which owns 14.8 per cent in the company.
The bond, issued in December 2012, gives Mubadala the option of increasing its ownership in the company on or before March 2019.
"If conversion happens, the number of shares will rise by more than 5x, but, there is no guarantee that revenue and earnings will improve sufficiently enough to counter the impact of greater number of shares on … EPS (as well as book value per share) and consequently on price multiples," Al Ramz said in a note in September.
Tabreed's shares finished the day down seven fils at Dh2.48 on the Dubai Financial Market.
The company's earnings coincided with the announcement of a fresh financing package by fellow district cooling company Empower, following its acquisition of Palm Utilities last week.
The Dubai-based company yesterday announced the details of a US$600m six-year term loan, underwritten by Citibank, Standard Chartered, Emirate NBD and Mashreq.
Repayments on the loan will be made in half-yearly instalments with the final instalment due to be made in December 2019.
"Empower continues to pursue a strategy of financing its projects through an optimal mix of debt and equity in order to better maximise shareholder returns," said Empower's chief executive Ahmad bin Shafar.
"This loan in particular will ensure that adequate and cost-effective funding is readily available to sustain our future growth and while also driving the implementation of our landmark projects."
The acquisition of Palm Cooling gives Empower control of Palm District Cooling, which provides district cooling services to Palm Jumeirah, Jumeirah Lakes Towers, Jumeirah Village, Discovery Gardens, Dubai Multi Commodities Centre and Ibn Battuta shopping mall.
Utilities companies such as Tabreed are mostly expected to benefit from increasing real estate and infrastructure projects in the run- up to Expo 2020 in Dubai, said Ms Ponceca.
"Tabreed has a long history of contracts with government bodies, not least projects like the cooling of the Dubai Metro," she said.
"The metro is one of the key pieces of infrastructure that will be "expanded in time for 2020, so Tabreed will definitely be one of the companies to benefit."
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