Palm Hills takes sharp fall in Egypt after losses

Turmoil in Egypt drove home builder Palm Hills Development to a 81.4 million pound loss for the first half of the year

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Shares of Palm Hills Developments, Egypt's second-largest developer, fell to a three-month low yesterday after the company reported a loss of 81.4 million Egyptian pounds (Dh49.7m) in the first half of the year.

The specialist in luxury home developments had posted a net profit of 191.4m pounds in the corresponding period last year. It offered no further detail in a brief statement issued to the Egyptian Exchange.

Palm Hills has been hard hit by the turmoil in Egypt and allegations that it received special deals on land from the administration of Hosni Mubarak, the ousted president.

Yassin Mansour, the Palm Hills chairman, and Ahmed El Maghrabi, the former Egyptian housing minister, were acquitted earlier this year of corruption charges involving a land sale. But a public prosecutor said last month he would appeal against the court's ruling on the charges against Mr Mansour.

"There is a lot of negative publicity involving the company," said Majed Azzam, an AlembicHC analyst. "`That has led to a lot of sales cancellations."

AlembicHC last week raised its rating on the company to "neutral", but expressed caution over the uncertain state of the business. Continued construction delays, purchase cancellations and the return of land to the government could continue to affect the company's bottom line, the firm said.

Palm Hills is also more exposed to a slowdown in second home sales than other Egyptian homebuilders, Mr Azzam said.

Analysts have expressed concern about the long-term liquidity of Palm Hills, if the sales market continues to face headwinds from the political turmoil.

"To book profits you need to deliver the unit, and in the current political environment we did have some delays in construction," Jan Hasman, an analyst at EFG-Hermes, told The National last week. "With Palm Hills Developments we do have some concerns about its liquidity and its ability to fulfil its commitments to its customers."

Shares in Palm Hills closed at 1.77 pounds yesterday, down from a high of 4.39 pounds on March 23.