A year after delivering the Burj Khalifa, the world's tallest building, Emaar Properties has had a 79 per cent drop in home sales.
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The company's net profit fell 44 per cent to Dh420 million (US$114.3m) in the first quarter compared with the same period a year ago, as the region's biggest developer felt the impact of Dubai's sagging property market. Overall revenue fell 32 per cent to Dh1.9 billion.
"They haven't started any new projects in Dubai in a while," said Irfan Ellam, an analyst with Al Mal Capital. "That's expected."
"We were expecting more handovers from international property," said another UAE analyst.
The results were below analyst forecasts. The company's share price fell 1.55 per cent yesterday to close at Dh3.17.
Emaar has been moving to diversify its business away from Dubai, with several large developments under way in Saudi Arabia and Egypt. But the new projects have yet to significantly affect the company's bottom line.
Emaar delivered only 270 properties in Dubai in the first quarter of this year, compared with 1,300 apartments and villas in the first quarter of last year, including the Burj Khalifa, according to analysts.
Revenue from sales of apartments fell 81 per cent in the first quarter to Dh347m, compared with Dh2bn a year earlier, the company reported.
Villa sales dropped 49 per cent to Dh60m.
The drop in property sales was partly offset by a 41 per cent jump in revenue from Emaar's hospitality arm, which generated Dh335m in the quarter compared with Dh237m a year earlier.
Rental income increased from Dh467m last year to Dh507m. Revenue was also bolstered by a sharp rise in office, commercial and land sales, which soared to Dh704m from Dh42.8m in the first quarter last year, including delivery of the Eighth Gate, a mixed-use development in Damascus.
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"The business is shifting to international markets and international markets don't have the same volume and prices are lower than Dubai," said Majed Azzam, an analyst with Alembic HC Securities.
The company expects to begin recording revenue from projects in Saudi Arabia and Egypt this year, analysts said. Saudi projects include Jeddah Gate and Al Khobar Lakes, while in Egypt the company is developing Uptown Cairo and Marassi.
Emaar also expects to begin generating revenue this year from developments in Jordan, India, Pakistan and Turkey.
The company needs to make fundamental shifts in its structure, analysts said.
Emaar acknowledged this month it was conducting a study to evaluate its long-term business strategies.
"As an organisation committed to long-term value creation for our stakeholders, it is extremely important that we review our corporate growth strategy in line with the prevailing global market trends and the socio-political landscape," the company chairman Mohamed Alabbar said.
Emaar has been frustrated in efforts to change its business structure, including a long-delayed initial public offering of its India subsidiary.
Emaar also owns a 45 per cent stake in Amlak, the troubled mortgage company. The company issued a $500m sukuk in January, offering a yield of 8.5 per cent.
