Emaar profit drops for first time in three years

Emaar costs surged 67% in Q3 as a result of the developer's expansion abroad.

Dubai's Emaar Properties missed most forecasts with its first decline in quarterly profit in at least three years as the largest Arab developer by market value ramped up foreign expenses in countries such as Egypt.

Net income in the three months to September 30 fell 2.8% to 1.56 billion dirhams ($424.8 million) compared with 1.605 billion dirhams in the year-earlier period, Emaar said in a statement.

The cost of revenue surged 67% to 2.79 billion dirhams, more than offsetting a 32% increase in income to 4.56 billion dirhams, the company said.

Expenditure increased "relating to sales launches in Egypt, Syria, Saudi Arabia, Turkey, Jordan and Morocco, and ramping up of the organisation structure of the various business segments - malls, hospitality and leisure, education and healthcare," the company said.

"It's very bad news," said Mohammed Alami, relationship manager in the dealing room at Dubai-based brokers Naeem Shares & Bonds. "Emaar is engaging in more activities that are less profitable ... that, coupled with delay in projects and problems in Saudi and India, mean it's a painful time for Emaar."

Emaar generates almost all its revenue from sales in Dubai.

Analysts' forecasts for third-quarter profit ranged from 1.55 billion dirhams to 1.75 billion dirhams, according to a Reuters survey last month.

"Our strategy of global expansion and business diversification has also gained momentum," company Chairman Mohamed Alabbar is quoted as saying in the statement.

"Significant" assets are scheduled for completion next year and Emaar's international operations will not make a "significant" contribution to revenue until 2010, the company said.

The company is involved in projects worth more than $100 billion, including the $26.6 billion King Abdullah Economic City residential and commercial project on Saudi Arabia's Red Sea coast.

Shares of Emaar and Saudi affiliate Emaar Economic City have been the only decliners this year of the Gulf's seven biggest real estate developers.

By comparison, shares of Abu Dhabi-based Aldar Properties and Sorouh Real Estate have more than doubled. Sorouh is up almost 150%.

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