Saudi's Dar Al Arkan's Q1 net profit falls 6.2%

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GRIM TIMES: Inflation and a sharp downturn in the local bourse have hit Saudis' disposable income. (Getty Images)

Saudi Dar Al Arkan Real Estate Development Co posted a 6.2 percent fall in first-quarter net profit as a fall in profit margins for land sales and the impact of a new accounting system weighed.

Net profit fell to SAR424.5m ($113.2m), or SAR0.59 a share ($0.17), after SAR452.8m ($120.8m), or SAR0.63 a share ($0.17), in the year-ago period, the largest Saudi developer by market value said in a statement on Tuesday.

The company said the decline was due to a fall in profit margins on sale of land and the inclusion of zakat, or Islamic tax, provisions in the first quarter finances.

Operating profit fell by 13.5 percent to SAR474.2m ($126.5m) in the first quarter, while sales ticked up 0.3 percent to SAR1.238bn ($328m), it said in the statement posted on the bourse website. It did not give an earnings outlook.

Al Eqtisadiah and Al Riyadh newspapers have said land and property prices have started to ease in the third quarter as banks tightened lending to realtors.

Dar Al Arkan, which caters mainly to the middle-class market sector among Saudi Arabia's 19 million indigenous population, raised SAR3.33bn ($888bn) in an initial public offering in December 2007 that was more than three times oversubscribed.

Real estate firms in the world's biggest oil-exporting region have been expanding before a six-year rally in oil prices was brought to a grinding halt in the fourth-quarter of 2008.

Inflation and a sharp downturn in the local bourse have hit Saudis' disposable income. The local market does not offer a wide range of financing options for property buyers.

Citigroup said on March it would start covering the firm with a "buy" rating as it would benefit from a mortgage law allowing wider access to property ownership that is expected to be enacted later this year.

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