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Mon 28 Nov 2011 11:15 AM

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Dubai's Damas first half net profits soar 531%

Middle East's largest jeweller makes $7.2m profit, boosted by rising cost of gold

Dubai's Damas first half net profits soar 531%
Gold touched a lifetime high of $1,920 an ounce in September

Dubai-based jeweller Damas said net profits for the last six months increased 531 percent as the cost of gold soared amid fears of a global slowdown.

The firm posted a net profit of AED26.5m ($7.2m) for the six months ending Sept 30 compared to AED4.2m for the same period the previous year, Damas said in a statement to Nasdaq Dubai.

Revenues from jewellery and gold bullion increased to AED1.79bn from AED 1.38bn a year earlier, said the company.

Gold touched a lifetime high of $1,920 an ounce in September as the debt crisis in Europe, slower US growth and inflation in China boosted investor and central-bank demand. It marks the longest rally since at 1920.

A decline in equity markets, technical selling and gains in the dollar have seen the cost of the precious metal decline in the last two weeks. Gold gained more than one percent to above $1,700 on Monday as the euro rose on hopes Europe will take a bolder step to resolve a crippling debt crisis.

Damas, the largest gold retailer in the Middle East, is ramping up its expansion outside of its home market. The firm in May said it would take 100 percent ownership of its Kuwait operations just weeks after it announced it had increased its stake in its Saudi joint venture to 98 percent.

The jeweller, on Nov 2, said it was in the final stages of negotiations with third party creditors in a bid to resolve an AED35m liability.

Without identifying the creditor, Damas said the amount may be reduced by the proceeds of selling an asset which has been held as collateral by the creditor.

“The company is currently negotiating the settlement terms with a view to entering into a settlement agreement, but have not yet signed a binding agreement,” said the firm.

Damas said in May it had signed a repayment agreement with its founding Abdullah brothers and creditors that cleared the way for selling certain assets of the founders. An inquiry last year showed that the Abdullah brothers owed the company a total of AED614m, which included AED256m worth of gold that the three brothers had withdrawn from the company.