Update: Despite drop in earnings, company says it expects to maintain 40% profit growth in 2015 and 2016
Dubai developer Nakheel expects to maintain profit
growth of 40 percent seen last year in 2015 and 2016, its chairman said on
Wednesday, as it benefits from diversifying into the retail and hospitality
The positive outlook from Ali Rashid Lootah came
after the state-owned company reported a 43.2 percent jump in full-year profit
for 2014 to AED3.68 billion ($1 billion), despite a substantial drop in
"We see the same trend will continue for this
year. We are very optimistic we will maintain similar (profit) growth for this
year and next year. A lot of the new projects we launched are in the phases of
getting delivered this year and next, so there are still good years to
come," Lootah told a press conference.
Nakheel was one of the developers worst hit by
Dubai's real estate crash, which knocked 49 percent off prices between the
third quarter of 2008 to the market bottom in the second quarter of 2009,
according to data from consultants Cluttons.
The sector has since rebounded and Nakheel paid off
its pre-crisis bank debt four years ahead of schedule. Property prices in Dubai
were among the fastest-rising in the world in the 18 months to June 2014,
causing fears of another bubble bursting, but prices stabilised in the second
half of the year.
Nakheel's profit growth in 2014 came despite a 24.7
percent decline in revenues to AED7 billion, which Lootah attributed to
securing higher margins on the properties it was selling and the writing back
of a AED460 million provision against a project on Palm Jumeirah, the
palm-shaped islands off Dubai's coast, which Nakheel developed.
"Although the revenue dropped, we had a better
margin because of our measures to control costs," said Lootah.
"Our (2015) revenue will stay around the same
(as of 2014) but we have healthy margins. We will increase revenue when we
complete the new retail, hospitality and leasing portfolio," he added.
He said that once all the projects in these sectors
were completed in 2017, it would generate around 7.5 billion dirhams of gross
revenue, compared to the 1.3 billion dirhams of net revenue it created in 2014.
There was around a 15 percent differentiation between gross and net revenue, he
The malls Nakheel was currently building would be
financed by bank loans, while it hoped to have 30,000 leasable residential
apartments and villas by 2017, Lootah said, up from 17,000 at the end of 2014.
Nakheel expected to secure AED7 billion
worth of new construction contracts in 2015 and hand over 1,200 villas, up from
AED5.3 billion of contracts in 2014.
* Nakheel no longer responds to media enquiries from Arabian Business, nor does it grant Arabian Business access to any of its media events or announcements.
is that healthy margins because they fail to deliver the facilities within their projects (or the projects!)?
If answers are needed, simply take a drive around Jumeirah Village Circle - what a blot on the landscape that is. The project planning has been a mess and it will take a lot of $$$ to fix that particular project.