Dubai’s Emaar Properties said on Monday fourth-quarter profit would be similar to the third quarter and it did not expect any further losses on the value of land due to the US mortgage crisis.
Emaar, which has projects in 16 countries from the US to Pakistan, also shrugged off the potential impact of Pakistan’s state of emergency on its $43 billion plan to build a city near Karachi, its largest single project.
Profit from normal operations would be in line with the three months to September 30, when net income fell for the first time in at least three years, Emaar Dubai Chief Financial Officer (CFO) Amit Jain said on a conference call.
“Gross margins in Dubai will remain robust in line with previous quarters,” he said, without elaborating.
Emaar, the largest publicly traded Arab developer, did not expect any further writedowns on the value of land in the US, where it operates through homebuilder John Laing Homes, said Low Ping, executive director for finance and risk.
Ping said Emaar wrote down $100 million in the third quarter as defaults on mortgages and a glut of new homes hit housing construction in the US.
Shares of Emaar had tumbled to a 28-month low in August, partly because investors were worried its profits would be hit by the US mortgage crisis, which has driven up borrowing costs and triggered a flight from risky assets.
Conservative provision
“In the fourth quarter we do not expect to make further provision because we think that we have provided very conservatively in Q3,” Ping told analysts.
Emaar, which is building the world’s tallest skyscraper, agreed on a $16 billion project with Dubai’s ruler last month, almost doubling the land it can develop in its home market until foreign projects make money.
The company derives about 80% of its revenue from projects in Dubai, but expects international projects will begin contributing to profit next year, Jain said.
Emaar’s third-quarter profit came in at the bottom end of forecasts after the company spent more on foreign operations in countries such as Egypt and Saudi Arabia.
“Earnings contribution from most of the international entities [is] expected to start by the second half of 2008,” Jain added.
Emaar’s Pakistan project, among the $100 billion of developments in the pipeline, would not be affected by the political crisis, the executives said.
Pakistani President Pervez Musharraf declared a state of emergency on Saturday, deploying troops and sacking a top judge to reassert his flagging authority against political rivals and Islamic militants.
“We do not expect any adverse effects in terms of the political uncertainty,” Chief Executive Officer Vinod Kumar Gomber said.
“The projects we plan are in the next two or three quarters and we see the economic and political situation stabilising in the next few months,” he said. (Reuters)
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