Dubai's Emaar Properties EMAR.DU, the builder of the world's tallest tower in the Gulf Emirate, made a loss of 1.29 billion dirhams ($351.2 million) for the second quarter after it wrote off the complete book value of its U.S. unit.
Due to continued slowdown in the U.S. real estate market and chapter 7 proceedings relating to John Laing Homes, Emaar also decided to write down its complete book value of J L Homes amounting to 1.73 billion dirhams during the second quarter, the developer said in a statement on Thursday.
The second-quarter loss compares to a second-quarter profit of 1.66 billion dirhams in 2008.
Executives at Emaar were not immediately available for comment.
The results fell short of forecasts. Two analysts in a Reuters survey earlier this month had forecast a profit of 321.7 million dirhams and 377 million dirhams but these had not anticipated the scale of the eventual writedowns.
At the operating level the outcome was ahead of what people were expecting, Bobby Sarkar, an analyst at Al Mal Capital in Dubai said.
I think investors will take the writedown positively as Emaar have decided to wash their hands of J L Homes completely and move on, Sarkar said.
Net operating profit for the quarter climbed to 442 million dirhams from 237 million dirhams, while revenue rose 25 percent to 1.94 billion dirhams, the company said in the statement, attributing both increases to higher unit deliveries and more sales of completed units.
The plunge into the red is the firm's second loss after it posted a 1.77 billion dirham loss in the fourth quarter, also due to writedowns in its U.S. unit.
It wasn't unexpected. The company was initially in Chapter 11 and then it moved to Chapter 7, which is final bankruptcy proceedings, said Chet Riley, an analyst at Nomura Investment Bank, referring to the write-off.
No comparative figure for the first quarter of 2009 is available as the firm changed its accounting methods.
Property firms in the United Arab Emirates have been hit hard by the global financial crisis, which ended an economic boom in the Gulf Arab region.
Aldar Properties ALDR.AD, the largest developer in the neighbouring emirate of Abu Dhabi, reported a 79.7 percent slump in second-quarter net profit on Tuesday.
Emaar Properties created nearly 10,000 new jobs in Dubai during the first six months of the year with its mall and hospitality projects, its chairman Mohamed Alabbar said in the statement.
But thousands of jobs have been cut in the emirate as a result of the downturn and waves of expatriates made redundant have had to leave as they were unable to secure new jobs.
Emaar and Dubai Holding, owned by the ruler of the emirate, said in June that Emaar would merge with local firms Sama Dubai, Dubai Properties and leisure developer Tatweer. [ID:nLS331146]
Dubai-based Investment Group Overseans (IGO) said on Wednesday the merger of its partner Emaar will not derail a Syrian development worth about $1.1 billion.
Emaar's shares closed 1.11 percent higher at 2.74 dirhams in earlier trading on Thursday, below a 6.60 dirham long-term fair value set by EFG-Hermes earlier in July.
The results were released after the close of business on Dubai's bourse .DFMGI. (Editing by Andrew Hammond and Richard Hubbard)