Assets drive Mubadala profit surge

First-half results more than quadruple, with the main reason seen as higher revaluations on oil and stock investments.

Mubadala has enjoyed a surge in profits due to higher market prices for its holdings of oil and stocks.

Mubadala Development, the Government's strategic investment arm, said yesterday that profits more than quadrupled in the first half of this year, after rising prices for its growing pool of assets offset higher costs incurred as the company expanded into new operations. Most of the surge in Mubadala's profits was the result of recognising higher market prices for its holdings of oil and stocks. Without such revaluations on investments, the company's net income from operations actually fell.

"Mubadala is showing strong financial metrics while delivering projects that deliver on the double bottom line - financial performance and strategic interests," said Waleed al Muhairi, the chief operating officer. "Part of the core mission of Mubadala is diversifying our economy from oil and gas and therefore reducing the risk of our portfolio. And so while oil and gas remains our biggest contributor, there's no question we're developing other contributors."

Mubadala said its total comprehensive income rose to Dh2.7 billion (US$735 million) in the first six months of this year compared with the same period the year before, as sales more than doubled to Dh5.9bn. Operating profits declined 42 per cent to Dh894m. Mubadala's assets swelled 46 per cent to Dh79.4bn. The results mark a significant turnaround from an annual report the company issued for the first time in April, when it revealed that dramatic write-downs in the value of its assets amid the global economic crisis had left it with almost Dh12bn in losses.

That report provided the first and most comprehensive look yet inside a sovereign wealth fund, placing Mubadala alongside Norway's government pension fund as one of the only funds that publicise their financial statements. Part of the disclosure came from necessity: Mubadala later sold $1.75bn in bonds to international investors, and securities regulations overseas required that it disclose its financials as part of that sale. But analysts hailed the unprecedented transparency of an unlisted company whose sole shareholder is a government with no taxpayers. That makes Mubadala's release of a half-yearly report, although unaudited, even more unusual.

According to Mr al Muhairi, securities regulations do not require that it release such statements. But: "It's useful for our debt-capital investors to know what to expect halfway through the year," he said. Mr al Muhairi said Mubadala had drawn down less than half of the Dh21bn it was due to receive from the Government this year, demonstrating its cautious approach to investing in the uncertain global economy. Sales of oil and gas were the largest contributor to Mubadala's revenues, largely from its wholly owned subsidiary, Pearl Energy of Singapore, and its 51 per cent stake in the UAE's Dolphin Energy.

While oil prices have risen in recent months, sales of hydrocarbons were down. As a result, operating income from energy and industry fell 20 per cent to Dh2.3bn. More dramatic results came in the provision of aircraft maintenance and repairs, thanks in part to holdings in Piaggio Aero and SR Technics, providing Dh1.9bn in new sales and contributing to a more than quintupling of operating income from aerospace and technology, to Dh2.1bn.

Sales of land also provided a new stream of revenue. The National Bank of Abu Dhabi bought 6,700 square metres of commercial land on Sowwah Island, according to Mubadala, contributing to Dh497m in property proceeds for the company and Dh492m in operating income from Mubadala's combined property and hospitality interests. [e-mail]