Profits down at Dubai Financial Market

Dubai Financial Market, the only Gulf stock market to sell shares to the public, said first-quarter profit dropped 95.9 per cent from the same period last year as revenues fell and operating expenses rose.

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Last Updated: May 9, 2011

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Net income was Dh2.18 million (US$593,488) in the first three months of the year, missing analysts' expectations. Dubai Financial Market (DFM) reported profit of Dh53.5m in the first quarter last year.

"This is a major miss," said Haissam Arabi, the chief executive of Gulfmena Investments in Dubai.

"We need to see the numbers to figure out what went wrong. Even with a third of the turnover, of which commission income remains the bread and butter for the exchange, the drop in profitability is too significant."

Total revenues declined 46 per cent to Dh48.7m for the quarter, compared with Dh90.4m in the same period last year. Operating expenses rose to Dh46.52m, from Dh17.8m in the same period last year. The company is yet to release its full financial statements.

"The low trading activities are purely passing circumstances mainly due to the repercussions of the global financial crisis and these conditions are going to improve in light of the sound fundamentals of the UAE economy," said Abdul Jalil Yousef Darwish, DFM's chairman.

Investors have remained on the sidelines in the first three months of this year as protests unravelled throughout the Middle East and North Africa region.

Trading value on the DFM in the first quarter dropped by almost two thirds to Dh10.9 billion compared with Dh28.9bn in the same period last year.

"Last year, markets sold off after Dubai World said it was seeking to restructure Dh23.5bn worth of debt, prompting foreign investors to flee the region," Mr Arabi said.

"This was followed by the Abu Dhabi Government announcing a bailout, which caused prices to initially spike and stabilise afterwards. Exchanges make money on both buying and selling transactions, and the combination of all those factors meant higher profits for DFM last year."

The Dubai Financial Market General Index slid 7.5 per cent during the first quarter compared with the same period last year.

DFM shares declined 1.5 per cent to Dh1.31 at the close yesterday before the company published its results.