Emaar earnings hit by The Address Downtown Dubai blaze writedown

Emaar booked a Dh301 million write-off relating to the fire incident at The Address Downtown Hotel. Marwan Naamani / AFP

Emaar Properties posted fourth-quarter results that missed expectations after a Dh301 million writedown arising from the New Year’s Eve, blaze at its flagship hotel in Dubai.

Net profit in the three months to December 31 was Dh1.03 billion, a 1 per cent drop from a year earlier, the company said in a statement.

Fourth-quarter revenue rose 58 per cent to Dh3.8bn from Dh2.4bn a year earlier.

Full-year net profit inched up 11 per cent to Dh4bn from Dh3.67bn a year earlier. Full-year revenue rose 33 per cent to Dh13.6bn from Dh10.3bn a year earlier.

“Fourth-quarter earnings were slightly below our estimate,” said Ayub Ansari, an analyst at Sico Bahrain. “However, the miss was due to a Dh301m write-off relating to the fire incident at The Address Downtown Hotel. Excluding this one-off, earnings were actually better than expectation – largely due to higher-than-expected property development revenues.”

He said he expects the group’s hospitality operations to come under some pressure this year from lower room rates, while growth from mall operations could also be lower.

Dubai’s biggest listed property developer said last month that there would be “no material effect on the company” from the hotel fire because the building was covered by insurance.

Arqaam Capital said last month that Emaar’s hotel revenue is forecast to decline by 13 per cent this year, compared with last year, to Dh1.4bn because of the closure of the hotel.

Based on the new forecasts, Arqaam expects total group revenue this year to rise by 29 per cent to Dh17.8bn compared with its previous estimate of a 31 per cent year-on-year increase in 2016.

Arqaam is “assuming disrupted operations of 12 months … for necessary refurbishment-rebuild works”.

Last year, hotel revenue accounted for 12 per cent of Emaar’s total revenue.

Emaar’s chairman, Mohamed Alabbar, said the developer’s diversified development approach helps it “to address market challenges efficiently”.

Emaar’s results follow weak earnings from Emaar Malls, which owns Dubai’s largest shopping centre, The Dubai Mall. Emaar Malls missed analysts’ expectations and reported a 5.5 per cent growth in fourth-quarter net profit to Dh435m.

Emaar is not the only major property developer to report lower earnings because of the slowdown in the real estate market.

Fourth-quarter profit at the government-owned Dubai developer Nakheel fell by 28.7 per cent to Dh770m from Dh1.08bn a year earlier.

House prices in Dubai fell by an average of 11 per cent last year as lower oil prices, the strong dollar and geopolitical unrest continued to affect the city’s property market, Reidin data showed.

House prices in Dubai are likely to fall further this year, but at a slower pace according to the property consultancy Asteco.

Emaar shares fell 1.25 per cent yesterday to Dh5.51.

The developer released results after the market closed.

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