Egypt's Palm Hills posts modest profits in 2013 first semester

Ahmed Feteha, Marwa Hussein, Wednesday 18 Sep 2013

Egypt's prominent listed property developer Palm Hills Development realises a LE2.1 million ($300,000) profit in the first half of 2013, pushed up by positive first quarter results

Egypt's second-biggest listed property developer, Palm Hills Development (PHD), reported it made a net profit of LE2.1 million ($300,000) in the first half of 2013, compared with a loss of LE77 million ($11 million) in the same period of last year.

However, the company lost LE10.1 million during the second quarter of the year. Profits of the first quarter are the main drive of the company’s profits over the first semester.

The company realised a consolidated net profit of LE45.3 million in the first quarter of 2013, up from a net loss of LE16.3 million in the same period last year.

“Palm Hills has some liquidity problems, which impacted its operations significantly post-revolution,” Habiba Hegab, real estate analyst at Beltone Financial, told Ahram Online.

Hegab notes that construction almost stopped on a number of the company’s projects, with severe delays witnessed.

Despite the pick-up in the sector, the company is still struggling with its high level of cancellations, as it remained in the negative net sales zone in 1H2013.

“People have concerns about the lack of management in Palm Hills, especially that Yasseen Mansour, its chairman, is currently outside Egypt,” says Hegab.

Palm Hills has been hit by the country's political turmoil. An Egyptian court ruled shortly after the revolution that a land sale to Palm Hills was illegal and scrapped the contract.

Chairman Yasseen Mansour was among several businessman facing corruption charges, but was cleared later.

Mansour resigned as CEO after the revolution, but remains chairman.

Palm Hills managed to shrink its losses in 2012. It recorded a LE134.6 million (about $20 million) net loss in 2012, a decrease of 59 percent compared to the preceding year.

Hegab estimates that improvement in the company’s performance is due to people’s interest in real estate.

"People are investing in real estate to hedge against inflation and currency depreciation. Also, the stock market is very volatile, as well as restrictions on foreign currency transactions. This was quite evident in the strong sales figures YTD reported by Egypt’s three major developers, namely: SODIC (Sixth of October for Development and Investment Company), PHD and TMG (Talaat Mostafa Group)."

She predicted the imposed curfew to impact construction in different real estate companies.

“We expect the curfew to result in some delays in deliveries in 3Q2013, but we believe that the companies will manage to end the year within their budget, if the political situation doesn’t get worse,” Hegab concludes.

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