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Mideast unrest takes its toll on UAE firms

MUSCAT: The Emirates Securities and Commodities Authority (SCA) has said that the disclosure rate of the local public United Arab Emirates companies for the first quarter of 2011 has reached 98.1 per cent, says a UAE Corporate Profitability report prepared by Global Investment House.

Dubai Financial Market showed 100 per cent compliance. Total UAE-listed companies witnessed almost unchanged performance in the first quarter compared to the first quarter in 2010, in terms of percentage change. However, higher oil prices and the political unrest that swept across the Middle East, causing the stepping down of both the Tunisian and Egyptian presidents had its ripple effect on some major UAE companies.

The Global report said that many UAE companies had direct exposure to Egypt either in terms of financial investments, which were hit by panic selling and shutting down the stock market for more than 39 sessions or scheduled projects that were delayed due to political and economic instability.

The combined aggregate performance of UAE stock markets in the first quarter of 2011 stood at Dh10.18 billion compared to Dh10.15 billion recorded in the corresponding period of the previous year, representing a 0.25 per cent decline. It is worth mentioning that all listed non-UAE companies have been excluded when taking into account total profitability.

Sectorwise, six out of the ten sectors reported declines in the first quarter of 2011 with the Investment sector showing the biggest drop, with an aggregate profits plunging to Dh55.50 million, a retreat of 81.60 per cent from Dh301.50 million reported in the first of 2010.

Banking sector

The banking sector was the major contributor in UAE aggregate profitability constituting almost 53 per cent. The sector registered a 9.18 per cent growth in aggregate profits for the first quarter of 2011, totaling Dh5.80 billion compared to Dh5.31 billion in the first quarter of 2010.

Dubai banks saw a higher year-on-year rise of 11.54 per cent mainly due to Tamweel , which had the highest growth of 430.85 per cent during the first quarter of 2011.

Tamweel was suspended from the bourse since November 2008, when talks over a planned merger with its largest competitor, Amlak Finance, failed to materialise and Dubai Islamic Bank took full control of the company.

The company's share resumed trading on May 11, 2011. Tamweel posted a net profit stood at Dh27.24 million in the first quarter of 2011 compared to Dh5.13 million recorded in the first quarter in 2010, on the back of declining provisions and improved funding costs. Worth mentioning that, Fitch Ratings upgraded Tamweel 's long-term issuer default rating to BBB-, from BB, with a stable outlook.

On the other hand, Amlak Finance, was the only bank that massively extended its losses.

Telecom sector

The telecommunications sector, excluding non-UAE companies, realized a 3.26 per cent drop in net profit for the first quarter of 2011, with total profits amounting to Dh2.02 billion compared to Dh2.09 billion in the first quarter of 2010. This retreat was due to Emirates Telecommunications Corporation (Etisalat), which reported 8.88 per cent lower profits in the first quarter of 2011.

Real estate sector

The real estate sector had a total first quarter profit of Dh890.72 million, 19.51 per cent higher year-on-year. Abu Dhabi real estate sector showed strong signs of recovery shifting to profitability in the first quarter with total profits amounted to Dh288.92 million compared to Dh141.82 million, net loss recorded in the first quarter in 2010.

This improvement was mainly driven by Al Dar Properties, which turned back to profits in the first quarter of 2010, reaching Dh189.07 million net profits in the first quarter of 2011. Emaar Properties, the largest company in the sector, reported a 44.6 per cent drop in profits for the firs quarter of 2011 to come to Dh421.0 billion.

Insurance sector

Oman Insurance Company -- managed to report 10.50 per cent higher in the first quarter profits reaching Dh108.32 million on account of higher investment income and lower operating and interest expenses.
Islamic Arabic Insurance Company reversed back to profitability with Dh29.71 million in the first quarter compared to Dh7.07 million net loss in last year.

Investment sector

Dubai Financial Market net profit plunged by 95.92 per cent in the first quarter amounting to Dh2.19 million compared to Dh53.58 million in the first quarter in 2010. This huge drop was on account of massive decline in trading volumes hurt by lower liquidity.

© Times of Oman 2011