Egypt's Palm Hills slips into H1 net loss

CAIRO: Egyptian real estate firm Palm Hills Developments, the country's second-biggest developer, slipped to a 2011 second-quarter net loss, hit by weaker revenues from its real estate operations.

The firm, battered by an uprising that toppled President Hosni Mubarak and widening graft probes that have frozen sales and increased cancellations, reported a 45 million Egyptian pound ($7.5 million)net loss for the second quarter of 2011.

Palm Hills reported an 84.3 million pound net profit in the same period a year earlier. But the figures came closely in line with a Reuters poll of three analysts who predicted a net loss of 45.3 million.

"The loss was expected by the market. All real estate companies are suffering in the second quarter due to a slow down in the sector, slower deliveries, and higher costs," Harshjit Oza of Beltone Financial said.

Palm Hill's financials showed revenue for the first half of 2011 from its real estate projects at 281 million pounds, a 46 percent drop from 522.7 million pounds in the same period a year earlier.

Talaat Moustafa Group, the country's biggest listed developer saw first-half net profit slide 44 percent.

"The second quarter has been a weak quarter for all real estate companies," Oza said.

LAND CHALLENGES

Palm Hills is among several real estate firms facing legal challenges contesting its land bank.

Its Chairman Yasseen Mansour was among businessman who were facing corruption charges. Mansour and the former housing minister Ahmed el-Maghrabi were cleared of corruption charges in a state land sale last month.

But although Mansour was cleared of criminal charges, the company is awaiting a verdict by another court on whether the contract for one of its land plots will be scrapped. That court is due to hear the case on Oct. 4.

The firm is facing other court cases contesting the legality of two of its land plots and has said it would return at least two plots of land to help manage cash flows.

Analysts say Palm Hills may have to struggle to rebuild its balance sheet, one of the weakest among Egyptian real estate developers.

"Debt and land liabilities will likely necessitate asset sales to fund operations, particularly since they don't seem to have access to bank financing," one-Gulf based analyst who declined to be named said.

"But its balance sheet is holding up," the analyst added, pointing to net cash flows of 317 million pounds for the first half of 2011.

Palm Hills posted a net loss of 81.4 million pounds in the first-half of 2011, compared to a 191.4 million net profit in the same period a year earlier.

Its shares slid 4.4 percent, compared to a 3.2 percent drop in the main benchmark index.

Copyright Reuters, 2011