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Aldar cuts a quarter of its workforce
To scale down on certain functions, 105 jobs to go; Other Abu Dhabi developer Sorouh profit up 13 pct, misses view
October 31, 2011 10:49 by Reuters
Aldar Properties , an indebted Abu Dhabi developer struggling to recover from a property collapse despite a government bail out, plans to cut a quarter of its staff in a restructuring, it said on Monday.
The builder of the Yas Marina Formula One received a $5.2 billion rescue package from Abu Dhabi earlier this year but sluggish property markets have curbed a recovery, forcing the developer to slash costs further and scale down operations.
House prices in Abu Dhabi, 60 percent below their peak, may fall further, with about 11,000 new homes expected to hit the market in the fourth quarter, according to a report by property consultants Jones Lang LaSalle.
Aldar will let go 24 percent of its total staff, equating to 105 people, it said. “Aldar’s new strategic plan takes into account the existing market environment and is designed to reorganise and refocus the company’s business development efforts.”
The restructuring will also see the company scaling back on some of its operations.
“Aldar has a very leveraged balance sheet … and it is probably a lot more impacted by the slowdown in Abu Dhabi,” said Amer Khan, fund manager at Shuaa Asset Management in Dubai.
The real estate collapse began in neighbouring Dubai, where home prices fell more than 60 percent from their peak in 2008, triggering the restructuring of its flagship firmDubai World .
The impact soon spread to oil-rich Abu Dhabi, which was on its own building spree. The emirate is now tightening its purse strings as it reviews some of its projects.
Abu Dhabi government-owned Tourism Development and Investment Co (TDIC) postponed the opening of three museums, in a fresh delay for one of the largest cultural projects in the Middle East.
“It looks like the authorities in Abu Dhabi are not in a particular rush to actually funnel money into these projects which aren’t infrastructure-related or necessary immediately,” said Khan. “Aldar gets affected by all that.”
Aldar had said earlier this month its chief financial officer of five years would be replaced by Greg Fewer, an executive at state fund Mubadala, in signs of growing influence of the government in the company.
Aldar shares were down 1.9 percent at 0750 GMT, having fallen 52 percent year-to-date.
Separately, Sorouh Real Estate , Abu Dhabi’s second largest developer by market value, reported a modest 13.4 percent rise in third-quarter net profit, about half the level forecast by analysts.
Sorouh made a net profit of 67.3 million dirhams and the firm’s chief financial officer said the company may take further provisions in the coning quarters.
“Rents are falling,” Richard Amos said in a conference call with reporters. “It is prudent to take provisions quarter by quarter. It depends on the state of the market and there could be possible impairments by the year end.”
The company took provision of 50 million dirhams against investment property in the third quarter.
Amos said the company will spend 800 million dirhams in the fourth quarter. Its shares were trading down 1 percent on the Abu Dhabi bourse. (By By Praveen Menon and Stanley Carvalho; Additional reporting by Nadia Saleem; Editing by Dinesh Nair and David Holmes)