June 9, 2011
Real estate firm Egyptian Resorts posted first-quarter net profit of EGP3.8 million Egyptian pounds (USD$639,500) on higher revenues, the firm said on Thursday.
The company, which makes most of its money selling land to developers, reported a net loss of EGP1.9 million in the same period a year earlier.
The firm, in a partnership to develop land with Orascom Development Holding, made sales of EGP3.2 million at its joint Sawiri project, the statement showed.
Swiss-based Orascom said last year it would jointly develop 2.5 million square metres of Egyptian Resorts property on the Red Sea and had bought a 4.5 percent stake in the group.
“We were expecting profit this quarter because they managed to book some contract reservations from their Sawiri project in January,” Hisham Halaldeen of Naeem Brokerage said.
The firm posted revenue of EGP12.3 million pounds, up from EGP4.4 million a year earlier.
But Egyptian Resorts, like other property developers in Egypt, is reeling from challenges to its land purchases.
In April, the tourism development authority retracted its approval for selling land to the firm for Sahl Hasheesh, its main project, along the Red Sea coast. The firm has said it would contest the decision.
The company, which has not sold any plots of land since the third quarter of 2008, when the global financial crisis hit the appetite for big real estate purchases in Egypt, is also likely to see a slowdown in profits because of its legal woes, analysts say.
“Everything will come to a standstill until there is more clarity on the land cases,” Halaldeen said.
Egyptian Resorts said it had paid USD$7.6 million, or 27 percent of the land’s contract value, and paid a further USD$5.3 million in rent and other costs.
The legality of the Sahl Hasheesh project is being contested after a lawsuit was filed saying the government broke the law in selling the land to the firm.