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CHAMPION OF THE DAY
Solidere posts first
net profit since 2016
Share price hits record high in seven years
Solidere has posted a net profit of $49 million in 2019 after recording a loss of $115.7 million in the previous year, according to the company’s recently released audited financial statement.
This is the first net profit realized after two consecutive years of losses.
Total revenues jumped from just $66.2 million in 2018 to $295.4 million last year. Revenues from land sales, which represented 79 percent of total revenues, soared from nearly $1.3 million to $234.5 million. Revenues from rented properties decreased six percent to $53.2 million.
Jean Hanna Deputy General Manager at Fidus said that Solidere is now back on the profit path and this trend will continue. He said that land sales allowed the company to repay its loans which reduced its interest costs and therefore the net profit resulted not only from the increase in sales revenues but also from the decrease in interest expenses.
The company has decreased its total liabilities, including bank loans, by 40 percent. Total liabilities dropped to $417.4 million at the end of 2019. Solidere’s interest expenses fell by $13.7 million compared with 2018.
The company had said that it had succeeded in further lowering its liabilities in 2020 to $225 million at the end of June, thanks to the increase in sales. It settled debts to banks worth $190 million. “Proceeds collected from sales will reach $342 million in the first half of 2020,” it said.
When Solidere saw the surge in demand for real estate it stopped selling at discounts of 30 to 40 percent as it used to do in the past when there was a slump in demand, according to Hanna. It began to sell at a fair price but afterwards it increased prices by around 30 percent with the continuous rise in demand, he said.
Now that it has settled its debt Solidere is less interested in selling properties that is why it has raised its prices, according to Hanna. The fact that real estate sales on the local market at large were only limited property owners who wanted to settle debt to banks has also contributed to the increase in demand for Solidere’s properties, he said.
Faysal Barbir Director of Capital Markets at FFA Private Bank said investors will continue to buy real assets, mainly real estate, as long as confidence in the banking sector remains weak because of the current crisis. People will continue to use their deposits in more secure investments as long as local investor sentiment remains subdued, he said.
According to Barbir, buying Solidere’s properties is not bringing fresh money to the country as investors are paying through bankers checks drawn on their local bank accounts.
Solidere’s shares ‘A’ and ‘B’ closed on Tuesday at $13 up 6.2 percent and 6.7 percent respectively. This is the highest value of Solidere’s share recorded in the last six to seven years, Hanna said.
The surge in the share price was mainly driven by an approaching general assembly which will decide on dividend distribution. The meeting is usually held in mid-July or in early August if there was a lack of quorum.
The increase demand for Solidere shares on Tuesday was also partly triggered by the statement of the outgoing Director General of Finance Alain Bifani about the risks of a haircut on deposits, according to Hanna.
Barbir said that the price of Solidere’s ‘A’ share, which is a benchmark of its stocks, surged 85 percent during the first half of 2020 due to the fallout of the capital controls. In December 2019 alone it jumped by 40 percent, he said.
Reported by Gisele Khalaf and Shikrallah Nakhoul
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Jul 01, 2020
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