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Dar al-Arkan targeting 10% profit growth

Chairman says developer is 'okay' after repayment of $1bn loan

The Saudi government's Public Investment Fund approved a $1.1bn facility to finance one of Dar al-Arkan?s biggest projects, the Qasr Khozam developmen
The Saudi government's Public Investment Fund approved a $1.1bn facility to finance one of Dar al-Arkan?s biggest projects, the Qasr Khozam developmen

Dar al-Arkan, Saudi Arabia’s largest listed real estate developer, is aiming for over 10% in profits next year and is financially healthy following the repayment of a $1bn Islamic loan, its chairman told Reuters.

The developer has issued three international sukuk and one domestic sukuk over the past five years, raising a total of $2.25bn (SAR 8.4bn).

On Saturday it announced it had transferred $1bn to Deutsche Bank, the principal paying agent, to redeem a sukuk coming due this month.

“So far we have paid back SAR 6bn ($1.6bn). What remains is SAR 2.4bn ($640m) to be paid over the next three years,” chairman, Youssef al-Shelash, said in an interview.

The company used cash reserves and proceeds from land sales to make the repayment, and plans to use the same method for its remaining maturities – $200m (SAR 750m) in 2014 and $453m (SAR 1.7bn) in 2015, he added.

“We had a cash position of SAR 3.2bn ($853m) by the end of the second quarter. After the sukuk repayment we have remaining cash of almost SAR 100m ($26.7m),” Shelash said.

“We also have receivables of almost SAR 1bn ($267m) for this year - almost half of it will be in the third quarter,” he added.

Shelash also revealed that Dar al-Arkan had no plan to issue a new sukuk this year.

“I don't think so, we don’t need it, thanks be to God...we are okay,” he said when asked whether there were any plans to issue debt soon.

Last October, the government’s Public Investment Fund approved a $1.1bn (SAR 4bn) facility to finance one of Dar al-Arkan’s biggest projects, the Qasr Khozam development in Jeddah, which is estimated to cost $3.2bn (SAR 12bn).

Shelash said he expected profit growth for the remaining two quarters of this year to be at least 10% and that earnings would rise further next year as the pressure of repaying debt subsided.

“The firm was under a lot of pressure to accumulate liquidity to pay back its debt and liquidity over the past 20 months was not reinvested...Now that we are done with the pressures to repay our debt, I hope we will achieve over 10% annual growth next year,” he said.

Earlier this month, Dar al-Arkan said its second-quarter net profit rose 11% from a year earlier to $88.3m (SAR 331m).

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Construction Week - Issue 751
Oct 13, 2019