Company rides on chilled water wave to register profit

According to the recently released first quarter 2010 consolidated financial results, Tabreed has registered a healthy profit.

For the three months ending March 31, 2010, Tabreed’s total revenue was reportedly Dh184.6 million – broadly similar to the corresponding period in 2009. However, the company reports that the net profits more than doubled over the same period in 2009 – from Dh21.7 million last year to Dh43.8 million in 2010. Excluding minority interests, Tabreed’s share of profits, it explains, was Dh40.4 million compared to Dh10.8 million in the previous year.

During the first quarter of 2010, Tabreed added four new plants to its portfolio, enhancing 27,000 TR of capacity and bringing Tabreed’s total installed cooling capacity to 422,100 TR across 40 plants.

According to Tabreed, the surge in profit was thanks to its core business of chilled water. As a result of three new plants coming online in 2009 and four new plants coming online in the first quarter of 2010, it recorded sales of Dh117.1 million – an increase of 91% over the same period last year. In effect, profits more than doubled – up by 109% – to Dh22.8 million. Margins for the chilled water business reportedly improved from 18% to 20%.

Tabreed’s wholly owned subsidiary, Gulf Energy Systems (GES), was the biggest contributor to the strong results, particularly reflecting GES commissioning the chilled water network on Al Reem Island and signing Dh60 million of new orders for the Sowwah Island network project.

Tabreed also added that the company’s contracting segment recorded sales of Dh 36.1 million – an increase of 37% over the same period last year. Profits for the segment were Dh15.6 million.

However, Tabreed’s manufacturing segment reported sales of Dh15.6 million – a significant decline from Dh81.4 million for the first quarter 2009 – due to a significantly reduced order book. Profits for the manufacturing segment were Dh0.7 million.

During the quarter, Emirates Pre-insulated Piping Industries was awarded three new projects, valued at approximately Dh25 million, which are expected to be completed by the second quarter of 2010.

Again, Tabreed’s services segment, which is involved in the design and supervision of building electrical and mechanical works, reported sales of Dh15.9 million – down by 23% over the same period in 2009 – reflecting reduced order books from the slowdown in the economy. Profits for the segment were Dh5.5 million – unchanged over the same quarter in 2009. According to Tabreed, as of March 31, its total installed cooling capacity is 422,100 TR across 40 district cooling plants. The Company expects nine more plants to come on stream in the remainder of the year.

Commenting on the overall positive picture, Sujit S Parhar, CEO of Tabreed, said: “The first quarter 2010 results demonstrate the significant progress we have achieved to date in reengineering the business and implementing corporate governance and process controls. We have a strong core business of chilled water and a steady pipeline of new plants coming on stream. We will continue to focus on improving operations and actively managing facilities. We acknowledge the challenges facing the business in the year ahead, and those associated with our recapitalisation process, but we are confident in the long-term prospects for the Company.”

Steve Ridlington, CFO, Tabreed, added: “In addition to operational improvements, we have also taken steps to implement a more rigorous financial discipline and focus on efficiency for our business, both of which are evident in the results announced today. Our efforts have translated into the best first quarter results in the company’s history.”

Reiterating Parhar’s comments, Khaled Al Qubaisi, Managing Director, Tabreed, said: “While we are very pleased with the first quarter results, which reflect the hard work of the management team under the direction and supervision of the Board, we recognise that there are challenges that face the business in the year ahead. We are confident, however, that the improvements in the company, and the way its business activities are conducted provide a strong platform to achieve the company’s objectives of improving performance, increasing profitability and maximising returns.”

Talking of the sensitive issue of recapitalisation, he said, “The initial discussions we have had with key stakeholders in respect of the recapitalisation of the company is positive and encouraging. The support from major 2008 Sukuk holders for the company’s decision to defer the May 19 payment is a strong endorsement of the steps being taken to complete the recapitalisation process.”

FINANCIAL HIGHLIGHTS – FIRST QUARTER ENDING MARCH 31, 2010:

• Total revenue was Dh184.6 million, compared to Dh189.7 million in the same period in 2009.
• Gross profit increased 11% to Dh88.9 million, compared to Dh80.2 million in 2009.
• Net profit doubled for the first quarter to Dh43.8 million, compared to Dh21.7 million in the same period in 2009, in part reflecting certain noncash finance gains associated with the company’s 2008 Convertible Sukuk.
• However, excluding these non-cash finance gains, underlying net profits increased 15% off the back of strong growth in the company’s core chilled water business.
• Chilled water revenue for the period was Dh117.1 million, a 91% increase over the same period in 2009, as new plants and customers came on line. Profits more than doubled to Dh22.8 million and margins improved from 18% to 20%.
• Basic and diluted earnings per share, attributable to ordinary equity holders of the parent increased from Dh0.01 in 2009 to Dh0.02 in 2010.