CAIRO: Real estate giant Sixth of October Development and Investment (SODIC) reported a decline in second quarter earnings, but analysts are praising the numbers saying that the company's guidelines for reporting earnings skew results. SODIC reported LE 3.85 billion in revenues for the period from April 1 through the end of June. That's down dramatically from the LE 11.61 billion for the second quarter of 2008. The company posted a net loss of LE 20.8 million ($3.7 million) in the first half of 2009, the stock exchange said on Monday. The firm had posted a first quarter loss of LE 8.3 million, and said the loss compared to a profit of LE 7.2 million in the first half of 2008, reported Reuters. Analysts said because of International Accounting Standards, these results are misleading. SODIC reports its earnings based on properties delivered, meaning that when work finishes on a house, for example, only then does it add the revenue generated from that project to its revenue chart. Revenue, said SODIC CFO, Ahmed Dabbous, "is down because there were no deliveries during that period. Gross profit, though, was only down slightly, falling to LE 2.47 billion in the second quarter of this year from LE 2.58 billion in the second quarter of 2008. "The decline in revenues and net income is not an indication of a deteriorating performance by SODIC as revenues are recorded based upon delivery revenues recognition, which creates fluctuations in revenues on a quarterly basis, wrote brokerage firm Beltone Financial in a note. With its accounting practices that can make it challenging to read SODIC's real performance, a violent market shock in the form of global economic turmoil, and a slowdown in the Egyptian high end real estate market, stability has become king. In that vein, SODIC is succeeding. Over the past year, its cash standing rose from LE 238 million to LE 255.3 million, illustrating a consistency investors like. And investors, lately, have rewarded the real estate giant. After hitting a mid-winter slump, the company's share price has climbed from a low of about LE 24.0 per share back in February to about LE 73.0 today. This may be part of a recovery from a drop that saw SODIC's share price plummet from a high of over LE 250.0 back in March of 2008. The company has a number of projects in the works, both in Sixth of October City and in New Cairo, including Eastown, Westown and Allegria. "We view the results as positive as SODIC's accounts receivables declined by LE 50.4 million from LE 1,257.9 million in fiscal year 2008 to LE 1,207.5 million in the second quarter of 2009 indicating an increase in sales in phase four of their project Allgeria, 'The Hill,' wrote Beltone. SODIC's reaction to the global economic crisis has played a significant role in its ability to ably weather the storm, while competitors have suffered. In January of this year, just as the global economy was reaching a crisis point, SODIC decided to re-work phase four of its project, Allegria, which was about to go on sale. Over the course of eight weeks, executives re-modeled the development, adding smaller, less expensive homes in the hope they would sell at a bad time for the industry. Homebuyers gobbled up the offering. Dabbous said the company has made LE 400 million in sales on Allegria this year. Also, the company reacted to the economic slowdown by taking a conservative approach: turning down opportunities to buy new pieces of land outside of Egypt and delaying construction of some of its Eastown and Westown projects. "We've signed for 2011 deliveries, said Dabbous, "but we're ahead of schedule, so we'll be delivering next year, and that's when you should start to see profits. Dabbous also said that at that point company executives will be able to schedule the deliveries cyclically, so that each quarter's revenue report can show strong figures.
