Solidere losses lead
to lowered expectations

FFA Private Bank had decreased
target price to $11 per share

Solidere posted a loss of $87.2 million in 2015, following a profit of $113.7 million in the previous year. The loss is due to weakness in revenues from sales. Additionally, two major sales deals needed to be provisioned against, due to pending cancelation after talks for rescheduling payments had faltered. Solidere said it has created provisions of $82 million to write off those earnings for land sales concluded before 2015.

Two weeks ahead of the results announcement, FFA Private Bank had revised down its target price for shares of Solidere from $13.5 to $11 per share. It had forecasted a loss of $35.9 million not accounting for the last minute announcement of the two deal cancellations. After the announcement, FFA Private Bank maintained its target price and its recommendation at ‘Marketweight’, i.e. to hold the stock.

Solidere has been trading in the $9.8 to $10 per share throughout May.

Marwan Mikhael Head of the Research Department at Blominvest Bank said that Solidere could have reported a profit if it didn’t create these exceptional provisions. He said that the company does not have any structural problems but that its performance is highly influenced by the political mood in the country.

Solidere said the loss from its domestic operations was $119 million. This loss was partially offset by profits realized by Solidere’s affiliated companies, especially its 39 percent owned affiliate Solidere International, which has reported a net profit of $62 million.

The revenue mix reflects a decline in contribution from land sales although the trend is expected to improve in 2016, according to FFA Private Bank.

Solidere said that its land sales witnessed a significant recovery in the first quarter of 2016, with signed contracts reaching $158 million so far. Other contracts are under negotiation so full-year land sales are expected to reach at least $200 million.

Solidere’s General Manager Mounir Douaidy said: “Land sales remain our major source of income and we will do our best to close the sales deals that are now under negotiation in order to achieve a profit in 2016.”

Douaidy said that his company enjoys geographical diversification through Solidere International, which is performing well financially.
Regarding the impact of the results on the share price, Mikhael said that the company’s performance is already factored in the market price. Solidere’s shares fell only 0.6 percent to $9.91 on May 1, just after the announcement of the results. Solidere shares are more affected by the political situation than by its own performance, Mikhael said.