Solidere, Lebanon’s largest company, announced net losses of $2.7 million in the first six months of 2000 compared to losses of $435,986 for the same period last year, while total revenues declined by 14 percent to $15.19 million.
The real-estate giant developing the Beirut Central District attributed the decline in profits to the ongoing economic recession and to administrative delays in obtaining permits from the government. Net revenues from land and real estate sales rose 13.44 percent to $1.8 million while income from rented properties increased 5.2 percent to $2.47 million.
Interest income accounted for 60 percent of overall revenues and stood at $9.13 million. Bank loans were almost unchanged from year-end 1999 and totaled $350.28 million, with the leverage ratio standing at 21.4 percent of shareholder equity. Also, the firm increased its cash balance to nearly $93 million, up 20.65 percent from year-end 1999.
Solidere’s chairman Nasser Chammaa previously declared that the government has been delaying the issuing and release of permits since the start of 1999, causing $500-million worth of international projects planned for the Beirut Central District to remain on hold.
Saudi investor Prince Al-Walid Bin-Talal is pulling out of a $250-million project citing bureaucratic obstacles and a number of investors have threatened to cancel their Solidere projects if the government does not release the permits soon.
Solidere posted net income of $3.7 million in 1999 compared to $54 million in 1998 and $77.8 million in 1997. Shareholders voted to forego the distribution of dividends for 1999 due to difficult operating conditions anticipated in 2000, making it the second consecutive year the firm withholds dividend distribution.
In a report on Solidere, Merrill Lynch recommended a “neutral” stand towards the firm’s GDRs as the stock is trading at a 27 percent discount to its NAV of $9.2. The investment house indicated that Solidere has been facing major obstacles in recent years due to problems in obtaining necessary building permits for new developments, the ongoing economic recession and the oversupply of space.
However, its fortunes may have changed in its favor due to the sweeping electoral victory of its founder, Rafic Hariri, and his likely return to power. The report noted that Solidere’s business environment is tied to the economic recovery, and the prime position of the Beirut Central District will make it the premier location for future economic activity.
Bank of Beirut SAL (BoB), along with the Dubai-based Emirates Bank International and Banque Pictet of Luxembourg, are launching the first fixed income fund to invest in Lebanese sovereign and corporate eurobonds. The $25-million Beirut Fixed Income Fund will be managed by BoB while Pictet will be the custodian.
Bank of Beirut set November 15 as the closing date for subscriptions following the end of its marketing road show. The bank expects 80 percent of subscriptions to come from Lebanese institutions and individuals, with the remaining 20 percent originating from Gulf and European investors.
Annual returns to investors are expected at about 10 percent. The fund will invest up to 35 percent of its capital, is registered in Lebanon and will be regulated by the Central Bank of Lebanon. — ( Lebanon Invest)