www.bethelfinance.com
The cooling of Israel's housing market caused a 27% drop in homes sales in 2011 by Shikun u'Binui Holdings Ltd. (TASE: SKBN), controlled by Shari Arison through Arison Holdings Ltd. However, the performance of the company's other operations resulted in higher revenue, although profits fell sharply. The company expects that the government's efforts to cool the housing market will continue to adversely affects its results in 2012, but CEO Ofer Kotler told "Globes" that the company's other operations will offset the weakness in the housing market. He therefore does not expect that the company's revenue and profit will be harmed in 2012.
Shikun u'Binui, Israel's largest residential construction company, said in its financial report that the slowing in apartment prices was due to the increase in housing starts, interest rate hikes by the Bank of Israel and its macro-prudential measures, as well as tax measures by the Ministry of Finance. "The impact of these measures, like the land marketing efforts by the Ministry of Housing and Construction, may have an effect during this year," it says.
Shikun u'Binui built 830 apartments in 2011, 27% fewer than the 1,142 apartments built in 2010. It believes that the drop in apartment sales is temporary. "There has been no change in the scale of the company's activities in the sector, nor any material change in the number of housing units under construction, because of the assessment that there is still a housing shortage and the slowdown in demand is only temporary," it says. Kotler predicts that home prices and sales will again rise in 2013 because of the decline in housing starts.
Shikun u'Binui's revenue rose 10% to NIS 5.34 billion in 2011 from NIS 4.87 billion in 2010. Fourth quarter revenue rose 13% to NIS 1.41 billion from NIS 1.25 billion for the corresponding quarter of 2010. Residential construction in Israel accounts for only 20% of the company's revenue. Its other operations include infrastructures in Israel and internationally through Shikun u'Binui Solel Boneh Building and Infrastructure Ltd. and Solel Boneh International Ltd., desalination and water, and renewable energy. These operations more than offset the dip in the company's domestic residential construction business.
Net profit fell 19% to NIS 444 million in 2011 from NIS 545 million in 2010. Fourth quarter net profit fell 76% to NIS 76 million from NIS 295 million for the corresponding quarter.
The company recognized revenue from apartments sold before 2011, which improved its overall numbers for the year. It reported NIS 811.4 million revenue from 649 apartments delivered, compared with NIS 587.1 million in 2011. Gross profit from domestic home sales rose to NIS 292.8 million in 2011 from NIS 191.8 million in 2010.
Despite the drop in profits, uncertainty in the real estate market, and worries about regulations by the government and Bank of Israel, Kotler's salary cost was NIS 7.7 million in 2011, including a NIS 4.4 million bonus. The salary cost of chairwoman Ravit Barnit was NIS 6.7 million, and the salary cost of Shikun u'Binui Real Estate CEO Tamir Dagan was NIS 5 million.
"In general, 2012 will be at least as good as 2011 by every measure, including revenue, net profit, and operating profit," said Kotler. "There is some drop in apartment sales in Israel, but we increased the number of sites, and in recent months we began work on new sites in Yokne'am, Hadera, and Ashkelon. We'll build hundreds of apartments there."
"Globes": How is it that press releases by contractors in recent months talk about demand and sales, but we see a plunge in sales in financial reports?
Kotler: "There is a combination of demand and supply, but all in all, this is a sophisticated market that balances out over time. Even if there is some drop in apartment prices in 2012, this will right itself in 2013 because there won't be housing starts."
No comments:
Post a Comment