Tabreed, the world’s largest district cooling company, reduced debt and increased profits by more than a third in the second quarter in spite of lower sales.
Net profit at the company, which is partially owned by Mubadala, increased 37 per cent to Dh79.4 million during the three months from April compared with the same period the previous year, while group revenues fell 6 per cent to Dh278m.
Tabreed, which provides chilled water-based cooling to buildings and developments such as Dubai’s Metro, said the reduction in revenues was part of its long-term strategy to wind down its less profitable non-core businesses such as pipe manufacturing.
Revenues for Tabreed’s chilled-water business increased 4.4 per cent over the first six months of the year compared with a year earlier to Dh 464.8m as 46,000 refrigerated tonnes – an industry measurement – of new customer connections were added across the region.
However, revenue from the non-core business approximately halved during the same period from Dh75.5m to Dh37.7m.
Tabreed, which expanded rapidly during the boom years of 2006 and 2007, was hit hard when the property market crashed. The company’s high-value district cooling plants were left without the expected number of paying tenants, leaving it with spiralling debts and falling income. The company said financing costs fell 16.7 per cent to Dh77.6m during the first half of the year compared with the previous year as it continued to benefit from a recapitalisation plan it completed in 2011.
“These robust results demonstrate the benefits of the company’s steadfast focus on growing our core chilled-water business while improving operational efficiency and cost discipline,” said Waleed Al Mokarrab Al Muhairi, Tabreed’s chairman.
Last December, the company issued a Dh1.13 billion convertible bond to Mubadala, which gives Mubadala the option of increasing its ownership in 2019.
In February, Tabreed’s shares plummeted after the company announced it planned to issue further convertible bonds to Mubadala, which already owns 14.8 per cent of the company.