Tabreed, the Abu Dhabi district cooling company, failed to convert rising revenues from supplying chilled water to buildings into earnings growth in the first three months of the year.
Net profit decreased by 25 per cent to Dh32.8 million (US$8.9m) compared with Dh43.8m in the same period last year. Earnings were hit by higher financing costs, which company officials said came from the final phase of a recapitalisation programme that was completed on April 1.
"Our efforts have remained focused on strengthening our core business of chilled water, which is reflected in the sustained growth of our revenues," said Sujit Parhar, the chief executive of Tabreed. "We continue to improve operational efficiencies and reduce our costs by applying discipline in everything we do."
Tabreed, also known as National Central Cooling Company, creates district cooling plants that supply much of the country with air conditioning.
Tabreed builds central plants with feeder networks to buildings in surrounding areas. Chilled water is pumped to them to create air conditioning.
The process is said to be more efficient than each building having its own separate chillers.
Tabreed began suffering difficulties in late 2008, when local and international banks began to reduce their lending to UAE companies as the credit crisis spread.
Tabreed was closely connected to the property sector and had spent billions of dirhams on plants for projects that have since been delayed. It tried to sell assets to long-term infrastructure funds with limited success.
The situation led Mubadala Development, a shareholder, to increase its stake in February and Tabreed to restructure its debts.
Mubadala, a strategic investment company owned by the Abu Dhabi Government, committed Dh3.1 billion in long-term capital to the company.
On April 1, Tabreed completed the refinancing of Dh2.63bn in debt. The company said that together with healthier profits, the recapitalisation and restructuring would allow it to cover its debts this year.
"Given the completion of the recapitalisation, the group's management and board of directors are confident that the capital structure of the group ensures the long-term stability of the business," Tabreed said.
While financing costs rose during the quarter, Tabreed's chilled water revenue rose to Dh183m from Dh139m in the same period last year, while contracting revenue increased to Dh64.1m from Dh32m.
It has additional 13 plants under construction, including eight for the Dubai Metro Green Line.Shares of Tabreed closed unchanged yesterday at Dh1.35 on the Dubai Financial Market. The company's share price is down 19.16 per cent for the year.