Mubadala posts steady revenue but profit falls in first half

Mubadala Development generated steady revenue in the first half, but earnings halved amid declines in its hydrocarbons revenues and a surge in depreciation cost.

Revenue for the first six months of this year was Dh15.9 billion, compared to Dh16bn for the first half last year, said the Abu Dhabi government’s strategic investment company.

Profit attributable to the owner was Dh625 million, down about 52 per cent from Dh1.3bn in the same period last year.

Mubadala’s profit was bolstered by better performance of its investment income from assets such as a stake in General Electric and the private equity firm Carlyle, as well as a gain on unspecified “hedging instruments”.

But its operating units posted sharply lower profits, with total operating income of Dh762m, down more than 68 per cent from Dh2.4bn last year.

Mubadala’s “comprehensive income” – the bottom line after excluding investment income gains – fell 63 per cent to Dh478m from Dh1.3bn.

“Global economic conditions reinforce more than ever the importance of Mubadala’s long-term investment strategy and diversified portfolio,” said Khaldoon Al Mubarak, Mubadala’s chief executive.

Set up in 2002 as part of Abu Dhabi’s long-term strategy to diversify its economy and attain social goals such as career development for Emiratis, the investment company is also mandated to generate financial returns for the government.

Mubadala covers a wide range of sectors. Its subsidiaries operate in industries such as petroleum, semiconductor manufacturing, satellite services, health care, aircraft components, real estate and utilities providers.

In the first half, the revenue of the semiconductor maker GlobalFoundries, Mubadala’s largest subsidiary, rose 9 per cent to about Dh8bn. Mubadala’s satellite, medical services and chilled water provision businesses also posted higher revenues.

But Mubadala’s hydrocarbon revenue declined further, having posted sharply lower full year results for 2014, when a Dh1.88bn asset writedown hit the bottom line.

Revenue for the oil and gas division tumbled a further 17 per cent in the first half to Dh2.4bn. Revenue at the aircraft division fell 17 per cent to Dh2.9bn.

In terms of cost, depreciation rose 22 per cent to Dh4.5bn from Dh3.6bn, largely because of the commencement of a Fab 8 semiconductor plant in the United States. That helped to drive the technology division’s losses of about Dh2.7bn.

Mubadala is expecting improved financial performance at some of its subsidiaries that are ramping up and have yet to make positive financial contributions.

Badr Al Olama, the chief executive of Mubadala’s Strata Manufacturing unit, said this month that Strata was expected to break even by 2017.

Set up five years ago, Strata makes aircraft parts for Boeing and Airbus.

Mubadala is also expecting a positive contribution from Porte Sudeste, its joint venture iron ore port operation with the commodities firm Trafigura.

The two companies acquired the port last year for just under US$1bn from the financially troubled Brazilian tycoon Eike Batista.

Mubadala said the first shipment of iron ore was made this month.

Mubadala and Trafigura have extended their relationship to include a metals extraction venture that will start with copper mining in Spain.

Mubadala’s balance sheet was little changed in the past six months, with assets at Dh242bn and a gearing ratio of slightly above 9 per cent.

The investment company has one of the lower debt levels among Abu Dhabi’s government-related entities, boasting high investment grade ratings from major credit rating agencies.

In view of “challenging market conditions such as volatile commodity prices”, Carlos Obeid, Mubadala’s chief financial officer, said “as the economic situation remains unclear, we continue to carefully manage our operations and balance sheet”.

Follow The National’s Business section on Twitter

Share This Post