Lower Gross Profit Margin Offsets Gains from Associates, Pressuring United Development Company’s Q3 2025 Results

• The company's sales revenue increased by 16% year over year.

• United Development’s shares experienced an 11% decrease during Q3 2025.

• The company's net profit witnessed a sharp drop, driven by a drop in gross profit margin and an increase in expenses. This was partially mitigated by an increase in revenues and improvement in associates' results and fair value adjustment.

During the first nine months of 2025, United Development Company’s stock price declined notably, falling from QAR 1.12 per share at the beginning of the year to QAR 1.00 per share by the end of September — a drop of approximately 11%. In comparison, the QSE Index increased by around 2% over the same period, indicating that the company’s share performance lagged significantly behind the broader market.

Here are the key numbers:

• Sales Revenue: 1,379 million QAR vs. 1,179 million QAR in Q3 2024 (a 16% YoY increase).

• Gross Profit: 396 million QAR vs. 438 million QAR in Q3 2024 (a 10% YoY decline).

• Net Profit: 222 million QAR vs. 241 million QAR in Q3 2024 (an 8% YoY decline).

• Earnings per Share: 0.069 QAR/share vs 0.068 QAR/share in Q3 2024 (a 1% YoY increase).

The company operates in the real estate business, which has witnessed expansive growth in demand and prices over the past several years. This growth was primarily driven by the world's major central banks implementing very low (even negative) interest rates, making mortgages more affordable for a broader population. This trend was especially prominent in affluent countries like Qatar.

However, the situation began to change at the end of Q1 2022 when the aforementioned central banks started raising interest rates to combat inflation. Among the first sectors affected was the real estate market, as mortgages became more expensive. As a result, there has been a significant drop in demand, and the impact on prices is already visible in major world markets.

An analysis of United Development's financial performance reveals an increase in sales revenues, which positively impacted net profit by 70 million QAR. However, this was offset by a significant drop in the gross profit margin, which declined from 37% in Q3 2024 to 29% in Q3 2025. This decline in margin resulted in a negative contribution to net profit, totaling 113 million QAR, compensating a big portion of the increase in revenues.

Moreover, focusing on higher-profit projects within the real estate business can be a strategic approach to improve overall profitability. By identifying and prioritizing projects with better returns, the company can allocate resources more efficiently and enhance its financial performance.

Due to the company's business model, it is crucial to regularly adjust the value of its investment properties to accurately reflect current market conditions. In Q3 2024, the company increased its negative fair value adjustment for these properties, reflecting adverse market trends. However, in Q3 2025 company made a positive adjustment, which contributed to a positive impact on net profit amounted to 10 million QAR.

Associated companies performed better, which resulted in a positive impact on the net profit amounting to 22 million QAR.

On the expense side, general and administrative expenses impacted net profit negatively by 9 million QAR. This has to be approached by the management carefully, as an increase in the expenses in the situation when the net profit falls is justified just in the situation if it will lead to future profits. Examining the net financing costs, it becomes apparent that the overall trend of increasing interest rates has led to a reduction in profit by 18 million QAR.

Other income sources beyond the core business contributed notably adversely to the net profit, totaling 42 million QAR. However, the company did not provide further clarification or specify the exact nature of these sources.

For more comprehensive information, please refer to the reliable financial information source, http://sahmik.com.