JWC cuts forecasts

Poland's largest residential developer, JW Construction (JWC), has slashed its 2008 net profit forecast by 31 percent following the publication of its Q2 results. The firm now expects to earn a net profit of zł.150.6-million this year, down from zł.219.7-million. JWC has also reduced its revenue forecast by a fifth, to zł.820-million.

The firm's revised forecasts stand in contrast to its Q2 results. It earned a net profit of zł.31.8-million on revenues of zł.266.5 million - y/y increases of 121 percent and 220 percent, respectively. The firm's net profit after two quarters reached zł.50.9-million, 98-percent better than in H1 2007.

So why did the firm downgrade its forecasts so sharply? The main reason is weaker demand for new apartments in Poland. The residential market has cooled following price stabilization and interest rate hikes. Interest rates currently stand at their highest level in more than three years.

"Although JWC's results for the second quarter were quite good, the future results - based on current sales - seem to be rather weak," said Michał Sztabler, an analyst at DM PKO BP. He underscored that all housing developers are witnessing a slowdown.

"We, the analysts, will be watching the next few quarters' results and keeping an eye on the current sales. In my opinion, even the predicted zł.150-million net profit is an ambitious forecast when we consider that the third quarter is traditionally the weakest in the year," added Sztabler.