Mubadala Development Co., the Abu Dhabi sovereign fund merging with International Petroleum Investment Co., posted a 4.43 billion-dirham ($1.2 billion) loss in the first half because of lower commodities prices and smaller gains from financial investments.
The result compares with a 625 million-dirham profit a year ago, according to a financial statement from the fund on Thursday. Sales increased to 14.3 billion dirhams from 13.6 billion dirhams a year earlier, while higher depreciation and impairments contributed to the slump.
Abu Dhabi, holder of about 6 percent of global oil reserves, is cutting spending, tapping reserves and driving mergers at state-owned companies as it confronts a halving in oil prices over the past two years. The loss mirrors a similar slump at IPIC, which in June said that it had a loss of $2.7 billion last year and that its assets had dropped to $58 billion from $66 billion in 2014.
“The global economic challenges we have faced since the beginning of 2015 persist,” Chief Executive Officer Khaldoon Mubarak said in the statement. “That said, we continue to develop priority sectors and industry champions, in line with Abu Dhabi’s long-term vision.”
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Abu Dhabi is merging two of its largest sovereign funds to create an entity with assets of about $125 billion and debt of about $42 billion. The combination of Mubadala and IPIC will form an asset pool more than twice the size of Russia’s Reserve Fund and with stakes in companies ranging from pipelines and chemicals to microchips and music. Mubadala is charged with making investments that will help diversify Abu Dhabi’s economy from oil.
Mubarak, in an interview earlier this week, gave some insight into the difficult market conditions that the fund has been enduring. “It’s been a very challenging year, and that’s been reflected in the results of many companies,” he said from his office in Abu Dhabi. “The key for me, from a Mubadala perspective, is to ensure we continue to manage through these cyclical times from an economic perspective, manage the portfolio of Mubadala in an effective and efficient way.”