Arabtec’s profitability has taken a hit over the past year like other contractors in the UAE. The group reported a 48 per cent decline in net income to AED495m for 2009, although it plans to reverse this year. The firm’s recent performance indicator has been positive. Arabtec managed a 26 per cent quarter-on-quarter increase in revenues in the last quarter of 2009 to AED2.09bn.

However, Arabtec’s future performance will depend on its ability to grow outside Dubai,  which has been hit hardest by the regional property downturn. Despite aggressive expansion plans in Saudi Arabia, Qatar and other parts of Middle East and North Africa (and beyond), the company’s revenue streams are still mostly centred on Dubai’s real estate and infrastructure development.

Government and semi-government entities comprise about 61 per cent of Arabtec’s total Dubai exposure, an increase of 10 per cent over 2008, according to a 4 March research note by Bahrain-based Sico Research. Analysts have expressed concern whether the firm can build up its overseas portfolio to a sizeable level to compensate for the weakness on its home turf.

Arabtec had weak project backlog of $3.6bn due to a contract cancellation in Dubai and a lower scope of works in Qatar and Saudi Arabia, according to Germany’s Deutsche Bank in a 14 March research note. The backlog fell short of the firm’s $4.8bn expectation.

Receivables are also a problem for the company. Lack of payment has forced Arabtec to halt work on one of Dubai developer Nakheel’s largest housing projects this year. In March, Arabtec reported $2.5bn in late payments. According to Sico, provisioning of AED294m in 2009 – an increase on the AED5m in 2008 – may not be sufficient to cover risks of bad debts on its receivables.

However, the company has made a strong start to 2010, with a slew of new contract awards. The UAE-based Shuaa Capital reports Arabtec won about $462.8m worth of contracts during the first quarter, which equates to 35 per cent of its full-year 2010 expectations.

Over the long-term, Arabtec’s positioning as a global contractor with a specialisation in high-rise projects may help deliver some big contract awards. In 2008, it won a AED10bn contract to build the Okhta Centre in St Petersburg, for Russian oil refiner Gazprom Neft. If it can win similar major deals overseas, it may be able to compensate for slump in revenues in Dubai.