Arabtec posts loss despite stable revenues

13 May 2015

UAE contractor records losses in first quarter of this year

  • Arabtec confirms losses of AED278.9m
  • Total revenues remained stable at AED1.8bn
  • The first four months of this year saw the second-lowest level of contract awards in the Middle East’s construction sector since 2008

UAE contractor Arabtec Holding has recorded a dip in profits in the first quarter of 2015, as its difficult year continues.

The company confirmed first quarter losses of AED278.9m, compared to a net profit of AED137.9m in the same period last year. Revenues remained stable at AED1.8bn compared with the same period last year. Arabtec has now lost month two quarters in a row.

Arabtec attributed the loss to the changing landscape of the region’s GCC construction market. Commenting on the results, the company’s new chairman, Mohamed Thani al-Rumaithi, said: “the construction sector in general and Arabtec in particular are affected by low returns from commercial positions accrued on its projects with developers, which has prompted us to adopt a more conservative policy in announcing our projects’ profits and issuing our financial results.”

The company has seen several leadership changes in the past year. Al-Rumaithi was elected chairman earlier this month, taking over from Khadem al-Qubaisi, who was not included in the list of board nominees released on 15 April. The company’s founder Riad Kamal was also left off the list. Al-Rumaithi is also chairman of local Unilever arm Thani Murshid Unilever, National Marine Dredging and Abu Dhabi Chamber of Commerce & Industry.

In late March, Arabtec Construction changed CEO, appointing Raja Ghanma into the position. Ghanma previously served as the firm’s chief operating officer (COO) and has been with Arabtec since 1995.

The CEO position has changed several times in recent years. On 18 June 2014, Hasan Abdullah Ismaik resigned as CEO when Arabtec’s share price fell from a high of AED9.9 ($2.7) on 7 May to close at AED4.4 on 17 June. Ismaik had been driving an ambitious strategy to turn Arabtec into one of the 10 largest construction companies in the world by 2018.

Hasan Abdullah Ismaik, Arabtec Holding

Hasan Abdullah Ismaik

Since Ismaik’s departure much of this strategy appears to have been abandoned. The company has retrenched senior executives and a limited number of staff to boost productivity and reduce costs after it posted a loss of AED94.4m ($25.7m) in the fourth quarter of 2014.

Arabtec’s poor performance has also come at a time where the GCC construction sector is facing troubling times, with increasing costs, ailing confidence due to falling oil prices and low contract awards.  

The first four months of this year saw the second-lowest level of contract awards in the Middle East’s construction sector since 2008, as the impact of low oil prices is felt in the industry. While work under way or where financing was in place has largely continued unaffected this year, the region is experiencing a fall in new contract awards.

This impact is expected to continue throughout the year. Contract awards for work either directly or indirectly associated with the Expo 2020 in Dubai or the 2022 Fifa World Cup in Qatar are expected to still happen. But awards for projects that are not considered strategically important could slow down or stop.

Arabtec projects in Middle East
ProjectCountryContract value ($m)Main contractors
Bahrain Bay HQBahrain60Arabtec Construction
St Regis AmmanJordan197Arabtec Construction
Bab Bahr and ManaraJordan80CCC / Drake & Scull / Arabtec
Westin AqabaJordan110CCC / Drake & Scull / Arabtec
Red Sea AstrariumJordan1,550Arabtec Construction
Jumeirah Al-Qalaa and Qasr al-AqabaJordan350CCC / Drake & Scull / Arabtec
Sabah al-Salem UniversityKuwait429Arabtec / Combined Group
Twin Towers DohaQatar190Arabtec Construction
Msheireb Phase 2Qatar631Arabtec Construction
Msheireb Phase 2 Boutique HotelQatar70Arabtec Construction
Al-Waab City Phase 3Qatar50Arabtec Construction
Al-Waab City Phase 4Qatar50Arabtec Construction
380 Aramco VillasSaudi Arabia283Arabtec Construction
Al-Ain HospitalUAE1,170Arabtec / San Jose
Fairmont Hotel Abu DhabiUAE270Arabtec Construction
Midfield Terminal BuildingUAE2,960Arabtec / TAV/CCC
Louvre- Abu DhabiUAE653Arabtec / San Jose / Oger
Maysan TowersUAE120Arabtec Construction
Reem Island MosqueUAE8Arabtec Construction
Najmat Abu DhabiUAE81Arabtec Construction
Views SarayaUAE170Arabtec Construction
Dubai International airport Terminal 2UAE153Arabtec Construction
Palazzo Versace HotelUAE626Arabtec Construction
Sanctuary FallsUAE112Arabtec Construction
Damac HeightsUAE150Arabtec Construction
P-17 TowerUAE193Arabtec Construction
Barsha DrainageUAE15Arabtec Construction
Lillian TowerUAE221Arabtec Construction
Palma VillasUAE46Arabtec Construction
Tiara HotelUAE53Arabtec Construction
Mira CommunityUAE338Arabtec Construction
Total 11,389 
Source: MEED Projects

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