• 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
Project Country Contract value ($m) Main contractors
Bahrain Bay HQ Bahrain 60 Arabtec Construction
St Regis Amman Jordan 197 Arabtec Construction
Bab Bahr and Manara Jordan 80 CCC / Drake & Scull / Arabtec
Westin Aqaba Jordan 110 CCC / Drake & Scull / Arabtec
Red Sea Astrarium Jordan 1,550 Arabtec Construction
Jumeirah Al-Qalaa and Qasr al-Aqaba Jordan 350 CCC / Drake & Scull / Arabtec
Sabah al-Salem University Kuwait 429 Arabtec / Combined Group
Twin Towers Doha Qatar 190 Arabtec Construction
Msheireb Phase 2 Qatar 631 Arabtec Construction
Msheireb Phase 2 Boutique Hotel Qatar 70 Arabtec Construction
Al-Waab City Phase 3 Qatar 50 Arabtec Construction
Al-Waab City Phase 4 Qatar 50 Arabtec Construction
380 Aramco Villas Saudi Arabia 283 Arabtec Construction
Al-Ain Hospital UAE 1,170 Arabtec / San Jose
Fairmont Hotel Abu Dhabi UAE 270 Arabtec Construction
Midfield Terminal Building UAE 2,960 Arabtec / TAV/CCC
Louvre- Abu Dhabi UAE 653 Arabtec / San Jose / Oger
Maysan Towers UAE 120 Arabtec Construction
Reem Island Mosque UAE 8 Arabtec Construction
Najmat Abu Dhabi UAE 81 Arabtec Construction
Views Saraya UAE 170 Arabtec Construction
Dubai International airport Terminal 2 UAE 153 Arabtec Construction
Palazzo Versace Hotel UAE 626 Arabtec Construction
Sanctuary Falls UAE 112 Arabtec Construction
Damac Heights UAE 150 Arabtec Construction
P-17 Tower UAE 193 Arabtec Construction
Barsha Drainage UAE 15 Arabtec Construction
Lillian Tower UAE 221 Arabtec Construction
Palma Villas UAE 46 Arabtec Construction
Tiara Hotel UAE 53 Arabtec Construction
Mira Community UAE 338 Arabtec Construction
Total   11,389  
Source: MEED Projects

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