Dubai construction companies post heavy losses

16 November 2015

Prospects for the region’s construction market continue to deteriorate

  • Arabtec and Drake & Scull post heavy losses in third quarter
  • Revenues decline as prospects for regional construction sector deteriorate
  • Value of contract awards has slowed during 2015

Dubai’s two main listed construction companies, Arabtec Holding and Drake & Scull International, have posted substantial loses for the third quarter of this year as the prospects for the region’s construction market continue to deteriorate.

Arabtec recorded net losses of AED617m ($168m) from continuing operations, compared with a gross profit of AED269m in the third quarter of 2014.

The company also recorded a revenue contraction of 24 per cent in the third quarter this year compared with the same period in 2014, according to a statement released on the Dubai Financial Market (DFM).

The Dubai-listed construction firm, which has experienced major restructuring and management challenges over the past 18 months, said its revenues in the third quarter of this year sat at AED1.6bn ($435m) compared with AED2.1bn in 2014.

The statement also said Arabtec has adopted a more conservative approach in terms of recognising revenues, costs and profit, and that the benefits of its restructuring programme will “further reduce the group’s cost base in 2016”.

DSI has reported net losses of AED985m ($268m) for the third quarter of this year compared to a net profit of AED21.37m ($5.81m) for the same period in 2014.

DSI said its first quarterly loss of the year was mainly due to one-off provisions and revenue adjustments in the “current challenging market conditions.”

The company also said its revenue for the first nine months fell to AED2.83bn ($770m) from last year’s AED3.6bn ($979m).

“The decline is due to the more conservative approach to revenue recognition and to adjustments for uncertified variations orders and disputed extensions of time claims,” said a company statement.

The statement added that DSI plans to sell its non-core assets to generate cash and boost liquidity.

The Dubai said that the current “challenging macro-economic environment; characterised by weaker oil prices, a slowdown in the construction sector and a more competitive landscape” had caused developers and clients to defer payments and delay projects across DSI’s major markets.

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