MEED: How does Arabtec view the current contracting market in the region?
Riad Kamal: The emphasis or focus of construction has shifted from Dubai to Abu Dhabi, Saudi Arabia, and to some extent to Qatar. There is also an extensive and busy market in Libya, Algeria and Egypt. There will be plenty of opportunities in these markets and in other African countries for companies who are prepared to be adventurous and take a little risk.
How has Arabtec’s profitability held up?
Arabtec’s profitability [the holding group as well as the construction group] has, like most other contracting groups operating in this area [the UAE], suffered slightly in the past year due to projects being put on hold, stopped or even cancelled, thereby affecting turnover and profits. We have also had to make some provisions for receivables, but we may be able to reverse this as the market begins to improve.
Do you see a revival in construction activity in the UAE?
Construction activity is still considerable in Abu Dhabi, which has plans for a large number of projects and developments, which will certainly go ahead and keep the market busy for many years to come. Dubai may be experiencing a downturn at the moment, but if they continue to resolve the financial issues, then we expect projects currently on hold or even temporarily stopped to start again and be completed soon. However, construction activity will be limited beyond this.
Do you expect to expand overseas, and which markets will top the list?
Arabtec companies are already expanding overseas and are operational in Saudi Arabia, Qatar, Pakistan, Russia, Syria and Jordan. We expect to continue to grow in these countries, in particular Saudi Arabia, Qatar and Syria. We plan to open a presence soon in Angola, Africa and possibly Libya, Algeria and Egypt, where we are having serious discussions at present, and have been tendering some projects. If we achieve even half of these possibilities, we will have achieved significant growth and be extremely busy.
What kind of strategic partnerships have you formed with other firms?
International contracting companies form joint ventures to work in the UAE. The same principle is being adopted in countries such as Saudi Arabia and Qatar. We are also engaging in mutual agreements to further our growth into other countries. In most cases, this is considered essential to our growth plans.
Do you expect conditions to improve in 2010-11? How does your order backlog look?
We do expect conditions to improve in 2011 due to Arabtec having diversified outside Dubai. Revenues from operations in other countries will kick in significantly next year and we expect this to improve turnover and profitability, although margins have become a little tighter. Our order backlog is becoming healthier by the week with new awards in Abu Dhabi and Qatar and even one in Dubai.
We expect to be awarded some big projects in Saudi Arabia and Abu Dhabi in the future. Considering the negative impact from the global crisis on the Dubai market, we believe that our profits for 2009 have been outstanding, to say the least.
How have you coped with the property downturn over the past couple of years? Will you make furtherprovisioning?
The property downturn in Dubai has resulted in projects being put on hold, or even cancelled so our focus was shifted fairly quickly to markets such as Abu Dhabi, Saudi Arabia, Qatar and Syria, where there is more of an upturn in the property market. We therefore look forward to having an increased turnover this year.
With the recent debt restructuring announcements from Dubai World and Nakheel, we are quite optimistic and expect similar positive developments with other government entities. Therefore, we hope that making further provisions will not be necessary and indeed that we may be able to reverse all the provision made last year for doubtful receivables.
What are the key components of Arabtec’s success?
The key components are Arabtec’s organisational capability, keen competitive procurement, adaptability and incorporating the latest technology into its projects to ensure quick safe, competitive projects delivered on time and within budgets.