In the first six months of 2015, reputed Dubai contractor firm Arabtec incurred Dh1.3 billion net losses. Compared to their whopping profit of Dh265m last year, this has come as a great shock to many of the company’s shareholders, investors and partners.
Not only that, the company has also reported further Dh996.4m losses for the second quarter of the year 2015, whereas back in 2014 they were performing well with a profit of Dh113.5m. In the press release, the reason behind such financial pitfalls has been stated as “a number of poorly-performed projects” on their part.
In the share markets, Arabtec’s shares went down to a 4.9 percent.
In response to their overwhelming legacy issues, Arabtec has been undergoing certain corrective reforms. The company has already bid goodbye to some high ranking officials of their management team, including Iyad Abdul Rahim-ex Chief Finance Officer, Yazan Hatamleh- ex Administrative Officer, Chief of HR and Wassel Al Fakhoury- former General Counsel. All these high profile departures took place last month.
It has also been found in the notes to accounts that Arabtec posted huge losses before disposing of its Saudi Arabian ventures. Some of these companies include Arabtec Construction Machinery, Efeco Saudi Arabia, Austrian-Arabian ReadyMix, and not to mention, Arabtec Saudi Arabia itself; these ventures were to face a potential sale.
The fate of these companies has ended up being classified as ‘discontinued operations’ under Arabtec’s latest accounting rules. Since June, the company has gotten itself negative revenues amounting to Dh149.8m in the period of three months.
However, Arabtec promises benefits due to its massive overhaul, which would begin taking effect in its performance in Q4 2015 and continuing into 2016 at a reduced cost-base. Its ‘healthy backlog’ of Dh20.2bn ensures highest quality and on-time project delivery.
Mohamed Al Rumaithi, Chairman of Arabtec says that this process of restructuring, changes in management and undertaking of conservative company policy is an indication that the company is on the right track. This will enable Arabtec to face the challenges of the current industry and regain its leading position.
Seeing the recent developments as a ‘negative read’ in the three quarters of sorry figures, Research Director of Arqaam Capital investment bank Dubai believes that slow execution and cost proliferation have had heavy impact on P&L. The changes in company structure will bear fruit, albeit taking time to regain its trust in the market.
Seeing the gradual downfall of Drake and Scull this month, the financial expert added that market conditions for contracting firms remains very difficult.
The sector income and cash flow will continue to be pressurized by the current macro environment in the industry, he opined.