Dubai duo Arabtec and Drake & Scull cut losses

Kuwait Times - - BUSINESS -

Two of Dubai’s largest con­struc­tion con­trac­tors, Arabtec Hold­ing and Drake & Scull (DSI), re­ported nar­row­ing third-quar­ter net losses yes­ter­day af­ter cut­ting costs amid a re­gional slow­down in in­fra­struc­ture projects. Con­struc­tion com­pa­nies have been strug­gling with a dif­fi­cult in­dus­try en­vi­ron­ment as Gulf economies slow and gov­ern­ments re­strain spend­ing be­cause of low oil prices, lead­ing to projects be­ing halted and pay­ments be­ing de­layed.

In a sign of con­tin­u­ing pres­sures, Drake & Scull said it ap­pointed a fi­nan­cial ad­viser in the third quar­ter to as­sist in a num­ber of busi­ness trans­for­ma­tion and strate­gic ini­tia­tives. The uniden­ti­fied ad­viser would help DSI to ad­dress “chal­lenges the group is fac­ing in its key mar­kets”, Chief Fi­nan­cial Of­fi­cer Kailash Sadangi said in a bourse state­ment.

Re­cently ap­pointed Chief Ex­ec­u­tive Wael Allan said the com­pany has be­gun a fi­nan­cial re­view of the busi­ness and that it could “ne­ces­si­tate dif­fi­cult ex­ec­u­tive de­ci­sions”. These could in­clude a with­drawal from non-core mar­kets, re­trench­ing on civil works in Saudi Ara­bia and a more con­ser­va­tive stance on re­cov­er­ing cer­tain re­ceiv­ables. DSI has made sig­nif­i­cant pro­vi­sions in re­cent quar­ters for non-pay­ment of dues, in­clud­ing a large im­pair­ment on its Saudi busi­ness in the third quar­ter of last year.

This has weighed on its prof­itabil­ity, with the com­pany re­port­ing wors­en­ing earn­ings in nine of the pre­ced­ing ten quar­ters. By not re­peat­ing the large Saudi im­pair­ment from a year ear­lier, as well as dou­bling its con­tract rev­enue to 868.5 mil­lion dirhams ($236.5 mil­lion) and con­tin­u­ing its “re­lent­less” cost-cut­ting pro­gram, the com­pany man­aged to ar­rest some of the dam­age in the three months to Sept 30. DSI made a 46.3 mil­lion dirham net at­trib­ut­able loss in the quar­ter, com­pared with 877.8 mil­lion dirhams a year ago and an EFG Her­mes fore­cast for a quar­terly net loss of 56.41 mil­lion dirhams. —Reuters

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