Dubai duo Arabtec and Drake & Scull cut losses
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