The construction giant Arabtec slipped into a substantial Dh2.3 billion loss for 2015 (against a net profit of Dh215 million in 2014), while revenues suffered a 12 per cent erosion to Dh7.3 billion amid difficult trading circumstances for the industry. The loss per share was 51 fils as against an earnings of 5 fils in 2014.
But the company said its medium-term outlook remains positive, given recent project awards totalling Dh6.1 billion — which includes one in January from Aldar Properties for Dh2 billion for 1,017 villas — and a backlog of Dh19.3 billion. Another major win was a $1.1 billion (Dh4 billion) letter of intent from Bahrain’s Ministry of Transportation and Telecommunication for the main works related to the modernising of the international airport in the Gulf state. This deal will be done in association with TAV Construction. Also, its EPC subsidiary Target Engineering managed to pick up multiple contracts with a combined value of Dh1.1 billion plus last year.
The project pipeline seems to have boosted investor interest in the scrip, which was up 3.7 per cent to Dh1.12 on Sunday. It was also the top trading stock on DFM, accounting for a near 20 per cent of the volumes. The Arabtec share’s 52-week low was 93 fils.
Last year was “difficult for all regional construction companies and given the uncertain economic backdrop,” said Saeed Al Mehairbi, the acting CEO. “In light of this environment, we are very pleased of our bright start to the year with recent project awards that demonstrate clients’ faith in our project execution expertise.”
Annualised cost savings
Apart from the new wins, the company will continue to look within to raise efficiencies wherever it can, in a continuation of a process that began more than a year ago. It confirmed that the restructuring — already well into the process — and cost reduction programme will continue.
“The company is seeking to reduce its cost base even further in 2016 in addition to the annualised cost savings previously announced.”
The dominant focus will be on maintaining the “working capital position and ensuring collection of receivables”.
To this end, all group entities are pursuing “full recovery” of receivables due. And in a stark message to the marketplace, it said that where necessary, Arabtec will work to “enforcing” its rights where payments have not been made.
“The management and Board continue to appropriately assess the recoverability of the group’s receivables in the current difficult economic situation,” it said in a statement.
According to Al Mehairbi, “The company’s continuing cost reduction programme is ensuring the operations are suitably lean without affecting our client service. In addition, the group is executing a more selective approach to project tendering, ensuring new projects deliver appropriate returns.”
One detail that investors were keenly looking to has not been spelt out. This relates to the company’s possible involvement in major works on behalf of the Egyptian Government.
By Manoj Nair
