Drake & Scull profit plunges 93 per cent amid higher costs

Contractor's third-quarter profit falls to just Dh3.9m, as the Dubai firm is hit hard by higher costs and falling contract revenue.

Drake & Scull International's third-quarter profit plunged by 93 per cent due to higher costs and falling revenues, the firm said yesterday.

Dubai’s second biggest contractor, which specialises in mechanical engineering and plumbing operations, said profits fell to Dh3.9m (US$1m) during the three months to September, down from Dh57.5m during the same period last year. The results missed analysts’ forecasts that generally predicted third-quarter profits for the company of about Dh40.6m.

In a statement to the Dubai Financial Market, DSI said revenues from contracts for the three-month period fell to Dh622.8m, a 26.5 per cent decline from last year.

At the same time the company said general and administrative expenses increased to Dh81.5m, up 15 per cent from a year ago.

For the first nine months of the year, DSI said profits had slumped 56 per cent from Dh154.7m last year to Dh67.6m as contract revenues fell from Dh2.2bn to Dh2.1bn.

Earlier this year, DSI blamed lower productivity and exposure to the euro for disappointing second-quarter profits that slumped to Dh26.1m from Dh51.3m a year earlier.

The company has been expanding its operations from the UAE into other GCC nations, especially Saudi Arabia. “The [third quarter] results reflect an overall slowdown in the construction sector in the region,” said Osama Hamdan, DSI’s chief financial officer.

“Productivity rates dropped across all our projects in the GCC and Africa.

“The procurement cycle in our operations dipped as a result of the summer holiday season, thereby impacting the overall profitability. The company also extended its contract provisioning in the third quarter.”

Last week, DSI announced that it had agreed to a five-year $120m loan deal with a syndicate of banks – including First Gulf Bank and HSBC Middle East – which it said would fund overseas growth.

The announcement followed news that DSI had been awarded three new contracts worth a total of Dh318.5m to complete works on two schemes in Abu Dhabi and one in Taif, Saudi Arabia.