The Dubai-listed contractor Arabtec posted another heavy set of losses for the third quarter of this year as it was forced to write off Dh379 million of previously declared profit on "a number of challenging projects".
The company announced a net loss Dh944.7m in the three months to September 30, compared with a profit of Dh68.7m in the same period last year. Revenue also fell by 24 per cent year-on-year to Dh1.6 billion.
This means that its cumulative loss for the first nine months has reached Dh1.94bn, compared with a profit of Dh309m in the same period last year. Revenue was also 10 per cent lower at Dh5.2bn.
In a statement accompanying its results, Arabtec said that its board “recognises that the regional construction market is currently very challenging, a dynamic that is expected to persist throughout 2015 and possibly into early 2016”.
Arabtec said that it was continuing with a restructuring and cost-reduction programme that had led to annualised savings of Dh95m so far. It added that it would take “further actions expected to further reduce the group’s cost base in 2016”.
The company’s backlog stood at Dh18.7bn at the end of the third quarter, down from Dh20.2bn at the end of the second quarter. Arabtec’s net assets have fallen to Dh3.6bn, down from almost Dh6bn at the beginning of the year.
Sanyalak Manibandhu, a research manager at NBAD Securities in Abu Dhabi, said that the company’s statement “didn’t tell you anything that was new.
“What they need to do is talk to the investment community more.” Mr Manibandhu argued that expectations for the results had been low, and that he believed a process of “kitchen sinking” – identifying all problems and recognising losses – was taking place.
“But the danger is you don’t know how long that process will last,” the research manager said. “Back in the summer, the chairman said that he thought in the fourth quarter there might be a profit. The fact that the loss was deeper tends to make that more possible – in other words, this could be the last phase of kitchen sinking, but nobody can be sure.”
However, Mr Manibandhu expressed some concern about Arabtec’s worsening balance sheet, and what that might mean for the company, particularly in relation to its biggest shareholder, Aabar Investments. Aabar increased its stake in Arabtec last November after purchasing US$1bn worth of shares from Arabtec’s former chief executive, Hasan Ismaik.
“At what point do we worry about Arabtec needing more capital, and is there a danger that there will be a privatising? I don’t think they would do that just yet because when the Aabar buy-back took place, it was a bad experience for everybody.”
According to Dubai Financial Market data, Aabar is the biggest shareholder in Arabtec, with a 36.11 per cent stake. Mr Ismaik is the second-biggest shareholder, with 11.8 per cent.
mfahy@thenational.ae
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