Arabtec swings to third quarter loss on lower revenue

Company cites delays in handing over legacy projects and tough real estate market as factors in its results

Arabtec Construction won a major contract from Emaar Misr to build a residential project on the north coast of Egypt. Jeffrey E Biteng / The National
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Contractor Arabtec swung to a loss of more than Dh400m in the third quarter of 2019 as revenue declined.

The company declared a loss of Dh437.4m in the three months ending September 30, compared to a Dh67m profit in the same period last year.

Revenue during the quarter fell 31 per cent to Dh1.62bn, and it declared a Dh47.8m loss relating to Duba-based fitout contractor Depa - an associate firm which declared a Dh200.8m loss in the first six months of 2019.

The company also cited delays in handing over legacy projects, a continued decline in the real estate sector and challenges in securing project funding, with liquidity in the construction market remaining tight.

“We are disappointed with the Group performance during the third quarter 2019," group chief executive Peter Pollard said in a statement accompanying its results, adding that it is currently handling over a series of legacy projects which should reduce future risks.

"Additionally, we have focused on stabilising the construction business by reorganising the management team, cost optimisation, rationalising our workforce, enhancing corporate governance, implementing initiatives to strengthen the balance sheet and diversifying our backlog towards industrial and infrastructure projects," he added.

Arabtec is the biggest publicly-listed contractor in the UAE, with total assets of more than Dh10.8bn and net equity of about Dh1.19bn. The company has been involved in the construction of many of the UAE's most iconic projects, including Dubai's Burj Khalifa and the Louvre Abu Dhabi. It employs more than 45,000 staff and had a backlog at September 30 of Dh13.5bn.

The company won two major infrastructure and industrial projects during the period, and five construction contracts including a deal at the Expo 2020 site and a contract at the Uptown Cairo project.

It also said in its statement that it had managed to reduce debt by Dh341m during the quarter, and said it "continues to rightsize its workforce reducing manpower and support functions" as part of a drive to reduce costs and improve productivity.

Arabtec recorded a Dh379.5m loss for the first nine months of the year, compared to a Dh180.5m profit for the same period a year earlier. Revenue during the nine-month period dropped 18 per cent to Dh5.83bn.

In September, the company confirmed it was in exploratory merger talks with Abu Dhabi-based construction group Trojan Holding, which is part of the Royal Group conglomerate. Last month, it hired UBS as a financial adviser to work on a "preliminary evaluation" of a potential deal.