Dubai builder Arabtec to be more selective in taking on work

Saeed Al Mehairbi, the chief executive of Arabtec, said that the company will look to ensure 'new projects deliver appropriate returns and, in turn, long term shareholder value.'

Arabtec announced heavy losses for 2015. Pictured, the Saraya residential towers project on Corniche in Abu Dhabi. Ravindranath K / The National
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The UAE contractor Arabtec is adopting "a more selective approach to project tendering" after posting a preliminary loss of Dh2.3 billion in 2015, which it blamed on a difficult regional construction market and some poorly performing projects.

Saeed Al Mehairbi, the acting chief executive of Arabtec, said that the company will look to ensure “new projects deliver appropriate returns and, in turn, long-term shareholder value” after declaring results that suggest a further quarterly loss at the end of 2015 and a full-year revenue decline of 12 per cent to Dh7.3bn compared to Dh8.3bn in 2014.

Detailed accounts will be published next month, but a comparison with the company’s third-quarter accounts show that losses attributed to the shareholders of the parent reduced to about Dh404 million during the fourth quarter of 2015, which was a 57 per cent quarter-on-quarter drop compared with the Dh945m loss in the three months to the end of September. As a result, its stocks finished 8 per cent up on the Dubai Financial Market yesterday, at Dh1.17 per share.

Mr Al Mehairbi said that 2015 had been “a difficult year for all regional construction companies”, and that it was maintaining a restructuring programme during which many senior figures had left the firm.

The company is also taking a more aggressive approach towards getting paid for work it has carried out. In its statement to the Dubai Financial Market, Arabtec said: “Due to the backdrop, the group is even more focused on maintaining its working capital position and ensuring collection of its receivables. Accordingly, all of the group’s entities are vigorously seeking full recovery of receivables due and, where necessary, enforcing the group’s rights where payments are not made.”

Sanyalak Manibhandu, head of research at NBAD Securities, said that the loss at Arabtec was much higher than its expectations, but that revenues came in ahead of forecasts. He said that the boost in its share price was likely to be only temporary.

Over the course of the year, the company’s net assets dropped by 46 per cent, standing at Dh3.19bn at the end of the year compared to Dh5.96bn at the end of 2014. “They’ve suffered losses for the past five quarters,” said Mr Manibhandu. “If they are going to be a competitor in … the upturn, they are going to need more capital.”

The Burj Khalifa builder has previously tapped capital markets, raising Dh2.4bn in July 2013 through a rights issue.

Last month, Arabtec won a Dh2bn contract from Aldar Properties for 1,017 villas on Yas Island.

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