Drake & Scull International profits plunged 71 per cent in the fourth quarter of last year, driven lower by a slowdown in the Saudi and UAE property markets.
Net profit for the three months to December fell to Dh13 million from an estimated Dh45m the previous year as the mechanical, electrical and plumbing contractor was hit by payment delays in both countries. Revenue for the quarter remained flat at Dh1.24 billion, the company said.
“In the second half of the year, the entire region experienced unforeseen global economic challenges and uneven geopolitical developments that had a far-reaching effect on the region’s economy,” said Khaldoun Tabari, the chief executive.
“A cautious sentiment in the real estate sector has led developers to become more price-conscious, which has lengthened the project development cycle in all our key markets,” he added. “This has resulted in delays in our collections, which created a slowdown in our revenue generation.
“The impact of this also affected our profitability margins.”
For the full year 2014, DSI reported that net profit fell 40.5 per cent to Dh110m from Dh185m the year before.
Revenue for the year stood at Dh4.83bn, down slightly from Dh4.9bn a year earlier.
Saudi Arabia, which represents 43 per cent of DSI’s business, began a clampdown on illegal workers last year, doubling its costs of employing local workers. The company said that the size of its operations in Saudi Arabia meant that it was forced to strain its liquidity attempting to overcome payment delays.
However, the company forecast an improvement for the year ahead.
"Despite the recent decline in oil prices that has created a cautious economic environment in the Mena region, we remain confident in our ability to refine our efficiencies and deliver improved profitability in 2015. Our strategy of service diversification and integration, as well as our geographic footprint, will help our business model to ride through the current cycle of economic downturn in our region," DSI said.
DSI reported that its order backlog increased 20 per cent during the year to Dh14.4bn from Dh12bn the previous year.
Shares fell 1.09 per cent in trading yesterday to close at Dh0.81 each.
“We are not very pleased with these results, especially on the profitability side,” said Allen Sandeep, the director of research at Naeem Brokerage.
“However, our outlook remains neutral because the company is involved in a couple of large projects in Egypt and Saudi Arabia that, if they take off this year, could completely change the outlook.”
lbarnard@thenational.ae
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