Al Hassan net rises 13% on contract boost

Al Hassan's combination of EPC deals and partnerships has boosted income.

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Al Hassan Engineering, the Omani contractor, saw a rise in contract income help boost the company’s net profit for 2010, despite the intensifying competition in the country for project work.

The EPC contractor, which focuses on oil and gas, utilities and infrastructure projects in the Sultanate, said contract income rose 11.39 % to OR 60.1 million from OR 53.9 million a year before. Net profit before tax rose 13% to OR 3.4 million, though a one-off payment of tax incurred in 2000 reduced overall net profits to OR 2.67 million, still higher 1% than the previous year.

Despite increased pressure on selling prices brought about by increased levels of competition and general overall cost increases, by adopting various cost saving initiatives, gross margin continued to improve throughout the year,” said Hassan Bin Ali Salman, chairman, told investors in a statement on the Oman Securities Market.

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Salman said the company could expect to see further growth from the non-oil and gas sectors due to increased business confidence in the country, despite the rise in contractors from the neighbouring countries clambering for contracts in the country. The company will focus on EPC contracts

“Coupled with this, the relatively open market in Oman has attracted many additional international players to participate in already strongly competitive market,” he said, warning investors that 2011 would be a difficult year, with the company to focus on EPC contracts whether as the sole engineer or in a joint venture.

The Oman government has sought to diversify its revenue away from oil, leaving many opportunities in the industrial and infrastructure sectors.

Last year the company completed work on the Salalah Methanol project and the Burham West and Harmal field development, the latter completed four months ahead of schedule.

It currently has work in water and waste water projects as well as an EPC contract for Petroleum Development Oman (PDO) on the 260 MW Amal power plant and the civil and other work for PDO’s gas compression facility under construction at its Kauther site, a project built by Petrofac.

Al Hassan, based in Wadi Kabir in Muscat, won four major projects last year including construction work on the Depletion Compression project at Saih Nihayda delegated to the company by main contractor GS Engineering & Contracting. It will also work with the Korean firm on the construction of an independent power project at Barka, a power transmission system for Occidental Mukhaizna LLC, as well as civil and building work to expand the GASCO Gas Processing facility at Asab.

The company’s profit after tax is looking to climb back to the OR 2.867 million posted in 2006, which has dipped since until last year’s results. Salman said the company is also eyeing developments in the renewable energy, nuclear energy and railway sectors.

The results reflect similar rises in net income for the company for the first nine months of 2010. After-tax gains reach OR1.7 million, up 13% against the OR1.5 million posted last year. Contract income reached OR39.3 million, up 6.3% from OR37 million.

The company has seen renewed support from analysts. Kanaga Sundar at Gulf Baader Capital Markets recommended an “accumulate” position on 16th February; an improvement on the “hold” position taken by Vishal Gupta at Bank Muscat on 31st October 2010 and the “neutral position taken by Ahmed Gad of EFG Hermes on 26th May 2010.