Arabtec net profits shed 66% in 2011 first half

Riad Kamal, CEO of Arabtec Holding, beside the company's most famous project.

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Arabtec Holding saw net profits for the second quarter and six-months both fall by two-thirds respectively, as the company struggles to generate income for projects away from Dubai.

The UAE’s biggest construction conglomerate by market value, which includes its main building arm Arabtec Construction among numerous other subsidiaries, said after tax gains stood at AED 44.5m ($12.1m) for the last three months, down 66.5% from last year. Revenue for the period was AED 1.2bn ($326.7m) from AED 1.28bn ($348.4m) last year, and income from other operating income fell by more than half to AED 7m ($1.90m).

Net profit for the six months fell 67% from AED 301.79m ($82.16m) last year to AED 98.55bn ($26.82m) as revenue declined 13.2% to AED 2.45bn ($667m) over the period.

Arabtec Holding shares fell 6.29% yesterday on the news, closing at AED 1.34.

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The Dubai company has over the last year been trying to expand its services and geographical reach across the Gulf in the wake of the continued slump in the UAE construction markets, primarily in its home emirate. Arabtec Construction has successfully won a string of projects since the start of the year, including the structural and MEP work on two residential towers in Abu Dhabi and design-and-build work on staff accommodation in Fujairah, two awards worth a combined AED 623m ($169.6m).

The company also secured its first major project in Saudi Arabia, the source of many contractors’ new work in the wake of the global financial downturn, along with additional projects for its operations in Bahrain, Egypt and Kuwait.

But Arabtec’s lack of traction in Saudi Arabia has put it behind contracting rivals such as Drake & Scull International, according to Nishit Lakhotia, a senior financial analyst at SICO in Manama.

Arabtec has only one major project in the country, with only 54% of its backlog to come from outside the UAE, only 33% exposure to Saudi Arabia and 30% still rooted in Dubai, he points out in a report, published earlier this year. Further, the company’s decision to form joint ventures with partners across the region is likely to reduce its earnings, the bank said.

Statistics from Arabtec’s financial statement show that its revenue from non-UAE GCC projects rose 32.4% to AED 490m ($133.4m) for the last six months against last year.

The company’s net cash position from operating activities leapt from AED 14.9m ($4.05m) for the six months to AED 409.5m ($111.48m), though its total cash position when factoring financing and investment activity remained steady since last year, down just 1% to AED 634m ($172.6m).