Arabtec announces new joint venture in Saudi

Arabtec, whose contracts include the Burj Dubai, expects to receive $2.6 billion in revenue this year with a net profit margin of around 10%. (Getty I

Dubai’s Arabtec Holdings, the region’s largest listed contractor, has announced the formation of a new joint venture in Saudi Arabia to take advantage of the Kingdom’s continued growth.

Arabtec Saudi Arabia will have a paid up capital of US $40 million (SAR150 million) and is expected to turnover $400 million in its first year and up to $1.3 billion within three years said Arabtec CEO Riad Kamal at a press conference

"This is a natural expansion in our activity in the region," he said.

“We feel that through this alliance, Arabtec Saudi Arabia has the potential of becoming one of the leading construction companies in the Kingdom, especially given the enormous volume of projects announced recently by his Majesty King Abdulla Bin Abdul Aziz Al Saud to be completed over the next few years.”

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The new firm will be 40% owned by Arabtec, with a 35% stake taken by CPC Services, a member of the Saudi Binladin Group, and 20% by Prime International Group Services.

Kamal said the company would immediately start work on a project in Riyadh, but declined to give further details.

Arabtec, the UAE's largest construction firm whose contracts include the Burj Dubai, posted fourth-quarter net profit of about $50.2 million (AED 184.8 million), down from $52.2 million a year before and missing analyst forecasts.

Chief finance officer Ziad Makhzoumi said that the company still expects to receive $2.6 billion in revenue this year with a net profit margin of around 10%.

Meanwhile Kamal said the company's cash position was also "beginning to show very positive results" despite the slump in Dubai’s property sector and tightening liquidity markets.

"The cash situation, the receivables, have been coming in very slow in the last three months but the situation has changed in the last couple of weeks and we are beginning to see some liquidity being pumped into the system," he said, adding Arabtec had received almost all monies due up to December last year.

"We've been promised that the flow will continue for our receivables in the coming few weeks and months," he said.

The company has a backlog of projects worth $10.6 billion, including $2.7 billion for a tower project in St Petersburg in Russia, which is awaiting final approval by the board of Gazprom and is expected soon, Kamal said.

Dubai residential real estate prices have fallen by an average of 25% since a peak in September, Morgan Stanley said last month, adding some $263 billion of projects had been cancelled or put on hold in the UAE.

The company has laid off 250 employees of 5,000 working in administration as a result of the financial crisis but has not cut jobs of those working in the labour sector, said Kamal.