Recovery Report, Part 1: Money talks

Ziad Makhzoumi: Arabtec's chief financial officer says management needs to be more dynamic.
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Moving forward
With many new projects and government investment schemes this year, from Saudi Arabia and Azerbaijan to north African states such as Egypt and Libya, 2010 is no time for contractors to give up.

Irrespective of being the largest construction contractor in the UAE, Arabtec is also going through some challenging times. The company’s most recent financial results for Q2 2010 for example, showed a 23% fall in after-tax profits from AED393.3 million for the same quarter last year to AED301.7 million in 2010.

That said, the company continues to surge ahead, committed both to diversifying its markets and taking a somewhat strategic approach to cash management.

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Likewise, Walsh explains that ALEC is focusing on new sectors, and on reinforcing win-win relationships with stakeholders, suppliers and subcontractors, as well as financial institutions.

“I believe we face a recession which is expected to be severe and prolonged, combined with exceptional stress in the financial system,” says Makhzoumi. “Even as funding opportunities begin to re-emerge, it will be essential to maintain financial strength and independence, and to keep tight control of finances.”

Among his many tips for struggling companies, this year, Makhzoumi advises that all contractors make it their focus to understand how refinancing needs to evolve, and that they develop contingency plans to prepare for future funding gaps.

He also suggests that firms manage their company receivables effectively so as to limit expensive and increasingly risky trade credit, and implement strict spending controls internally with a view to improving their financial strength during rocky economic times. He maintains that there needs to be a shift to a more dynamic management approach in a more complex and unpredictable environment.

“This should include restructuring balance sheets, business models and overall business strategies. At the same time, it is important to remember that the mid- and long-term implications of these measures need to be evaluated, especially because the current climate offers the chance to pursue capital investment opportunities at a lower than normal cost.”