Galfar posts US$3.58m first quarter net profit

Engineer sees income roll in as further focus falls on Indian projects

The company will compete for oil-related projects among others, says chairman.
The company will compete for oil-related projects among others, says chairman.

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Galfar Engineering & Congtracting said it made $3.58m (OR 1.38m) in net profit for the first quarter to reverse the $2.19m (OR 844,000) loss incurred in the same period last year, as projects reach completion and new contracts and income roll in.

The Omani contractor said total revenues for the period reached $206.47m (OR79.5m), down 11% against the same period last year. But its gross profit more than doubled to $12.98m (OR 5m) against $6.15m (OR 2.37m) and its operating profit was more than ten times that of last year, at $7.27m (OR2.8m) compared with $631,119 (OR243,000).

The company competes for contracts primarily in the oil and gas and infrastructure sectors, often as an EPC contractor, including rail, road, ports and airports as well as hotels and hospitals. It has an order book of $1.55bn (OR 600m), according to the directors in a statement to investors.

The company won five major jobs in the first quarter this year, including upgrade works for substations at Mudhaibi, Rustaq and Iski. “All of the ... projects have been secured with reasonable margins as dictated by the vibrant market situation,” said Sheikh Salem Said Hamed Al Fannah Al Araimi, chairman. “We expect these to yield good results in the forth coming periods.”

The rise in operational profit comes on the back of completed projects, such as the Indore-Ujjain road, its first in India.

The subcontinent has developed as a key area of focus for the company. Galfar India PvT, a wholly owned subsidiary, is soon to tender for some of the mega projects estimated at around $1.298bn (OR 500m) in the country. A consortium of Galfar and associates has started work on the Ghaziabad-Aligarh road project, and the company has also taken over the operation and maintenance of the Chandikole-Bhubaneshwar project.

“With various projects which are already tendered and likely to be tendered, we expect to consolidate and maintain our market position, and are poised for better performance and financial results during the second and subsequent quarters of the year 2011,” added Al Araimi.

The analyst team at TAIB Securities had revised upwards its forecast for Galfar'contract income at the start of the year 6.7%, to $974.7m (OR375.31m).

"Our top-line forecast for Galfar is subject to timely completion of projects. Any delay or cancellation of projects will impact our revenue and net income estimates and may call for a revision of our rating," the team said on the back of Galfar's first quarter project wins.

The company is still expecting to receive $479.1m (OR184.5m) in contract income and trade receivables, up from $436.58m (OR 168.1m) the previous year. Inventories have jumped from $44.93 (OR 17.3m) to $73.7m (OR 28.4m).

Shares remained static at the end of Thursday at O 0.454. Vijay Sridharan, an analyst at Gulf Baader Capital Markets, kept a ‘neutral’ position on the company prior to the release of the results.
 

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