Drake & Scull reports 38% drop in H1 profit
Firm blames delays in receiving revenues at Saudi projects for fall
Dubai-based contractor Drake & Scull reported a 37.6% drop in net profits for the first half of 2014 to $19.5mn (AED71.7mn) as revenues dropped by 8.3% to $640.6mn (AED2.35bn).
The company blamed the decline on the lower contribution from its general contracting arm, and said that this was due mainly to operational delays in the Kingdom of Saudi Arabia, where it is working on construction of the Jabal Omar Development Project in Makkah, among others.
Total revenues from the Kingdom dropped by 17% to $310mn (AED1.14bn). Revenues in Iraq also fell by 29.4% to $40.8mn as its work on the Zubair Field contract in southern Iraq draws to a close.
Despite this, the company said that its oil & gas business was contributing to its increased project pipeline following the award of a $600mn contract in May this year of a contract to build a petrochemicals project at Tahrir by the entrance to the Red Sea.
This has helped to swell its order book by 21.7% year-on-year to nearly $3.9bn.
Drake & Scull's chief financial officer Mukhtar Safi said: “Our revenue growth was slightly hindered and our profitability dropped year on year due to the delays on our major projects in KSA. We incurred significant cost overruns in the General Contracting business in Q1 and Q2 which affected operational margins and our bottom line.
"However, these costs are covered by large claims which we expect our clients to approve towards the end of this year, to early next year."
He added that he expected productivity to be stagnant during the third quarter due to a slowdown during the summer months and the holy month of Ramadan.
"Partial recovery of liquidity, operational and profitability margins is expected to materialise by end of the year as the major projects in the Engineering and General Contracting businesses pick up momentum from Q4 2014 and Q1 2015 onwards.”