Keep calm and carry on building

Strange though it may seem, paying less attention to financial markets could help the Middle East’s contractors to put themselves back in the black sooner rather than later

COMMENT, Projects, Construction, Contractors, Finance, Financial, Middle east, United Arab Emirates

In this issue of Construction Week, Raja Hani Ghanma gives his first interview since taking over as CEO of Arabtec Construction.

Like many construction firms in the region, UAE-based contracting giant Arabtec has had a tough time of late. Major shareholder, Aabar Investments’ decision to reduce its stake in the company in mid-2014 led to falls in the share price, and prompted the resignation of Arabtec Holding’s then-CEO, Hasan Ismaik. Its financials have struggled to recover ever since. Most recently, the firm posted a quarter-three net loss of $257m (AED495m).

Again, this situation isn’t limited to Arabtec. As the low oil price continues to cast a shadow over GCC economies, publicly-listed contractors across the region are feeling the pinch. But the fact that a behemoth like Arabtec has found itself in difficulty offers a potent reminder to all construction firms that – no matter how swimmingly things are going – hazardous externalities lurk around every corner.

Encouragingly for Arabtec, Ghanma has adopted a no-nonsense approach since taking charge of contracting activities. The CEO says his focus has been to consolidate, and to play to his business’s core strengths. In short, Arabtec’s priority is to build.

And in this respect, the contractor’s credentials are beyond doubt. Arabtec’s current project portfolio includes a plethora of multimillion- and multibillion-dollar megaprojects, from its home turf of the Emirates, across the GCC, and in markets as far afield as Egypt and Kazakhstan. Few contractors – regionally or globally – are building on the same scale as Arabtec.

The prioritisation of core competencies is a sensible tactic for a company on the road to recovery. But – in what is perhaps the most controversial statement of his interview – Ghanma goes one step further, downplaying his interest in share prices.

When quizzed about the company’s financials, he replies: “My focus is not the share price... So the share price goes up or down; it’s not my concern and I don’t even follow it on a daily basis.”

At first, I was taken aback to hear the CEO of such a large contractor talking so candidly about his lack of interest in share prices. But on reflection, I’m in full agreement with the Arabtec chief. Ghanma is an industry veteran with more than three decades of construction experience. What he doesn’t know about contracting, isn’t worth knowing. Put simply, he was appointed as Arabtec’s CEO due to his vast knowledge of building – not economics.

Furthermore, Ghanma’s clarity of vision in concentrating solely on construction represents a valuable lesson for the industry as a whole. When it comes to building – in its purest sense – the stock market is somewhat of a red herring.

Strange though it may seem, Ghanma’s refusal to focus on his company’s financials is likely to spell good news for Arabtec’s shareholders in the longer term. If the CEO looks after the business, the share price should look after itself.

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