Face to Face: Raja Ghanma, Arabtec Construction
CEO of Arabtec Construction, Raja Hani Ghanma insists if contractors focus on core strengths, the share price will look after itself
Raja Hani Ghanma is no stranger to the Middle East’s construction sector. He boasts 35 years’ industry experience and has enjoyed over two decades of employment – at increasingly senior levels – with UAE-based contracting giant, Arabtec.
With a curriculum vitae this strong, it should come as no surprise to learn that in April 2015, Ghanma received a promotion, leaving his position as chief operating officer for that of chief executive officer at Arabtec Construction. A sensible appointment for a senior role; nothing unusual to see here.
Altogether more unusual, however, was the set of circumstances in which Ghanma assumed his new responsibilities. His appointment followed a series of high-level – and high-profile – departures at the contractor. The decision of major shareholder Aabar Investments to reduce its stake in Arabtec in 2014 precipitated a fall in the firm’s share price, and prompted the resignation of former Arabtec Holding CEO, Hasan Ismaik.
It’s safe to assume that taking charge of Arabtec at such a tumultuous juncture required Ghanma to demonstrate nerves of steel – and to draw on every last bit of his vast experience.
Yet when Ghanma himself recalls his appointment in conversation with Construction Week, he makes the matter sound reassuringly straightforward.
“When I took over, my mandate was to go back and focus on our core business,” he explains. “Arabtec is a first-class contractor, as you well know. It is renowned for quality buildings and I could point to a lot of local landmarks that bear witness to that fact.
“I am now six months into the role [as CEO]. We are consolidating, focusing on what we do best, and I think we are on the right track,” he adds.
With the regional real estate market in good health, and sustained levels of infrastructure investment, Ghanma says that Arabtec has plenty of megaprojects to focus on. The company is currently working on the prestigious Louvre Abu Dhabi, for example. In 2013, the construction contract for the development was awarded to an Arabtec-led joint venture involving Constructora San Jose and Oger Abu Dhabi.
“We are proud to be involved with such a [challenging] project,” says Ghanma. “It is progressing well and is on track.”
Abu Dhabi International Airport’s Midfield Terminal represents another of the company’s UAE-based megaprojects. The $3.2bn (AED11.75bn) contract was awarded to a joint venture between Arabtec Holding, TAV Construction, and Consolidated Contractors Company (CCC) in May 2012. “We are on track with the project, with an expected completion date of July 2017,” says Ghanma, who adds that his firm is also working on Fairmont Abu Dhabi and a large hospital in Al Ain.
Arabtec has also been working to strengthen its presence outside the UAE, evidenced by a series of project wins in Saudi Arabia. The firm scooped a $272m (SAR1bn) contract from Saudi Aramco to build 380 villas in Al Dharan, where the national oil company’s staff compound is located.
Ghanma gives further indications that the contractor is going to ramp up its operations in the Kingdom, despite reportedly being in negotiations with Saudi BinLadin Group (SBG) to dissolve the joint venture of four Saudi Arabian subsidiaries.
Commenting on the current state of play, Ghanma says: “We are still in talks with Saudi BinLadin Group for the same; [we] haven’t reached a decision yet.
“We have other [activities] in Saudi Arabia as well, which include our mechanical, electrical and plumbing (MEP), oil and gas, and readymix subsidiaries,” he adds, noting that his team is also pursuing promising contracts in other parts of the Gulf. “We are involved with major projects in Qatar, Kuwait and Bahrain,” Ghanma points out.
Beyond the GCC, Arabtec has established a foothold in Kazakhstan with Abu Dhabi Plaza, a $1.08bn mixed-use project comprising hotels, retail outlets, and residential units.
In Jordan, the contractor is building the new St Regis Amman and The Residences at The St Regis Amman. This development will consist of three 17-storey towers linked by a single podium. Also in Jordan, Arabtec’s joint venture with CCC and Drake & Scull scooped a $629m contract to complete the first phase of Saraya Aqaba in June 2013. The project will see around 634,000 sqm of master-planned developments built around a manmade lagoon, and will add 1.5km of beachfront to the Gulf of Aqaba. “It is a massive project and we are on schedule,” Ghanma comments.
Although unwilling to go into detail about the contracts that Arabtec will pursue in 2016, the CEO reveals that the UAE, Saudi Arabia, and Egypt will comprise major geographical focuses. Commenting on yet-to-be-announced projects in the company’s pipeline, Ghanma adds: “Arabtec is in the final stages of discussion for several megaprojects, the contracts for which we expect to be awarded before the end of 2015.”
This all makes for positive reading, but at a financial level, Arabtec still appears to be reeling from the events of 2014. Despite its impressive project portfolio, the firm’s losses widened in the first nine months of this year.
In H1 2015, they amounted to $271m (AED998m), whereas in the same period of 2014, the company made a net profit of $65.4m (AED240m). Losses in Q2 2015, specifically, were $195m (AED718m), compared to the net gain of $52.3m (AED102m) achieved during the corresponding period of last year.
Unfortunately, the latter half of 2015 doesn’t seem to have done much to bolster Arabtec’s fortunes. The firm announced a net loss of $257m (AED945m) in the three months to 30 September, 2015, compared to a profit of $18.7m (AED69m) in the same period of last year. The company’s Q3 2015 revenues also fell by 24% year-on-year to $435m (AED1.6bn).
In a statement to the Bourse following the results, Arabtec said its board “understands that the regional construction market is currently very challenging, a dynamic that is expected to persist throughout 2015 and possibly into early 2016”. But Ghanma – speaking one week before the release of the firm’s Q3 2015 results – emphasises that the stock market is not his immediate concern.
“My focus is not the share price,” he tells Construction Week. “My focus is the business; the wellbeing and performance of [Arabtec Construction]. So the share price goes up or down; it’s not my concern and I don’t even follow it on a daily basis. The important thing is to make sure that the business is solid,” he says, adding that in this respect, Arabtec’s operations are extremely healthy.
Ghanma continues: “Yes, we have taken a few hits, but it’s not only our share price that has been affected – it’s the whole region. I am looking forward to 2016.”
Indeed, throughout our interview, Ghanma presents himself as a no-nonsense, forward-thinking CEO. The Arabtec boss seems genuinely uninterested in what has gone before, preferring to set his sights on the future of the company.
The contractor’s workforce, for example – which Ghanma refers to as an “army of 50,000 people” – represents a key component of his longer-term strategy for consolidation and growth. As he points out, it is important to identify individuals who will help Arabtec to regroup and grow.
“With the consolidation, we naturally need to restructure; to keep the people who are required for our core business. Those who didn’t fall within [these boundaries], we just had to disengage,” he comments.
Put simply, Ghanma’s tactics appear to follow a common theme. If a step is to be taken, it must move the contractor in the direction of its core competencies.
Make no mistake, Arabtec Construction requires an exceptional leader if it intends to revive its pre-2014 glory days. Only time will tell whether Ghanma is the right man for the job. Nevertheless, if the CEO’s efforts to take the firm back to basics prove successful, the share price will look after itself.