GCC: Top contractors disclose H1 2016 financials
Eight of the top contractors currently operating in the Middle East disclose details of their financial performances for the first six months of 2016
In a bid to find out how the economic slowdown has affected the Middle East's contracting market, Construction Week contacted eight of the region's largest contractors with questions about their H1 2016 financial performances.
To mitigate the impact of low oil prices, national governments have had to revise their economic strategies during the past 18 months. Needless to say, this situation hasn't been conducive to growth within the Middle East's construction sector.
With this in mind, it's understandable that the region's largest contractors have not been posting record levels of growth. However, the resilience demonstrated by many of these companies represents cause for optimism.
In the following feature, ALEC, Consolidated Contractors Company (CCC), Arabtec, Drake & Scull International (DSI), Al Shafar General Contracting (ASGC), BAM International, Orascom, and TAV Construction disclose details of their H1 2016 financial performances, and discuss their major recent and ongoing projects.
As it is not a listed company, ALEC declined CW’s request to disclose its H1 2016 profit. However, the multi-disciplinary contracting firm recorded revenues of $540m (AED2bn) during the first six months of 2016.
ALEC has participated in some of the Middle East’s most complicated construction developments, including Meraas’s mixed-use BlueWaters development in the UAE; Doha Festival City in Qatar; and Jabal Akhdar Anantara Hotel Resort & Spa in Oman.
The latter is a 115-key, five-star hotel in the sultanate’s Al Hajar mountain range. Situated 2,300m above sea level, it is the highest five-star resort in the Middle East.
ALEC also worked on the recently completed Concourse D at Dubai International Airport.
Al Shafar General Contracting (ASGC)
Al Shafar General Contracting (ASGC) reported revenues of $380m (AED1.4bn) during the first six months of 2016. As it is not a listed company, the contractor declined CW’s request to disclose its H1 2016 profit.
ASGC is working on a number of government projects in the UAE, including the much-anticipated Etihad Museum.
The company is also supporting construction at Abu Dhabi’s Marina Bloom and a hospital within Meraas’s CityWalk development.
At present, ASGC is supporting three of Abu Dhabi National Oil Company (ADNOC) and its related subsidiaries. Its project portfolio also includes projects from segments such as industry and education.
UAE-headquartered contractor, Arabtec Construction, succeeded in significantly narrowing its losses, year on year, during the first six months of 2015.
The contractor made a loss of $62.4m (AED229m) in H1 2016, compared to a loss of $353m (AED1.3bn) during the corresponding period of last year.
Arabtec Construction’s total assets were valued at $3.5bn (AED13bn), as of 30 June, 2016.
The contractor is currently supporting construction at a series of high-profile regional projects, including Abu Dhabi International Airport’s $3bn (AED11bn) Midfield Terminal development.
Netherlands-headquartered contractor BAM International reported revenues of $4.5bn (EUR4.04bn) in H1 2016, a 3% year-on-year decline from the corresponding period of last year.
The firm cited lower activity levels within German construction sector and British civil engineering as reasons for the fall.
BAM International’s total restructuring costs during H1 2016 were $14m (EUR12.6m), compared to $17.3m (EUR15.54m) during the first six months of 2015.
The contractor told CW that it has worked to maintain discipline within its tendering activities for all markets, focusing on margins, cash flow, and symmetrical risk profiles for new contracts.
BAM International’s current project portfolio includes high-rise buildings, football stadiums, fisheries and harbours, and liquefied natural gas (LNG) terminals in the Middle East.
Consolidated Contractors Company (CCC)
Greece-based Consolidated Contractors Company (CCC) reported a net profit of $200m during the first six months of 2016. This is a 67% year-on-year decline on its H1 2015 profit, which stood at $600m.
Revenues for H1 2016 stood at $2.5bn, compared to $4.3bn during the same period of last year – a year-on-year fall of 42%.
Despite these year-on-year declines, CCC is still comfortably in the black. The firm is also working on a series of impressive projects in the Middle East. It bagged a selection of high-profile projects in 2014, including a contract relating to the $10bn (SAR37.5bn) Riyadh Metro development.
At present, the company is involved in more than 50 projects across the Middle East, Africa, Australia, and Asia. CCC’s latest GCC contract wins include the $3bn (AED11bn) Midfield Terminal project at Abu Dhabi International Airport, which it is conducting as part of a joint venture with Arabtec and TAV Construction.
It is also working on a $300m (OMR115.5m) roadworks project in Oman, and a $4bn (KWD1.21bn) Kuwait Oil Company (KOC) development in conjunction with Petrofac.
Outside of the GCC, CCC is working with Arabtec on the $800m Abu Dhabi Plaza development in Astana, Kazakhstan. It is also supporting construction at projects in Iraq, Thailand, and Australia.
Drake & Scull International (DSI)
Drake & Scull International (DSI) reported a 23% year-on-year decline in its net revenue during H1 2016. The firm achieved turnover of $390m (AED1.8bn) during the first six months of this year, compared to $650m (AED2.39bn) in H1 2015.
DSI made a net loss of $59m (AED216m) in H1 2016, compared to a net profit of $9.2m (AED34m) during the corresponding period of last year.
The company attributed this year’s net loss to project cancellations and additional, one-off provisions that it has taken to mitigate the impact of market challenges.
The majority of these measures have taken place in Saudi Arabia, with the total impact on DSI’s bottom line amounting to $52.2m (AED192m). Some one-off project cancellations have been enacted by clients, but with a minimum bearing on the contractor’s ability to continue operations in the kingdom and other markets, according to DSI.
The company’s order backlog of ongoing projects stood at $2.5bn (AED9.37bn) as of 30 June, 2016. This figure was $3.6bn (AED13.24bn) at the end of H1 2015.
DSI said that the decline in its projects backlog was reflective of the KSA-related adjustments that it conducted during Q2 2016.
Egypt-based Orascom Construction reported a net profit of $48.5m (EGP430.82m) for the first six months of 2016, compared to $44.7m (EGP397m) in H1 2015 – a year-on-year rise of 8.5%.
The listed contractor posted revenues of $1.9bn (EGP16.9bn) during the first half 2016, compared to $1.8bn (EGP16bn) during the corresponding period of 2015. The firm’s net income for H1 2016 was $49.4m (EGP438.81m).
Orascom Construction reported a backlog of $7.5bn (EGP66.62bn) as of 30 June, 2016 – a figure that was bolstered by $2.2bn (EGP19.54bn) of contract awards during the second quarter.
The contractor’s Q2 2016 net profit stood at $22.6m (EGP200.75m), compared to the figure of $35.2m (EGP312.67m) achieved during the corresponding period of last year.
As it is not a listed company, TAV Construction declined CW’s request to disclose its H1 2016 profit.
However, Umit Kazak, managing director, provided a brief overview of the contractor’s financial performance during the first half of the year.
He commented: “[TAV Construction’s] revenues for the first half of 2016 remain the same as [those recorded during H1] 2015. Very recently, we successfully completed and handed over Terminal 5 of Riyadh King Khalid International Airport.
“We have also started working on the landmark terminal building project of the Airport Modernisation Programme in Bahrain. TAV’s proven track record in the region’s airport development segment has allowed us to sustain our backlog.”
Encouragingly, Kazak is not anticipating any major challenges within the Middle East’s construction market during H2 2016. “After the summer holidays, the construction market will possibly [become] more active,” he predicted.
Kazak concluded: “There are a couple of tenders that we have been following for some time. We expect these tenders to be awarded [during H2 2016]. We believe that 2017 will be a more active year for new awards, especially in the non-airport construction sector.”