Drake & Scull posts consecutive loss in Q3 2016
In the third quarter 2016, DSI booked $67m (AED246m) worth of new project awards, which included contracts in India and Palestine in the wastewater sector
Dubai-based contractor Drake & Scull International (DSI) reported a net loss of $22m (AED81m) in the third quarter of 2016 as compared to $268m (AED985m) for the same period last year.
The company posted revenues of $236m (AED869m) in Q3 this year versus $118m (AED434m) recorded in Q3 2015.
In a statement to the Dubai Financial Market (DFM), the third quarter 2016 losses for the company reflect the prolonged weakness of the construction sector in key markets such as Saudi Arabia, Qatar, and – to a lesser extent – the broader GCC and Middle East regions.
It also highlights the operational delays of certain ongoing projects and a slower backlog execution in Saudi Arabia and the Levant region resulting in cost overruns particularly in the civil sector.
For the first nine months of the year ending 30 September, DSI reported revenues of $735m (AED2.7bn) and a net loss of $81m (AED297m) as compared to last year.
Wael Allan, CEO, DSI, commented: “During the past six months, we have embarked on a thorough and detailed review to identify risks and opportunities. We have concluded a series of new management appointments which are critical to the continuity of the business and we have established a performance driven and strong culture with emphasis on cost reduction while maintaining client focus and performance excellence.
"Concurrently, we have introduced additional corporate governance and compliance policies to foster a culture of ownership, accountability and operational rigour.”
He added: “We maintained our revenues for the two consecutive quarters and continued to decrease our expenditure through our cost-cutting programme. Our order backlog is slowly moving towards a higher-value, higher-margin portfolio of projects with a focused geographical diversification, predominately in the UAE.
“However, despite achieving progress in our home market the UAE, the prolonged market headwinds and economic uncertainties, especially in what previously was one of our core markets (Saudi Arabia), has made us realise that it is time to be bold and engage in a real transformation.
"We have commenced our financial review to assess our working capital and funding requirements with respect to our individual business units and the company as a whole. The outcome will necessitate difficult executive decisions. These may include divestments in non-core geographies, retrenching on civil works mainly in Saudi Arabia as well as taking a more conservative stance on the recoverability of certain receivables across the business. This initiative is a stepping-stone towards the full transformation of DSI."
Allan mentioned that the company will emerge to start the 2017 financial year with a healthier balance sheet and better prospects to tender for new projects with clear strategy to return to profitability.
The Q3 2016 order backlog for the company declined 28% as compared to the same period last year and stood at $2.3bn (AED8.8bn) as of September 30 2016, owing to two project cancellations in KSA adjusted in Q2 2016.
The statement read: "The adjustments mitigated the operational and financial risks arising from civil works projects in Saudi Arabia. It has also allowed us to reduce our exposure to volatile and low performing segments in the country."
Qatar, witnessed a moderate decline in revenue generation mainly attributed to a slower execution on key projects.
In the third quarter 2016, DSI booked $67m (AED246m) worth of new project awards, which included contracts in India and Palestine in the wastewater sector. Over the nine months period, the company has added $222m (AED815m) of projects across Qatar, Iraq, Palestine and India in the rail, oil and gas, and wastewater sectors.