Arkan reports a drop of 25% in 2016 profits
Heavy rainstorm in March 2016 caused an exceptional loss related to damage for the company which impacted it net profit earnings
Arkan Building Materials, a construction and building materials company in the UAE, earned a net profit of $20.6m (AED75.7m), compared to $27.5m (AED101.1m) in 2015.
The firm claimed that due to an exceptional loss related to damage caused by heavy rainstorm in March 2016, net profits dropped drastically.
Cost efficiencies from better procurement of raw materials, use of recycled materials and renegotiation of transportation contracts outweighed the reduction in profit from price decrease in 2016 compared to 2015 estimated at AED18m, resulting in gross profit margins increasing by 9% to reach 36%.
Last year saw considerable operational progress, with sales volumes increasing across new markets in the UAE, as well as across new export markets for the company.
The firm has increased its footprint in the Dubai market, given the large number of construction projects underway; and is on-site at major projects, including Dubai South.
Arkan is also selling its speciality products into export markets, especially South East Asia, where it has seen success selling glass fibre reinforced polymer (GRP) specialised pipe solutions and manholes in Manila and Hong Kong.
Arkan has also been partnering with clients to offer turnkey solutions for projects, and providing expertise and support on site and in the laboratory around product development, quality, installation, and maintenance.
During 2016, Arkan launched dry mortar products and increasing high specification speciality blocks and pavers for prestigious projects, such as the new Abu Dhabi airport, Fairmont Marina residences, and Sheikh Zayed Grand Mosque Centre in Abu Dhabi.
The pressure on market prices continued across the product range throughout the year and consequently 2016 revenues stood at AED807.7, compared to AED876.9m in 2015.
At the year-end, Arkan decided to temporarily consolidate the production and sales of cement in a single location, namely its Al Ain Cement Factory and this is expected to generate savings in excess of AED45m over the course of 2017, the company said.
Eng. Jamal Salem Al Dhaheri, chairman of Arkan, said: “We continue to strategically drive the business through this harsh current market cycle, offering more products in more places than ever before.
We are opening new markets at home and abroad, introducing more innovative products and offering engineering solutions, which allows us to become true partners to our clients, not just a supplier.”