Saudi contractor Al-Khodari posts 198% loss amid cash flow delays
Contractor says 2014-15 were challenging financial years, but says liquidity has improved since late-2018
Saudi Arabian construction company Abdullah Abdulmohsen Al-Khodari Sons Co is facing losses worth $295.2m (SAR1.1bn), which it has attributed to cash flow and market challenges.
The contractor’s accumulated losses amount to 198.52% of its capital.
In a statement on the Saudi bourse Tadawul, where it is listed, Al-Khodari said cash flow challenges started with the work permit fees imposed on local companies. The Saudisation – or nationalisation – rate required within large contracting companies was raised from 5% to 8%, and Saudi staff were not considered as such unless their salaries were $800 (SAR3,000) or higher. It would take 26 weeks of employment of Saudis to consider the company as being compliant with the Nitaqat system.
In the event of non-compliance, no visas would be issued to the company for labour staff. Al-Khodari, in an Arabic-language missive to Tadawul, said that in 2014, it experienced a cash flow crisis that forced it to default on its compliance with Nitaqat. When it was able to comply, it did so at the expense of incurring operational costs. Its financial situation worsened in 2015 due to what Al-Khodari described as unreasonable delays in securing overdue payments from clients.
These payment delays impacted project delivery, with noticeable interruptions caused in the progress of many projects that overshot their schedules and contractual commitments. This, in turn, added to the pressure of cash flow woes that had several costly repercussions, as Al-Khodari has cited in previous disclosures on Tadawul.
To improve its financial situation, Al-Khodari arranged auctions of more than 1,000 vehicle and machinery assets between 2015 and 2018. Moreover, the liquidity situation has improved since late-2018 at Al-Khodari, which added in its Arabic-language disclosure that it had received official notices to continue work or accelerate the pace of its work on some projects. The contractor said it will require “the mobilisation of at least 7,000 employees and a large fleet of assets” to deliver this work.
Contractors will benefit from Saudi Arabia’s recently approved scheme worth $3.1bn (SAR11.5bn) to reimburse private-sector companies that struggled to pay expat work permit fees in 2017 and 2018.
The scheme is in line with Saudi Arabia’s $53.3bn (SAR200bn) private-sector stimulus plan that seeks to provide direct incentives for “differentials of work permits”, according to Saudi Arabia’s press office, SPA.