Contractor reports fourth consecutive period of losses, falling $257 million further into the red in the third quarter
Arabtec, the Dubai-listed contractor, has reported losses for a fourth straight quarter, with a “difficult environment” contributing to a 24% decline in revenue.
In a statement to the Dubai Financial Market, the contractor said it made a net loss attributable to equity holders in the parent of AED944.78 million ($257 million) in the third quarter.
Revenues from continuing operations declined to $435.6 million, as compared to the $571.7 million posted in Q3 2014.
Arabtec added however that it had made good progress on two new projects for Emaar Properties, worth a combined $272.2 million during the quarter. These included building villas at the developer’s Arabian Ranches project.
The contractor also took provisions, reversed some previously recognised claims and warned that the regional construction sector would remain difficult into 2016, Reuters reported.
It added that the company, whose largest shareholder is Abu Dhabi state fund Aabar, has seen its share price fall by more than 80% from a May 2014 peak, a decline driven by the failure to agree a deal for a project to build one million homes in Egypt, and its former chief executive quitting.
“The company’s balanced approach to revenue, cost and profit recognition, led the company to take charges against a limited number of challenging projects and reverse AED 379mn of previously recognised claims,” Arabtec said in a statement.
“The cumulative effect of the abovementioned items has resulted in the company reporting a significant increase in direct costs and, consequentially, a gross loss of AED 617mn from continuing operations (compared with a gross profit of AED 269mn in Q3 2014).
“As a consequence of a number of internal project reviews, the group has introduced a more selective approach to project targeting, in line with the group’s strategic direction for its businesses to focus on their core markets with strong market positioning and / or clear competitive advantage.”
Reuters data showed that the contractor’s losses have steadily worsened since falling into the red in the fourth quarter of 2014. Its combined total losses for the past four quarters amounted to a total of $560.85 million.
Arabtec added that in light of the “difficult regional construction market”, it would continue to implement its restructuring and cost-reduction programme. The board reported that, as of November 10, the company’s cost saving initiatives have realised annualised savings of more than $25.86 million. Further actions are expected to further reduce the group’s cost base in 2016.
“The board recognises that the regional construction market is currently very challenging, a dynamic that is expected to persist throughout the remainder of 2015 and possibly into early 2016,” the company said in a statement accompanying its results.
“Accordingly, the board remains confident in its cost reduction strategy and the implementation of the restructuring programme, ensuring Arabtec’s operations are as lean, flexible and efficient as possible to service its clients.”