Legacy Man
Big Project ME talks to Hasan Abdullah Ismaik, the new CEO of Arabtec, about his growth strategy for the UAE’s largest publically listed construction contractor
The day after the news broke that Riad Kamal had resigned from his post as chief executive officer at Arabtec, there was a distinct rumble in local stock markets as shares in the UAE’s largest publicly listed construction firm fell to a six week-low over fears of a significant shares dilution.
With the contractor looking to raise $1.8 billion in capital through a rights issue and convertibles at the time, it’s hard not to think that the abrupt departure of the founder of the company had something to do with the uncertainty surrounding the Dubai-based construction company.
Throw in the fact that the firm’s 2012 net profits had tumbled to $37.89 million from $60.19 million in 2011, and it’s safe to say that Arabtec wasn’t having the best of times in the first quarter of 2013.
So it was quite the situation that Hasan Abdullah Ismaik walked into, having been appointed as Arabtec’s new CEO at the start of March this year. Having already been a member of the board since August 2012 and already in place as the company’s managing director, it was a natural progression for him to step into Riad Kamal’s considerable shoes.
“I am the founder and chairman of the Abu Dhabi-based HAMG Group, an investment company that includes Marya Development and Real Estate Investment and Marya Investments and HAMG General Trading,” he tells Big Project ME.
“I’m also the chairman of Al Ashmal Real Estate Investment Company in Jordan and Hirmas Investments Group. Additionally, I head a diversified investment portfolio that spans several sectors, including energy, real estate, construction, transportation and architectural design services.”
As he brings such extensive experience to the table, Ismaik has now been tasked with formulating an expansive growth strategy for Arabtec, while at the same time overseeing an overhaul of the contractor’s management team.
Shortly after Ismaik was appointed as CEO of Arabtec, he oversaw the appointment of Shohidul Ahad Choudhury, a former Deutsche Bank executive as the contractor’s Mergers and Acquisitions head, Mark Andrews, former managing director of Murray and Robert’s Middle Eastern operations as chief operating officer and Iyad Abdelrahim as chief financial officer.
“Arabtec is expanding the company’s management team to ensure that we have the right skills and experience in place to drive our growth and achieve the optimum returns for our shareholders,” he explains. “We have appointed our head of M&A, COO and a new CFO for our construction business. We also have some new members which we will announce as soon as we are in a position to do so.”
“We believe that the new management team and ownership structure bring significant international experience and knowledge in the real estate and construction sectors that will enable us to achieve our new growth strategy,” he says.
“Our new strategic direction is driven by several key points including the opportunity to grow the business in different sectors and markets,” Ismaik adds. “Moreover, we are increasing the diversification of our business to build revenue and reduce counterparty and market risk. The company’s growth strategy will be carried out through organic growth, acquisitions and international joint ventures.”
As part of its growth strategy, the company will look at opportunities for expansion in the oil and g as industries, power and infrastructure, as well affordable housing. This could lead to exploring new markets with ‘strong potential’, Ismaik says, pointing out that India is an interesting option for the firm.
Part of the new strategy, he says, is to focus on expansion in markets outside the UAE, which wasn’t really a priority for the previous iteration of the company. As such, markets such as Qatar, Saudi Arabia and Kuwait will be increasingly targeted.
This changing focus was clearly evident in the announcement of a $631 million contract that was signed with Qatar’s Msheireb Properties in December. Hasan Ismaik’s influence was already evident in the deal, which saw the contractor agree to the construction of a built up area of approximately 370,000m2. Comprising of ten buildings between two and 19 storeys high, the massive project is part of the development of Phase II of Msheireb Downtown Doha.
“Qatar is an important market (for us),” he says. “We’ve extended our presence in Qatar, which is likely to continue being a key market for the company in coming years.”
“In addition to our focus on the GCC region, Arabtec is looking to develop projects in India, building on our position there. Our interest in these markets are not short-term priorities, but are based on long-term focus as they offer significant growth opportunities through strong trading ties between the two countries that can be leveraged on,” Ismaik asserts.
“We are currently conducting in-depth research of market opportunities in the two countries, and will begin to look at the possibility of joint ventures with strong local partners.”
“As I mentioned earlier, our new strategy also looks at expanding into oil and gas, energy and infrastructure EPC. They are all growth areas in the Middle East and of vital economic importance to the region. They are a natural extension of the specialisms that we have in the business and they are all experiencing long-term growth.”
“In addition to our broad knowledge and expertise, these factors pose an ideal opportunity for Arabtec to move into these sectors.”
“For example, in April of this year, Arabtec Holding and Samsung Engineering Co, Korea’s largest engineering company, announced the signing of a Memorandum of Understanding (MoU) for a new joint venture company. The joint venture will be called Arabtec-Samsung Engineering, and will be incorporated and headquartered in Abu Dhabi,” he says.
Arabtec will be a 60% shareholder in the new company, with Samsung Engineering holding the remaining 40% interest. The new JV will exclusively undertake large-scale projects in oil and gas, power and infrastructure in the Middle East and North Africa region.
As significant as this overseas progress is, it doesn’t obscure the focus the contractor has towards its domestic market. Having positioned itself as the predominant construction company in Abu Dhabi and Dubai, Ismaik is determined to build on the work his predecessor has done.
“Arabtec’s current backlog of approximately $5.9 billion includes works on the Louvre Abu Dhabi, the Fairmont Abu Dhabi, and the recent contract award for the Midfield Terminal Building at Abu Dhabi International Airport,” he says.
“Today, we have over 42,000 employees and have our name on several world renowned iconic buildings such as the Burj Khalifa, Emirates Palace and the Louvre Abu Dhabi and Msheireb Downtown in Doha, Qatar. Arabtec has built seven of the world’s tallest structures, and over 12,500 villas in the last decade alone.”
It is because of these projects that Ismaik feels that Arabtec could continue to go from strength to strength in the UAE market place. He points out that there was a 15% rise in revenue and a sharp increase in contracts awarded in 2012, which signalled a strong emergence from the regional downturn in the construction industry.
“The company reported total revenue of $1.5 billion in 2012, compared to $1.33 billion in 2011. Our backlog grew to $4.87 billion, an increase of 27% compared to 2011. In 2013, our backlog has continued to grow, and now stands at $5.82 billion,” he says.
“The construction market in the UAE is doing very well in recovering from a trough in the business cycle. Work on projects, is now back in full force and investor confidence in the property market is seen to have increased over the past year,” he continues. “(In fact), the global construction market has returned to growth. The current new wave of growth is expected to continue for the next seven to ten years powered by government spending on infrastructure, gradual improvement of liquidity, sustained low interest rates, and the continuing growth of city populations.”
According to Ismaik, global spending on construction is forecast to grow by an average of 6% – 8% per year for the next five years.
“In the GCC, a total expenditure of $172 billion is expected in 2013, the equivalent of several GCC States hosting World Cup tournaments at the same time,” he asserts.
So then what lies ahead for Arabtec in 2013 and beyond, given the considerable amount of work on its plate?
With projects such as the Louvre Abu Dhabi in the bag, Ismaik says that the focus is likely to be on finalising joint ventures similar to the Arabtec-Samsung Engineering arrangement over the coming year.
With clear signs that the construction industry is picking up across the GCC, industry analysts have stated that the project-driven MENA region’s oil and gas, power and infrastructure sectors are likely to be key drivers of long-term economic growth in the region.
“The major projects market in the Middle East in oil & gas, power and infrastructure is gaining momentum with the region’s 100 biggest schemes currently under construction accounting for more than $304 billion of capital spending in 2013 alone,” he remarks. “Activity in these sectors in 2013 and beyond is set to increase dramatically. Meanwhile, the top 50 projects currently planned or already under way across the region are valued at $1.6 trillion, representing a 42% increase compared to 2012.”
He then adds proudly: “We have achieved a high degree of success with 37 consecutive years of profitability and a reputation for high-quality workmanship, (and we’re determined to continue that).”
Barely two months into the top job at Arabtec, it’s clear then that Riad Kamal’s legacy is in safe hands.
