Construction

Labour law hits contractor profits by 68.9%

Contracting giant Al-Khodari Co. posts massive dip in profits for Q4 2013 due to increased manpower costs.

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Saudi Arabian contracting firm Abdullah AM Al-Khodari Sons Co. recently reported a Q4 decline in its net profit.

The country’s construction market has of late suffered stunted activity due to the changes in labour laws by the government, with companies facing challenges adapting to these new guidelines.

Al Khodari’s profits slipped 68.9%, earning only $2.3mn (SAR8.5mn) in the three months to Dec. 31 2013, the company announced in a bourse filing; the figures are much lower than the $7.2mn (SAR27.3mn) earnings from 2012, as per a report by local daily Saudi Gazette.

The company said an increase in manpower costs by 28.4% YoY and financing costs by 63.8%, besides the postponement of an auction of surplus equipment lead to the decline in its profits.

As part of its Saudisation drive, the Kingdom’s Labour Ministry began charging companies a fee of SAR2,400 for each foreign worker employed in excess of Saudi staff towards the end of 2012, and local reports over the last year revealed contractor dissatisfaction about the same.

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