Arabtec reports Dh99.7 million first quarter net profit

Dubai: Construction firm Arabtec on Thursday reported net profit of Dh99.7 million for the first quarter 2013 and posted a 20 per cent rise in first quarter 2013 revenue to Dh1.55 billion, largely driven by strong performance in Saudi Arabia and Qatar operations.

The company experienced a strong quarter for new contract awards, with its backlog rising Dh735.8 million (net) over the period to Dh20.4 billion as of 31 March 2013.

Arabtec has signed a series of major contracts since the beginning of the year, including the Louvre Abu Dhabi and the Fairmont Hotel in Abu Dhabi and has made good progress on executing existing projects.

“Arabtec’s backlog has increased significantly in the last year, which gives us strong earnings visibility. We are now starting work on several major projects, so the company should see a positive impact on earnings towards the end of the year,” said Hasan Abdullah Ismaik, Managing Director and CEO of Arabtec Holding.

“Over the past six months we have realigned our businesses and continue to enhance our operations through a number of initiatives to increase efficiency and reduce costs, as well as hiring key individuals to further strengthen, lead and execute Arabtec’s growth strategy,” he said.

Earnings before interest, tax, depreciation and amortisation (Ebitda) was Dh131.2 million, representing an 8 per cent margin compared to 12 per cent a year earlier, as a result of executing on projects with lower margins awarded during the industry downcycle. This was offset by reduced expenses and increased other income of Dh40.2 million, primarily from the reversal of provisions, which enhanced overall performance.

The company’s strategy of diversifying across the countries of the GCC s starting to yield results.

Arabtec’s Saudi Arabia operations continued to drive the company’s revenue growth in the first quarter, accounting for over a quarter of total first-quarter revenue. The company is building a large-scale residential project, with 5,000 villas, in Al Hasa in the Eastern Province, and expects further major awards given the strong infrastructure investment and demand for specialised construction services in the country.

Projects in Qatar are also growing in importance, accounting for over 10 per cent of revenue in the first quarter. Arabtec is currently working on the Twin Towers project in Doha (contract value Dh696 million), and expects to see revenues from Phase 2 of Msheireb Downtown Doha project (contract value Dh2.3 billion) pick up over coming quarters.

The UAE continues to be a major market for Arabtec, accounting for over half of total revenue in the first quarter of 2013. Major projects include Terminal 2 expansion at Dubai International Airport (contract value Dh561 million), Nation Towers in Abu Dhabi (contract value Dh800 million), Infinity Tower in Dubai (contract value Dh610 million), Baniyas Residential Development (contract value Dh423 million) and the Midfield Terminal development at Abu Dhabi International Airport (contract value Dh3.6 billion).

The construction of the Louvre Abu Dhabi (Dh800 million) and the Fairmont Hotel in Abu Dhabi (Dh1 billion) has already started, and will be in full swing over the coming quarters.

“We are now well positioned to capitalise on the significant growth opportunities across the region. Arabtec is forming a new company with Samsung Engineering, the leading EPC contractor in Mena, which will give us a major presence in oil and gas, power and related infrastructure. This is a key component of our five-year growth strategy, which will deliver attractive returns for our shareholders and position Arabtec as the leading diversified construction company in the region,” said Ismaik.

Arabtec’s gross margin in the first quarter of 2013 was a robust 12 per cent, compared to 10 per cent for full-year 2012. The construction industry in the Middle East is returning to growth and shaking off the residual effects of the downturn during previous three years as contracts were awarded with lower margins.