Business | General
Arabtec forecasts 75% rise in 2008 revenue
Construction company wants to diversify abroad to spread risk and to capitalise on growth in other potential markets.
- Reuters
- Published: 00:30 May 2, 2008
Dubai: Arabtec Holding expects revenue to soar 75 per cent this year to $2 billion as its Saudi business grows.
The UAE's biggest construction company by market value has won Dh15.5 billion worth of projects so far this year, including a Dh10 billion development project in Russia, its chairman Riad Kamal said.
"We are negotiating contracts in areas where we are operating, plus Saudi Arabia," he said. "Our expectation is of work in the region of Dh4 billion to Dh5 billion in all areas of our operations and Saudi Arabia in 2008."
Companies in the UAE's real estate sector are targeting non-domestic work, as construction costs at home have been soaring, leading to some project delays.
Construction of the world's tallest tower, Burj Dubai, which Arabtec is working on, is four months behind schedule, developer Emaar Properties said in March.
Arabtec stock, of which foreigners can own up to 49 per cent, was up one per cent to Dh15.65 by 0936 GMT with the Dubai index up 1.3 per cent by that time.
Construction costs are expected to increase 20 per cent this year, Kamal said, with cement prices rising 30 per cent, driven by an uptick in fuel costs, salaries and insurance.
"As long the dollar keeps weakening, energy prices going up, we are bound to see further rises in international commodities and basic materials," he said, noting the effect on Arabtec would not be great.
Passing on
"In most cases, the rise in the costs of construction eventually get passed to the developer and, in the end of the day, passed to the consumer who's buying the property or who's using the facility," he said. "Why do you think property prices are going up?"
About 35,000 construction workers employed by the firm staged a strike last year to demand higher wages as the dollar-pegged dirham weakened against other currencies. The company increased their wages 18 per cent to compensate for the decline in the value of the dirham, adding one per cent to the company's cost, Kamal said, but added it may be a one-off.
"If the exchange rate improves, they're already getting an increase," he said. "There will be no increase in wages unless the dollar slides and we start losing people as a result of that."
The company wants to diversify abroad in order to spread risk and to capitalise on growth in other potential markets, Kamal said, adding Arabtec will focus on Saudi Arabia, Qatar and India, which it hopes to enter next year, he said. "We are looking seriously at all these markets and looking to establish our presence there in a big way because of potential growth," he added.
By 2010, at least 30 per cent of the company's revenue will come from foreign operations, up from less than 10 per cent now, Kamal said.
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