Abu Dhabi — Arabtec Holding, the Dubai-based construction company, reported on Wednesday Dh1.02 billion in losses for the third quarter of this year, marking a significant plunge from the Dh90 million in net profits recorded in the same quarter last year.

The losses in the third quarter bring the company’s net losses in the first nine months of this year to Dh2.34 billion — a dive from the Dh355 million recorded in the same period last year.

In a statement issued by the company to the Dubai Financial Market (DFM), Arabtec said that significant non-recurring charges contributed to the net loss. The company added that its cost reduction programme is expected to realise further reductions in 2016.

“As a result of the continuation in the difficult environment, the company’s revenues from continuing operations declined by 24 per cent to Dh1.6 billion in the third quarter of 2015 compared with Dh2.1 billion in the third quarter of 2014,” the statement said.

General and administrative expenses from continuing operations in the quarter went up 34 per cent, reaching Dh302 million compared to Dh225 million in the same quarter last year.

The company’s loss in the third quarter of 2015 before tax from continuing operations stood at Dh945.8 million (down from a profit after tax of Dh51 million in the third quarter of 2014). This brings losses before tax from continuing operations in the first nine months to Dh1.88 billion (down from a profit after tax of Dh228.7 million in the first nine months of 2015).

“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 statement said.

Challenging market conditions

Analyst Osama Al Ashry said that such a statement about persisting challenges could mean further losses for the company in the next quarter and in 2016.

“Arabtec has attributed its losses to factors like challenging market conditions, restructuring, and high costs, but I think the main issue is actually with their fundamentals.

They bit more than they could chew in terms of projects and eventually had to cancel some of these projects including the highly-publicised one in Egypt where they had planned to build 1 million housing units,” he said.

Following the announcement, Arabtec’s share prices plunged as much as nine per cent in the first hours of trade. Share prices ended the day’s trade with a 5.07 per cent decline to reach Dh1.31.

“I think prices are likely to reach their next support level, which is Dh1.07, and could even drop below Dh1. The good news is that such low prices are going to make the shares attractive and trigger buying activity.

Thus, on the long-term, I think we could see shares above Dh2, which is not to say that fundamentals will improve, but that valuations will be attractive and this is what brokers look for; low prices,” Al Ashry, a member of the UK organisation, Society of Technical Analysts, said.

Pressure

Meanwhile, Sebastien Henin, head of asset management at The National Investor, said that the construction sector has been challenging lately, with other companies recording lower results, and that Arabtec was no exception.

“The problem is that real estate developers are putting a lot of pressure on construction companies in terms of postponing payments and getting more benefits from their payments.

Arabtec’s results aren’t really a surprise; no one was expecting positive results from companies operating in that sector,” he said.

Henin added that he did not expect the announcement to have a major toll on the overall performance of the DFM.

In its statement, Arabtec said that it has seen over Dh215 million in project wins for this quarter.