Abu Dhabi: Arabtec Holding, the Dubai-listed construction company, reported on Monday Dh225.5 million in losses for the third quarter of 2016 as the company managed to narrow its losses from the Dh944.8 million in losses in the same period last year.
Losses attributable to owners in the first nine months of 2016 also dropped to Dh458 million from Dh1.94 billion in the same nine months in 2015.
The losses, although lower on a year-on-year basis, are way below market expectations, with the Bloomberg consensus at Dh78 million for third-quarter losses.
Meanwhile, Arabtec’s revenues jumped to reach Dh2 billion in the third quarter of the year, marking a 25 per cent year-on-year rise. Revenues for the first nine months were up 17 per cent to reach Dh6 billion.
In a statement posted to the Dubai Financial Market, Arabtec attributed the increase in revenues to new project awards in the fourth quarter of 2015 and the first half of 2016. It also said it continued to implement cost-cutting measures to ensure better efficiency amid challenging market conditions.
“The group’s strong backlog and new wins in 2016 will support the group in building a strong platform for growth and maintaining its market-leading position despite the economic slowdown and reduced government spending in the GCC and the region,” the statement said.
Backlog
During the third quarter of 2016, Arabtec secured new projects that include a hotel in Dubai Media City, bringing its project awards for 2016 to Dh9.4 billion, the company said. Arabtec’s backlog amounted to Dh20 billion during the quarter.
However, analysts questioned whether Arabtec’s cost-cutting efforts and project awards were enough.
“You have to start wondering how these losses keep accumulating even though every quarter we hear [Arabtec] saying they’ve taken measures and next year should be better. Yes, revenues rose, but a revenue rise without net profit doesn’t make sense … because it means [profit] margins are low and they could be taking provisions for old losses,” said Mohammad Yasin, managing director at National Bank of Abu Dhabi Securities.
He added, “We also don’t see growth in the construction sector, so you have to worry that this may continue and there could be some more losses to come.”
The construction sector has been facing mounting challenges on the back of low oil prices, which are leading to delayed payment cycles from developers and lower profit margins.
Taking losses
The performance in third quarter of 2016 marks Arabtec’s eighth consecutive quarter of losses.
“Arabtec is a recovery story that’s been going on for about two years now. No matter how big the company is, if you spend two years taking losses and provisions, the next step could probably be lowering of capital to converse some of those losses, and that means that shareholders will take more pain,” Yasin said.
In June this year, Arabtec received shareholder approval to pull Dh1 billion out of its statutory reserve in order to extinguish 44 per cent of the losses it had accumulated thus far. The move was part of the company’s plan to salvage its financial performance this year, with its chairman saying Arabtec was aiming to break even in 2016.
Arabtec’s share prices ended trade on Monday 2.27 per cent lower to reach Dh1.29.
