Arabtec posts Dh111m profit

Dubai: Arabtec Holding, the UAE's biggest construction company by market value, yesterday reported a 40 per cent drop in second quarter profit to Dh111.1 million compared to Dh183.9 million a year earlier.

The second-quarter revenue stood at Dh1.28 billion versus Dh2.05 billion in the same period, disappointing analysts' predictions.

Nomura International pegged revenues at Dh1.7 billion quarter on quarter, but Arabtec instead recorded a 26 per cent decline.

The builder's revenues for the six-month period of 2010 dropped by Dh1.09 billion to Dh2.83 billion compared to the first half of 2009.

"Revenues were lower than the analyst community expected reflecting lower construction activity, particularly in Dubai. Competition is increasing pressure on the industry in general. Everyone is chasing projects in Abu Dhabi and many are prepared to lower their margins, but Arabtec won't do that," Chet Riley, analyst, Nomura International, told Gulf News.

Nomura expected net profit for the second quarter to hit Dh146 million instead of the Dh111 million.

It also expected Dh100 million to Dh150 million in cash receipts from Nakheel would boost Arabtec's profit at the net level.

"Arabtec reversed a series of impairments in this quarter, including Dh117 million we assume are directly associated with Nakheel as the deal for payment was struck in the last quarter. But most of it will go to pay subcontractors," he said.

"That Arabtec like others have started bidding for projects in Iraq just shows that contractors are sourcing work where they can find the right margins."

Arabtec's management, according to its financial statement, remains positive about the recovery of the Dh1.4 billion arising from its dispute with Meydan based on legal opinion it received. The contractor was not available for further comments.

"Work completion deteriorated in the second quarter as progress remained slow on existing contracts and few construction starts materialised on the record year-to-date awards," said Roy Cherry, analyst, Shuaa Capital.

However, he said Shuaa maintains its "buy" recommendation based on a positive long-term outlook on Arabtec based partly on the contractor's effort to diversify geographically.

• Dh1.28b revenues recorded in second quarter
• Dh2.83b revenues recorded in first half of this year