GCC construction sector: Rising or falling?
Earlier this week, it was revealed that the Dubai-based construction and engineering company, Drake & Scull International, is looking to review its business and find strategic investors to keep business afloat.
Kailash Sadangi, the chief financial officer of the firm, told Reuters that the company had held “informal talks” with advisers over the course of the past few weeks and had discussed a possible business review on finding new equity for the firm, the international news agency reported Tuesday.
Company shares fell sharply after the news, opening more than two per cent lower on Tuesday morning. The firm stated on Wednesday that it has not yet hired a legal adviser to help bring investors into the company.
“The company denies the appointment of any legal adviser in connection with bringing in a strategic investor or issuance of mandatory convertible bonds. The company will make appropriate disclosures when such material development comes into effect,” it disclosed in a statement posted on the Dubai Financial Market, where it is listed.
Drake & Scull, one of the Gulf’s biggest builders, has been hit – like others in the sector – by the slowing economies in the region due to low oil prices, among other factors.
The company’s revenue for the first half of 2016 reached AED1.83 billion, but suffered a net loss of AED216 million, compared with a net profit of AED34m in the first half of 2015.
The company stated in its half-year earnings release that the loss was due to “significant contraction and prolonged volatility in the regional construction sector”.
Struggling for a while
The company’s shares have dropped approximately 13 per cent during the past couple of weeks.
The company has been taking some measures in efforts to control the situation, including a management shake-up. Sadangi was appointed in the post of chief financial officer earlier in May, replacing Sam Deep, who had served in that position for only eight months.
It also brought in Wael Allan, former CEO at Arcadis Middle East, and appointed him as chief operating officer.
Drake & Scull only represents an example of a struggling sector, as other builders have not fared very well recently either.
Arabtec Holding, the UAE’s biggest listed construction company, reported its seventh straight quarterly loss earlier this August, making a net loss of AED186.4m in the three months leading up to June 30.
Arabtec has also been struggling with a slowdown in the sector and is desperately looking for help with cash.
Last July, the firm agreed to an AED400m debt facility provided by Aabar, an investment fund controlled by the Abu Dhabi government, which is one of the firm’s largest shareholders.
It has also been reported that Arabtec was planning to even talk to banks to improve its capital. Despite its efforts, analysts are sure whether the company will be able to break even this year.
This may all come in conflict with other news highlighting the thousands of underway and planned projects. While the numbers now tell a different story, the tough times have not ended yet and a lot can change till the time things improve.