Saudi contractor Khodari says to book loss after passing up state contract

June 27, 2016 10:38 am


Saudi Arabian contractor Abdullah Abdul Mohsin al-Khodari and Sons said on Monday it will book a multi-million riyal loss after it received state permission to reallocate a government contract it won in 2014 to another company.

 

Khodari, like many construction-related firms, has been pressured by a severe slowdown in the sector caused by cutbacks in state spending due to lower oil prices.

 

It won a SAR144 million ($38 million) contract to construct a building in the western city of Taif in March 2014. But Khodari said in a bourse statement on Monday it has now received government approval to pass the project onto Moenes Mohamad Al Shayeb Civil Works Co.

 

Khodari said the reassignment, which will result in a loss of SAR19.4m, was one of several measures it is undertaking in response to labour market reforms and current weakness in the construction sector.

 

Since 2011, the government has increased efforts to push more Saudi citizens into private-sector jobs by making it more expensive and difficult for companies to hire large numbers of foreign workers.

 

In 2012, it introduced a levy of SAR2,400 a year for every foreigner a company employs above the number of its Saudi workers. For companies such as Khodari, which employ considerable numbers of low-paid blue-collar workers from Asia in jobs usually shunned by local citizens, the total cost can be substantial.

 

These labour changes have had an “immense negative impact” since 2011 on the “delivery of projects, liquidity, profitability, talent retention, capacity, development, growth”, the statement said.

 

Khodari said its decision to pass over the Taif contract was also in response to delayed payments, with the company seeking to reduce its exposure to government projects in favour of work that is not directly state-related. ($1 = SAR3.7500)

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By Reuters
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