Arabtec Q2 profits below expectations

July 30, 2014 9:12 am

Arabtec fails to meet analysts’ predictions for its second quarter performance, despite reporting growth of 11 per cent against the same period last year.

According to Reuters analysts, Arabtec was on course to record profits of AED 111 million, whilst Bloomberg experts anticipated an even higher growth of AED 134 million. In reality, the construction-giant earned AED103 million from April to June 2014, which they announced on Sunday morning.

In a short, generic announcement accompanying the release, the company said “all decisions taken by (Arabtec’s leadership) aim at achieving the shareholders and investors’ interests, elevating the company’s position, increasing the revenues and achieving potential growth in future.”

In what has been an action-packed quarter, with share prices first rising to an all-time high of AED7.40 on May 14, before slumping to a record low of AED2.61 on June 30, shareholders will be hoping the saga stabilises throughout Q3 as the price currently floats slightly above AED4.10.

Nonetheless, as the most dominant stock on Dubai’s Financial Market (DFM), every announcement, report and even rumour concerning Arabtec will certainly spur high volatility across the market. Furthermore, with plenty of unanswered questions still remaining – including whether government-owned Aabar Investment will increase their stake in the company- the circus at Arabtec is far from over.

High volatility was even present throughout today’s session following the release of its financial reports for Q2. Having achieved growth, albeit below experts’ expectations, it was unclear whether the announcement would be met with a bullish or bearish response.

Within the first 15 minutes of opening, the share price began to slump below AED3.75, however, minutes later, confidence rapidly grew, reaching almost AED4.20 shortly after midday. By closing, the price stood at AED4.05, which was a 1.25 per cent increase on the previous session.

Another contributing factor to today’s drama is that on Thursday, the DFM announced that former CEO Hasan Ismaik trimmed his stake in the firm from 28.85 to 28.77 per cent. Valued at around four million dollars, the sale represents a fraction of the real dilemma.

Nonetheless, the move will be under the watchful eyes of investors and regulators alike as to whether we are expected to see a large sell-off of Ismaik’s shares and, more importantly, whether Aabar will consequently further consolidate their control of the company.