Dubai-based firm confirms restructuring phase, says needs to focus on its core construction business
Major Dubai construction company Arabtec retains the support of major shareholder Aabar Investments and has not cancelled any projects as a result of recent management changes and a restructuring of the firm, its chairman said on Wednesday.
Khadem Abdulla Al Qubaisi was holding the company's first news conference since a series of events in June shook investors' faith in one of Dubai's most prominent firms, slashed its share price and dragged down the entire stock market.
In early June, wealthy Abu Dhabi state fund Aabar Investments cut its stake in Arabtec to 18.94 percent from 21.57 percent, raising doubts over its willingness to support the company. Then on June 18, CEO Hasan Ismaik, who had built a 28.85 percent stake in Arabtec, abruptly resigned.
Arabtec shares plunged 70 percent from a record peak in mid-May to their intra-day low on Tuesday, erasing about $6.5bn of value, although they began to rebound in late trade on Tuesday because of hopes that a strategic investor would be found to buy Ismaik's stake.
Qubaisi said on Wednesday that Aabar considered Arabtec a long-term investment, and that investors had misunderstood the significance of the small reduction in Aabar's stake. He declined to comment on Aabar's real motive.
Aabar could even raise its stake in future, he added, without giving any indication that this was being considered.
Qubaisi also said none of Arabtec's projects, including a $40bn deal to build 1 million homes in Egypt over coming years, had run into problems. The Egyptian project is a strategic deal between Egypt and the United Arab Emirates, and is almost in the design phase, he said.
However, Qubaisi said the company was in a restructuring phase and seeking to reduce costs, so it needed to focus on its core construction business, rather than oil and gas, a sector which it last year announced plans to develop.
The total value of Arabtec's current projects inside and outside the UAE is AED26.2bn ($7.1bn), Qubaisi added.
He declined to comment on Ismaik's stake in the company or how it might be handled.
In late June, Arabtec said it had laid off a "limited number" of staff since Ismaik left; on Wedbesday, Qubaisi said "a few people" had been let go without affecting management operations. He did not name the people.
Qubaisi predicted the company would post positive quarterly results around the end of July, reiterating that it was strong financially and that there was no plan to delist its shares from the Dubai market, as was earlier rumoured.
He also insisted Arabtec was not responsible for the stock market's 22 percent plunge in June, attributing it instead to political changes in the Middle East.
Mohamed Al Fahim, a board member from Abu Dhabi's state-owned International Petroleum Investment Co (IPIC), the parent of Aabar, was appointed acting CEO of Arabtec after Ismaik's departure.
Qubaisi said on Wednesday that Fahim had the financial expertise to lead the company for now, and there was no deadline for announcing a new permanent CEO.
No answers here at all, and just a towering arrogance shown against minority shareholders who now know that their investment is not worth a dirham anymore unless the company learns transparency and honesty. This is an insult to every shareholder in the UAE.
I think the announcement is transparent and re-assuring of the company financial position and all its projects are in place.
Why are we worried?
CEO could be replaced so where is the problem.
I am reassured and have confidence in the clarifications that I need to hear. Fundamentals stay the same.
We can speculate and be negative of any company if we want to look negatively all the time.
Arabtec is one of the largest construction companies in the middleeast backed by large stake owned by the government owned company.
The current share price is a steal and well oversold.
The press conference was pointless. So many vague answers. As a shareholder, I have the feeling that they don't know what direction they company is going towards or if they do, they are not being transparent. UAE market regulators must investigate.
1) To carry out large scale construction projects, you need competent people but instead they have been firing senior executives which would take long time to hire a new batch. 2) They did not talk about who would buy Ismaek's 1.2 billion shares which every share holder wanted to know after his resignation. 3) No dates given on when construction projects would start , not even their own i.e. Aabar's $7.1 billion projects. Expecting a roller coaster ride on it share price in Dubai stock market again.
Jane, you sound like a shill for the company, and not a very competent one either.
When billions of dollars in value is wiped off a company's stock in a matter of days, everyone has to be worried. It didn't happen because there was a bad fig at iftar, it happened and there are no explanations, only obfuscations from the company.
This isn't some cake shop where a few negative comments are to be expected, it is a company that styled itself right from IPO as the new generation of Dubai firms, transparent, international and honest. They are doing none of the above at present.
Jane...When I first started reading your comment I thought it was written with a heavy dose of sarcasm...then as I read further I realised you were serious.
If this is seriously your opinion and evaluation of the whole situation then good luck to you but this event has opened a whole can of worms with regards to Corporate Governance etc and allowed people to ask themselves, what is really happening in these 'listed' companies. Are the majority competent enough to be 'listed'? Under what criterion were they able to become listed and how strict is that criterion?
When there was enough cheap money around and masses of surplus cash, I can imagine many companies came to market that really weren't competent enough to have a 'listed' status.
It happened in Biotech and the Internet boom in the west...it could easily have happened under the guise of cheap surplus money here.
Arrogance and denial - that's what sums up the entire press release.
Arabtec should be seen as high risk stock which will trade with high volatility meaning you could make your fortune on it or loose it all - No thank you
I agree with Ronald
They dealt with this as it is there own cake shop , not as multibillion company with thousands of investors