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Mon 20 Jun 2011 03:57 PM

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Arabtec will not reverse provisions in 2011, CFO says

Dubai builder plans to eventually more-than-double its workforce in Saudi Arabia to 25,000

Arabtec will not reverse provisions in 2011, CFO says
Arabtec chief financial officer Ziad Makhzoumi

Dubai builder Arabtec will not reverse provisions in 2011 and has no immediate plans to issue a shelved $150m convertible bond, its chief financial officer said.

The emirate's largest builder by market value is looking to eventually more-than-double its workforce to 25,000 in Saudi Arabia as it continues to shift its focus to other markets following a real estate collapse in Dubai.

"We had to take provisions as some developers were facing difficulties. Most of these developers are paying us back, but we're not doing reverse provisions yet," said Ziad Makhzoum.

"With the market going the way it is, I think it is prudent to wait until possibly the end of the year," he said on Monday, adding the builder would unlikely book further provisions this year.

"We have to be conservatively cautious now. There are lots of things that we are hopeful will happen soon, but the timing is not in our hands."

The builder expects to maintain its current backlog of projects worth around AED15bn ($4.08bn) in all of its markets by the end of the year, he said.

"We are hoping that Saudi Arabia will eventually become our biggest market... it's unlikely to happen this year, because of the delay in building projects, building capacity," he said.

"We look to build capacity up to 25,000 eventually."

Saudi Arabia, the biggest Arab economy, is facing a massive housing problem due to rapid population growth and an inflow of expatriate workers coming to the kingdom which is rolling out a $400bn  infrastructure spending plan.

Makhzoumi said the company is bullish on Qatar and will push for projects, as the tiny Gulf Arab country prepares infrastructure for the soccer World Cup in 2022.

"We are bidding for work in Qatar. We are also going for joint ventures to make sure we can get the maximum."

The builder shelved plans for a rights issue and a $150m convertible bond earlier this month, citing unfavourable market conditions.

Dubai's return to the bond market last week is a sign of investor confidence returning but the builder has no plans to issue the convertible bond this summer, he said.

"With the unrest growing in the region, the interest rate was not attractive for us. To me any cheap money should be considered and anything around 6 to 6.5 percent is cheap for me."

The government of Dubai launched a $500m 10-year bond on Wednesday, the first since September 2010.

Arabtec's first-quarter profits slumped by about 80 percent year-on-year, as revenues dipped.

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