Growth in Saudi accounts for 50% of construction firm's AED7.5bn in unfinished projects
Drake & Scull International, a Dubai-based construction and engineering company, may get as much as AED7bn ($1.9bn) in new orders in Saudi Arabia this year as political turmoil curbs growth in other Middle East markets, its chief executive officer said.
“We are growing and I can easily see another 5 billion by the end of the year,” Khaldoun Tabari said in an interview. “We could get 7 or 4 billion, but there is no reason why we can’t get more contracts.”
Drake & Scull has expanded in the Middle East and North Africa since 2008 as Dubai’s property crisis caused orders to decline in its home market. Growth in Saudi Arabia, which accounts for 50 percent of the company’s AED7.5bn in unfinished projects, will help support earnings as political unrest causes uncertainty in markets such as Syria and Egypt, Tabari said.
“In Saudi Arabia I’d say we should take our fair share,” the CEO said. “If we can get a grip and become a major player there, it will give us the grace period to wait and see what happens in the region. It would also mean we would be on target in terms of profit for the next two years without taking major risks.”
Drake & Scull is betting on a Saudi construction industry that’s set to benefit from $82bn of housing projects announced in February and March by King Abdullah Bin Abdulaziz. The company’s work in Libya has been suspended, though the political unrest in Egypt hasn’t stopped its operations there.
Abu Dhabi is the second-biggest market for Drake & Scull, which is aiming to make an acquisition in India before the end of the year, Tabari said.
“With growth rates of 8 percent, nobody can afford to be out of India,” he said. Drake & Scull is looking at several potential purchases but hasn’t decided which company would be the best fit. Tabari declined to specify the amount he would be willing to spend on an acquisition or how it would be financed.
The contractor also started operations in Djibouti, Vietnam and Thailand, though its experience in Thailand was hampered by many operational problems, the CEO said.
“ We are pretty sure now that Thailand is not the right place to go on to the rest of Asia,” he said. “They have very skilled workforce, but it’s very difficult to work in Thailand,” he said. “We will keep a small presence.”
Drake & Scull is carrying out mechanical, plumbing and electrical works on the River, a 73-story skyscraper that’s expected to be Thailand’s tallest.
In the UAE, more developers are succeeding in securing bank funding to complete projects halted in the aftermath of the global credit crisis, which caused property values in Dubai to slump by 62 percent from their 2008 peak.
“We are seeing this every day now,” the CEO said. “Buildings that were stopped are now back on track. Those are mostly projects in the Palm Jumeirah, Jumeirah Lake Towers and Business Bay.”