As contracts dry up for most Gulf builders amid the construction slowdown, the UAE's Al Habtoor Leighton Group is bucking the trend with multibillion dollar orders on its books and further expansion on the cards in 2009.
Across the gulf, building sites are falling silent as delays and cancellations hit projects, forcing contractors, reduced to scratching around for ever scarcer contracts, to shed staff and scale back growth forecasts.
Amid the malaise it's tough to find a builder with anything but a glum expression - after all, it's a far cry from just four months ago, when the region's construction sector seemed on an unstoppable upward curve, builders filling their swollen order books thanks to a seemingly endless list of ambitious real estate projects.
However, with contracts valued at $8.2bn under his belt and growth of at least 30 percent expected in 2009, David Savage, managing director of Al Habtoor Leighton Group (AHL), has every reason to look to the future with considered optimism.
"We are confident that we will come through this stronger," insists Savage, who shakes his head at the suggestion that the year ahead will be make-or-break for the struggling industry.
"As the market comes off the levels that were difficult to sustain, the stronger companies will always perform better than some of the newer companies," he continues. "These newer companies perhaps don't have the depth or strength of an AHL, and will fall by the wayside or return to their natural bases."
This strength and depth was ensured through a September 2007 merger between UAE company Al Habtoor Engineering and the Gulf operations of Leighton International, a subsidiary of the biggest construction conglomerate in Australia. The result was the formation of one of the largest contractors in the UAE, blending expertise across building, civil engineering, services, steel fabrication and interiors.
And overseeing the merger was Savage, who was immediately able to draw upon his 20-plus years of experience in the building industry in Asia, including 10 with Leighton, to help secure key contracts including the $2.4bn Dubai Pearl, $1.3bn Dubai International Airport Concourse 3, and the $817m Zayed University campus project in Abu Dhabi.
The group's healthy outlook is all the more marked given the shuddering halt in the region's real estate boom that has sent ripples through the construction sector. A recent report by market research firm Proleads revealed that more than half of the UAE's 1,289 projects, worth $582bn, have been suspended.
But Savage, who is also an associate director of Leighton Holdings, does not see the market as in its death throes, but rather at a more measured stage in the real estate business cycle.
"There's obviously been a change as some markets have been impacted in the short term more than others but, significantly, going forward this region still has huge potential and opportunities for growth," he points out.
"2009 will see a reversion to a more normal level of business, where the business out there will be more keenly sought, which will bring conditions and some of the ways that contractors and developers work back to a more normal level," Savage analyses.
Savage strongly believes the government, especially in Dubai, can play a part in helping to revive the sector.
"Construction is the lifeblood of Dubai and a healthy construction industry is a healthy Dubai," he insists. "We think the government should join hands with the industry and do everything it can to keep the industry healthy.
"We would certainly like to see the government put an emphasis on ensuring any disputes and claims [between developers and contractors] are dealt with quickly."
AHL's promising pipeline might be of some relief to parent company Leighton Holdings. The Aussie firm, which owns a 45 percent stake in the group, announced this month its first half profits in the six months to Dec 31, 2008 had plunged 56 percent, after writing down the value of listed investments in Australia due to the global economic downturn.
And AHL has not escaped entirely unscathed from the fallout caused by the contraction in the real estate market. It suffered its biggest hit in December when the firm's contract to build the prestigious $790m Trump Tower on the Palm Jumeirah was suspended, with developer Nakheel citing easing market conditions for its decision to delay the scheme.
Nevertheless, this blow was softened when AHL learned on the same day that it had secured the contract to build Dubai International Airport's Concourse 3, and so Savage is able to brush off the loss - at least in public.
Although the company has revised down its growth forecasts for 2009 in recent months, Savage still expects growth of at least 30 to 40 percent, which he acknowledges is remarkable given the current climate. Significantly, the group's order book stands at a very healthy $8.2bn, higher than during the market peak of six months ago.
With Dubai Pearl and Concourse 3 already in the bag before the slowdown in the emirate late last year, the group has not been as badly affected as other contractors by the lean period its primary market has entered.
"Things have slowed over the last three or four months, particularly in Dubai, but Abu Dhabi continues to steam well ahead of our expectations and our business in Qatar is going along just as strongly," he points out.
In Abu Dhabi AHL is working on the mixed-use Al Bustan complex, a contract worth $612m, and the 6.5km highway linking Abu Dhabi with Saadiyat Island for Abu Dhabi's Tourism Development and Investment Company (TDIC). Across the Gulf waters in Qatar, it is building five hotels for the Al Faisal Holding, the Al Shaqab Equestrian Centre for Qatar Foundation, and Dubai Towers in Doha for Sama Dubai.
Building upon Al Habtoor's contacts in the local market, the joint venture has been able to form strong relationships with key clients in the UAE capital. "All those people have more work coming up which we are pursuing," says Savage.
Indeed, AHL is on a shortlist of three construction firms for a contract for the $6.8bn Midfield Terminal expansion of Abu Dhabi International Airport.
"We are really busy at the moment tendering opportunities in Abu Dhabi as there's quite a pipeline of work still there," Savage says.
"Having a solid order book means we are able to grow, and to continue to grow our human resources particularly, to develop the business," he continues. "So the strong markets of Abu Dhabi and Qatar we can service well.
"In Dubai we've a solid workload to carry us through a period of uncertainty, which we think will be pretty short, and we'll then be in a strong position to meet opportunities once this period of uncertainty eases off," Savage adds with optimism.
The solid order book also means AHL has not been forced to make the drastic cutbacks in staff other contractors have had to make in order to survive.
"We still have a large number of employees that's getting towards 35,000 in the region," Savage says. "That number hasn't changed significantly over the last six months, and we don't expect it to change significantly going forward as we've a lot of work to complete."
If there has been a silver lining to the construction slowdown it is that it has given the company time to cast its net further afield to look for work. It is pursuing a number of opportunities in Kuwait and is also looking for openings to expand across the Middle East North Africa region.
"In the past 18 months there's been almost no capacity to look elsewhere," he says. "One of the upsides for us, to have come from Dubai slowing in particular, is that we have more capacity to look at opportunities elsewhere."
With new tenders for residential projects drying up due to dwindling demand and a frozen lending market, the group will focus on securing government-backed infrastructure projects such as airports, schools, hospitals, roads, bridges and marine work, Savage explains.
The contractor's associate businesses are performing well with its services management division, Thiess Services Middle East, a partnership with Australia's Thiess Services, signing a $299m contract with the Abu Dhabi government to recycle the emirate's construction waste. Under Thiess's new long-term deal, the first waste management contract for the business in the region, it will process steel, bitumen and concrete waste, enabling it to be used again in concrete and road construction.
AHL chairman Khalaf Al Habtoor had said the company planned to sell as much as 40 percent of its shares in an initial public offering in Dubai this year. This would appear to be on hold at the moment.
"Clearly, in the current markets it [an IPO] is not an option we will be pursuing in the short-term but it's an option for the company going forward," says Savage.
"We've got a strong balance sheet and an ability to support our business. An IPO would be for expansion and we would look on it as something that can help us grow our business in the future."For all the latest construction news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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