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Sun 13 Feb 2011 01:30 PM

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Middle East builders’ earnings set to rise, Deutsche Bank says

Dubai’s Drake & Scull top pick, forecast to see 15 percent rise in order backlog for the quarter

Middle East builders’ earnings set to rise, Deutsche Bank says
Khaldoun Tabari, CEO of Drake & Scull. The firm is forecast to see a 15% rise in its backlog for the quarter

Construction contractors in the Middle East and North Africa
are set to have higher earnings and improved backlogs in the fourth quarter as
orders pick up, Deutsche Bank AG said.

“Overall, we expect the MENA contractors under our coverage
to post an 18 percent quarter-on-quarter increase in earnings, after a dreadful
third quarter,” analysts Nabil Ahmed and Athmane Benzerroug said in a report
emailed Sunday.

“The improvement should be primarily driven by seasonality.”

Construction firms were hit by slumping orders after the
financial crisis caused half of all planned real estate projects in Dubai to be
cancelled. The credit crisis eroded demand in one of the Middle East’s most
active building markets.

Drake & Scull International remains the analysts’ top
pick, the report shows. The Dubai-based construction and engineering company
won $2bn of new contracts in Saudi Arabia, Abu Dhabi and Oman during the fourth
quarter, outperforming competitors, Deutsche Bank said.

The analysts predicted that Drake & Scull will post the
strongest improvement in its backlog for the quarter at 15 percent, surpassing
the seven percent increase estimated for Arabtec Holding Co.

Performance probably will be “flat” at Orascom Construction
Industries, Egypt’s biggest publicly traded builder, according to the report.

Arabtec won orders totaling AED2.6bn ($707m), Deutsche Bank
estimated, its best performance since the second quarter of 2009.

Egypt's Orascom’s new
orders came to about $800m in the quarter, “similar to previous quarters and
insufficient to fuel backlog growth,” the analysts said.

Drake & Scull’s third-quarter profit fell 44 percent on
rising costs, while earnings were almost wiped out at Arabtec, the United Arab
Emirates’ largest contractor, plunging 96 percent. Orascom reported a 22
percent gain for the period.

Contractors in the Middle East and North Africa probably
will report a 19 percent decline in overall annual profit, according to the
report.

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