Saudi woes see Drake & Scull swing to $61m loss in Q2

Dubai contractor says will “initiate fundamental changes to group and leadership structure”
Saudi woes see Drake & Scull swing to $61m loss in Q2
Khaldoun Tabari, CEO and Vice Chairman of Drake & Scull International PJSC
By Ed Attwood
Mon 15 Aug 2016 10:14 AM

Project delays and cancellations, especially in Saudi Arabia, were responsible for propelling Drake & Scull International (DSI) to a $62 million (AED225 million) net loss in the second quarter, the firm said on Monday.

The Dubai-based contracting giant said that the total impact of “project cancellations, additional one-off provisions and adjustments” amounted to $52 million.

The loss was in comparison to a $1.6 million profit in the same period a year earlier, and a $2.7 million profit in the first quarter of this year.

Revenue fell by 38 percent year on year to $219 million, and by 22 percent quarter on quarter.

In a statement posted on the Dubai Financial Market, the company blamed the fall in revenue on “the significant contraction and volatility in the regional constriction sector, the slow progress on ongoing projects, a decline in new project awards and adjustments in key markets across the GCC”.

Drake & Scull also said that the value of its order pipeline had shrunk to $2.55 billion, from $3.6 billion at the same time last year.

However, the firm also reported an improvement in revenue on newly awarded projects in its home market of the UAE, as well as better performances from its rail and infrastructure and oil and gas divisions, especially in Qatar and Iraq.

The contractor said that it “remained on track” with its cost-cutting programme, which involves the sale of non-core assets, and that the plans should realise “significant cost savings” by the end of this year.

“We are in the process of embarking on a new strategy to reposition ourselves as a leader in the market,” said Khaldoun Tabari, DSI’s long-running chief executive and vice chairman, in the bourse statement. “

“We will also initiate fundamental changes to our group and leadership structure which will be supplemented by a reorganisation and realignment of senior management roles as part of our efforts to enhance and streamline our operative framework.”

Tabari said that despite the challenges, DSI remained “operationally and financially robust” and that he was confident about the medium and long-term prospects for the regional contracting industry.

The DSI results followed a $50.8 million loss reported by another Dubai contractor, Arabtec, on Sunday.

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