By Benjamin Roberts
Gulf contractors that have posted the strongest results for the first three quarters of this year
This year has been a turning point so far for the biggest contractors. Many, though not all, have seen an increase in contract income, and often this is a reflection of the area in which they specialise; such as with National Marine Dredging Company. Though Arabtec and Drake & Scull International have seen recent falls in net profit, their diversification may lead to a strong end-of-year.
As with Construction Week’s Stock Stars profile last summer, a summary of the company’s activities also includes the companies’ share price performance against a CW benchmark of 5% above its opening price at the start of the year.
Nine month net: AED342 million
Big project: 5,000 villas in Saudi Arabia’s Eastern Province
Year so far: Nine month profits were almost half that of last year as project cancellations and a struggling property market weighed on the UAE’s biggest builder. The company has been rapidly expanding its portfolio away from its home market, and last month claimed contract wins in Saudi Arabia and Egypt, and announced a joint venture with Masawa Holding in Bahrain. After-tax gains reached AED342 million against the AED602 million posted last year, with revenues for the January-to-September period falling 26% to AED 4.1 billion.
Third quarter figures saw net profits fall more than 80% - AED41 million, down from the AED209 million. The company told shareholders: “Despite our positive medium-term outlook on the US$2 trillion MENA construction and infrastructure sectors, we expect a continued slowdown in Arabtec’s geographical diversification as delays in receivables collection and new awards impede management’s expansion plans.” Thomas Barry, CEO, told an audience at the ConstructionWeek conference that the company would be focusing on expansion for 2011.
Performance against CW benchmark: -46.17%
Drake & Scull International
Nine month net: AED120 million
Big project: ‘Smart City’, Madinah
Year so far: The company has continued its aggressive growth strategy, and the big contract wins earned in the first two quarters are starting to filter through. Net profits fell by 45% for the third quarter against last year, to AED34.1 million, with contract income rising 8% to AED432 million. Contract costs rose to AED375.7 million from AED309 million last year. Net profits for the nine month period fell by a similar percentage, down to AED120 million from AED214 million. The company’s backlog stands at AED 4.7 billion and it anticipates AED 1 billion worth of new projects before the end of the year.
Performance against CW benchmark: -4.5%
National Marine Dredging Company
Nine month net: AED352.9 million
Big ongoing project: The Ruwais channel in Abu Dhabi.
Year so far: The company saw a 74% rise in contract revenue for the nine months compared to that of 2009 on the back of some big deals – up to AED1.4 billion, compared to AED804 million – although operating cost almost doubled. The company has benefitted from the recent boom in port expansion, its key service. Profits from operations rose 50% against that of last year, up to AED338.7 million, with net profits rising to AED352.9 million, up 48%. The company plans to issue a US $85 million convertible bond next March.
Performance against CW benchmark: -1.5%
Makkah Construction & Development Company
Six month net: SAR161 million
Big project: Hilton Makkah
Year so far: The contractor has been involved in a number of interesting areas in the last few months, which has been augmented by an upturn in returns. Net profits for the last six months (the company schedules its finances in accordance with the Islamic calendar) rose 43% to SAR161 million, with the last quarter of profits rising 80% to SAR118.9 million. This is primarily due to the leap in occupancy rates in its Hilton Makkah during Ramadan and Shabaan months, the company has said.
Performance against CW benchmark: +5.3%
Mohammad Al Mojil Group
Nine month net: SAR35.7 million
Big project: Smelter, Ras Al Kour
Year so far: Saudi Arabia’s Mohammad Al Mojil’s year so far has been on the ascendance, and by June it claimed to have a backlog of SAR3 billion in orders. Contract wins include a SAR275 million deal for mechanical and electrical work and procurement for an aluminium smelter in Ras Al Zour. The 3% fall in net profits for the third quarter – down to SAR13.5 million – did not greatly dent its nine month after-tax gains. The company posted SAR35.7 million for that period, up 16% on the same period last year. The company said it has adopted a “conservative policy” to booking payments.
Performance against CW benchmark: -37%
Al Hassan Engineering
Nine month net: OR1.709 million
Big project: Amal Power Plant project
Year so far: Al Hassan Engineering saw net profits and contract revenue rise for the first nine months against the same period last year as money filtered through from clients and finance charges fell. The Omani contractor saw after-tax gains reach OR1.7 million, up 13% against the OR1.5 million posted last year. Contract income reached OR39.3 million, up 6.3% from OR37 million. The figures were due to improved performance on projects, reduced finance costs and higher “cash collection” from clients, the company said.
Performance against CW benchmark: +15.9
Galfar Engineering & Contracting
Nine month net: OMR 266 million
Big project: Expansion of Salalah airport (JV with Larsen and Toubro)
Year so far: Galfar Engineering & Contracting saw net profits fall 64.7% for the third quarter against the same period last year - OR3.4 million against OR9.7 million previously - with net profits for the first nine months falling 17.4% to OR266 million against OR322 million in 2009. Net cash from operations fell 82% to OR3 million from OR17 million for the nine months, despite a steep rise in returns from financing activities.
But the company said that it has secured OR92 million in new contracts over the third quarter. These include construction of Duqm Beach Hotel and a design, build, and maintenance deal for the New Darsait Sewage Treatment plant. This month the company won a US $764 million contract as part of a joint venture with Larsen and Toubro to expand Salalah airport. Further, its Indian subsidiary - Galfar India Pvt - has completed its first project, the Indore-Ujjain road, five months ahead of schedule.
Performance against CW benchmark: -15%