Diversification plans have been slow to pay off for Arabtec, the UAE's largest construction company, which yesterday reported an 80 per cent drop in net profit for the first quarter.
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Back to business
The company's revenue fell to Dh1.2 billion (US$326.7 million) for the quarter, compared with Dh1.5bn in the same period last year. Net profit was Dh26.6m, down from Dh134m last year.
Earnings fell from 11 fils a share to 2 fils a share.
"The numbers were a lot weaker than expectations," said Majed Azzam, an analyst with Alembic HC Securities. Analysts forecast earnings from Dh58m to Dh70m from the construction bellwether, which has been expanding into Saudi Arabia, Egypt and Qatar in the wake of the downturn in Dubai.
"The main reason is lots of projects finished at the end of the [last] quarter and not many have started," said Ziad Makhzoumi, Arabtec's chief financial officer, in a conference call with analysts.
But to date the expansion plans are not producing the type of profits the company had predicted, according to its filing. Net margins fell from 11 per cent in the first quarter of last year to 4 per cent this year.
"We're seeing a lot of competition squeezing margins for all contractors," Mr Azzam said. "But the pace of compression was a little bit surprising."
Several of the company's new projects have yet to launch. In October, the company announced a 5bn Saudi riyal (Dh4.8bn) joint venture in Saudi Arabia with that country's Binladen Group to build 5,000 houses. Preliminary construction has started on the project, which accounts for about 30 per cent of the company's backlog of projects, but the company doesn't expect to see any significant revenue from it until later this year, Mr Makhzoumi said.
Most of Arabtec's entries into new markets are through joint ventures, which have not aided its bottom line as much as hoped, analysts said. The company said Dh27m of its gross profit in the quarter went to "non-controlling interests".
"This reflects the new reality that minority-held businesses have been increasingly profitable as opposed to the existing business," Chet Riley, a Nomura Securities analyst, said in a note to investors.
There was some good news in the report, Mr Riley said. The company's cash position increased by Dh45m during the period, to Dh633m, and there was an increase in the backlog.
"At first glance it is disappointing, but there are some positives coming out of the results," said Mr Riley.
The company postponed in March plans for a rights issue and a $150m, five-year convertible bond, saying market conditions were not favourable. The company's stock jumped 55 per cent in the following weeks as investors took the move as a sign it was on stable ground and did not need the influx of cash. Analysts, however, expect the company to try to raise money again within the next year. "The company needs to raise capital to take advantage of what is going on in the region," Mr Azzam said.
After falling more than 3 per cent in early trading, the company's share closed yesterday at Dh1.42, up 1 fil. "I think at this level the stock is fairly valued ," Mr Azzam said. "The market is already factoring in the worst-case scenario."
The company also reported it was in arbitration over a three-year-old dispute to build the Nad Al Shebaracecourse in Dubai. Arabtec and its joint-venture partner are seeking payment of Dh2.8bn.
kbrass@thenational.ae
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Fines for littering
In Dubai:
Dh200 for littering or spitting in the Dubai Metro
Dh500 for throwing cigarette butts or chewing gum on the floor, or littering from a vehicle.
Dh1,000 for littering on a beach, spitting in public places, throwing a cigarette butt from a vehicle
In Sharjah and other emirates
Dh500 for littering - including cigarette butts and chewing gum - in public places and beaches in Sharjah
Dh2,000 for littering in Sharjah deserts
Dh500 for littering from a vehicle in Ras Al Khaimah
Dh1,000 for littering from a car in Abu Dhabi
Dh1,000 to Dh100,000 for dumping waste in residential or public areas in Al Ain
Dh10,000 for littering at Ajman's beaches
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The biog
Siblings: five brothers and one sister
Education: Bachelors in Political Science at the University of Minnesota
Interests: Swimming, tennis and the gym
Favourite place: UAE
Favourite packet food on the trip: pasta primavera
What he did to pass the time during the trip: listen to audio books
Bob Honey Who Just Do Stuff
By Sean Penn
Simon & Schuster
Day 3, Dubai Test: At a glance
Moment of the day Lahiru Gamage, the Sri Lanka pace bowler, has had to play a lot of cricket to earn a shot at the top level. The 29-year-old debutant first played a first-class game 11 years ago. His first Test wicket was one to savour, bowling Pakistan opener Shan Masood through the gate. It set the rot in motion for Pakistan’s batting.
Stat of the day – 73 Haris Sohail took 73 balls to hit a boundary. Which is a peculiar quirk, given the aggressive intent he showed from the off. Pakistan’s batsmen were implored to attack Rangana Herath after their implosion against his left-arm spin in Abu Dhabi. Haris did his best to oblige, smacking the second ball he faced for a huge straight six.
The verdict One year ago, when Pakistan played their first day-night Test at this ground, they held a 222-run lead over West Indies on first innings. The away side still pushed their hosts relatively close on the final night. With the opposite almost exactly the case this time around, Pakistan still have to hope they can salvage a win from somewhere.
The five types of long-term residential visas
Obed Suhail of ServiceMarket, an online home services marketplace, outlines the five types of long-term residential visas:
Investors:
A 10-year residency visa can be obtained by investors who invest Dh10 million, out of which 60 per cent should not be in real estate. It can be a public investment through a deposit or in a business. Those who invest Dh5 million or more in property are eligible for a five-year residency visa. The invested amount should be completely owned by the investors, not loaned, and retained for at least three years.
Entrepreneurs:
A five-year multiple entry visa is available to entrepreneurs with a previous project worth Dh0.5m or those with the approval of an accredited business incubator in the UAE.
Specialists
Expats with specialised talents, including doctors, specialists, scientists, inventors, and creative individuals working in the field of culture and art are eligible for a 10-year visa, given that they have a valid employment contract in one of these fields in the country.
Outstanding students:
A five-year visa will be granted to outstanding students who have a grade of 95 per cent or higher in a secondary school, or those who graduate with a GPA of 3.75 from a university.
Retirees:
Expats who are at least 55 years old can obtain a five-year retirement visa if they invest Dh2m in property, have savings of Dh1m or more, or have a monthly income of at least Dh20,000.
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Safety 'top priority' for rival hyperloop company
The chief operating officer of Hyperloop Transportation Technologies, Andres de Leon, said his company's hyperloop technology is “ready” and safe.
He said the company prioritised safety throughout its development and, last year, Munich Re, one of the world's largest reinsurance companies, announced it was ready to insure their technology.
“Our levitation, propulsion, and vacuum technology have all been developed [...] over several decades and have been deployed and tested at full scale,” he said in a statement to The National.
“Only once the system has been certified and approved will it move people,” he said.
HyperloopTT has begun designing and engineering processes for its Abu Dhabi projects and hopes to break ground soon.
With no delivery date yet announced, Mr de Leon said timelines had to be considered carefully, as government approval, permits, and regulations could create necessary delays.
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The specs: 2019 Haval H6
Price, base: Dh69,900
Engine: 2.0-litre turbocharged four-cylinder
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Director: Jordan Peele
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BORDERLANDS
Starring: Cate Blanchett, Kevin Hart, Jamie Lee Curtis
Director: Eli Roth
Rating: 0/5
