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Arabtec looks to shore up balance sheet as Dubai contractor’s losses narrow

The contractor Arabtec has said that it is “looking at ways to enhance its capital structure" after posting its sixth successive quarterly loss yesterday.

The company said it “is currently engaged in discussions with Aabar, its largest shareholder, in respect of potential options for cooperation and continues to remain in dialogue with its major lending banks" about its capital position.

It announced a Dh46.4 million loss for the first three months of this year – an 83 per cent reduction on the Dh279.8m loss the company declared in the same period a year ago. Revenue increased by 8 per cent year-on-year to Dh1.94 billion. Last month, Arabtec reportedly appointed the US restructuring adviser Alix Partners.

The group cut its costs by 2 per cent to Dh1.89bn, meaning it made a gross profit of Dh45m, instead of a gross loss of Dh141m in the same period a year ago.

Its accumulated losses stand at Dh2.27bn, according to the financial statement released by Arabtec yesterday, so it is planning to tap into reserves to reduce that figure and strengthen its balance sheet. It will seek shareholder approval for this at its general meeting on June 1.

Notes to its accounts also reveal that a new dispute has emerged with a minority shareholder of its Qatar subsidiary. The shareholder has refused to sign off last year’s accounts, stating that it accepts “no responsibility for the financial position and performance of the subsidiary" during the year. Arabtec’s statement said it had obtained legal advice and “believes that the non-controlling shareholder is responsible for their share" of the operations and liabilities incurred. Arabtec also recommenced proceedings against Meydan for Dh1.4bn it claims it is owed for work carried out on the construction of Meydan racecourse.

Sanyalak Manibhandu, the head of research at NBAD Securities, said he believed Arabtec “still has some way to go" in terms of moving back into profit, adding that although it has reduced losses, it did so mainly by cutting overheads and that gross margins remained weak.

“I’m still concerned that it’s not an easy investment case," he said. “It’s still a difficult situation that they are in, even though the headline loss has reduced. The region in which it operates still has a problem with low crude prices and financial system liquidity. We know that when times get tough, people tend to delay payments."

Arabtec said operational highlights during the quarter included the handover of 2,000 villas at the Mira and Palma projects in Dubai. It is in the final stages of handing over Saraya Tower in Abu Dhabi and is close to completing the Louvre Museum on Saadiyat Island. It also pointed to major contract wins, including a deal to build a terminal at Bahrain International Airport and the Dh2bn West Yas villas project for Aldar Properties.

Despite this, it said market conditions remained “challenging … The company is seeking to reduce its cost base even further in 2016 in addition to the cost savings plans previously announced," it said.

Arabtec’s shares closed almost 5 per cent lower, falling by 7 fils to Dh1.45 per share. Aabar Investments, which is owned by the Abu Dhabi Government’s International Petroleum Investment Company, is the biggest single shareholder in Arabtec with a stake of 36.11 per cent.

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