Dubai’s Drake & Scull posts profit drop as Saudi projects delayed

Dubai’s Drake & Scull said on Monday that unforeseen delays to two major projects in Saudi Arabia were responsible for the contractor missing analysts’ expectations with a 27.1 percent decline in first-quarter net profit.

The firm made a net profit of 45.7 million dirhams ($12.4 million) in the first three months of 2014, compared with 62.7 million dirhams in the corresponding period of last year, it said in a bourse filing.

Three analysts polled by Reuters, on average, had forecast a net profit for the period of 58.9 million dirhams.

Shares in Drake & Scull initially slumped 3.4 percent in early trading before recovering slightly to 1.72 dirhams, a 1.7 percent reverse.

Mukhtar Safi, the firm’s chief financial officer, said in a statement it had faced “a slowdown in our general contracting business in Saudi Arabia due to unforeseen delays in two major projects which are not recurring,” and that things would improve in the second quarter of the year.

He did not name the delayed projects.

Safi added that the contractor’s strategy for the rest of the year was aimed at strengthening its balance sheet and reducing costs as it delivered on its backlog of work worth 12.2 billion dirhams.

Drake and Scull’s gross profit in the first quarter fell as the cost of executing its contracts rose 3.3 percent while contract revenue only rose 2.1 percent. The firm's income tax expense also quadrupled to 7.5 million dirhams.