Arabtec second quarter net loss narrows but costs still weigh

Dubai contractor Arabtec on Sunday reported a narrower loss in the second quarter compared to a year earlier, its seventh straight quarterly loss as costs weighed on earnings.

The company has been struggling with a difficult construction industry environment as Gulf economies slow and governments restrain spending because of low oil prices.

Arabtec made a net loss attributable to equity holders in the parent of $50.8 million (186.4 million dirham) in the three months to June 30, it said in a statement.

This compares with a loss of $195 million (718.4 million dirhams) in the corresponding period of 2015.

EFG Hermes had forecast Arabtec would make a quarterly net loss of $22.65 million (83.2 million dirhams).

Direct costs of Arabtec in the second quarter totalled $585 million (2.15 billion dirhams), almost as much as the revenues it earned in that period.

Quarterly revenue

The firm's quarterly revenue was $588 million (2.16 billion dirhams), versus $490 million (1.80 billion dirhams) a year earlier.

"The direct costs are still too high, which is a problem. There was a good improvement in the first quarter but that has not been sustained in second quarter," Sanyalaksna Manibhandu, head of research at NBAD Securities said.

The company's finance costs from continued operations rose 89 per cent from the year earlier period to $4.63 million (17 million dirhams) during the quarter. The rise was due to increased borrowings for working capital for new projects, it said.

The company was working on projects worth a total of $6.15 billion (22.6 billion dirhams) in the quarter, it said, up 12 per cent from the previous year.

Structural reform

In a bid to help strengthen its capital structure and reform its business, Arabtec hired restructuring advisory firm AlixPartners, Reuters reported in April.

In June, shareholders agreed to use $3.67 billion (1 billion dirhams) of the company's statutory reserves to wipe out some of its accumulated losses.

Arabtec is aiming to break even this year and return to profit in 2017, its chairman said in April. "Unless there's improvement in the second half of the year, you'll doubt whether they'll break even this year," Manibhandu said.