The US project management company Hill International expects overall growth in the Middle East to return in terms of new contract awards next year, although it is planning to cut overheads in Oman in anticipation of a slower market in the sultanate.
Hill’s chief executive David Richter anticipated that “the slowdown in the Middle East will end” during a conference call with analysts after the company announced a 66 per cent decline in second-quarter net profit to US$1.5 million, largely because of a decline in fees from its Middle East project management arm.
“[It] will flatten and begin to get back to some level of growth,” said Mr Richter. “My guess is by the fourth quarter, we will have stabilised and we will be looking at growth in 2017 again.”
He added that contract wins secured so far this year, such as the $79m win to oversee construction of the new South Al Mutlaa city in Kuwait and a $42m, four-year deal alongside the Qatari building consultancy Astad and the Italian consultancy Italferr to oversee construction of the Lusail Light Rail Tram project in Qatar, meant revenue was “just beginning to ramp up” in the third quarter.
“We’ve seen a significant decrease in work from Oman, and especially profitability,” said Mr Richter. “In the second quarter, our consultancy fees in Oman were down 27 per cent, but our operating profit was down 74 per cent, and that was one of our big profit centres in the last couple of years. We’re adjusting to that, but given that business was down 14 per cent in the second quarter we are looking at and implementing overhead changes there to factor in the lower revenue that we are anticipating in that operation.”
The company has had to contend with a number of issues in Oman, where payments relating to its contract to manage the expansion of Muscat and Salalah International Airports were delayed until a contract amendment extending its role and the project completion was signed. Mr Richter said that it had received $31m of the $35m it was owed since the amendment was agreed in March, but added that the amendment signed would bring in lower revenue and margins for the company. Its gross margins on the project were likely to decline from 35 per cent to 22 per cent.
Hill International was appointed project manager for the airports in 2012 after the previous firm running the project, Denmark’s Cowi Larsen, had its contract terminated by Oman’s ministry of transport and communications. Work at the airports was originally due to be completed in 2014, but Mr Richter told analysts that he expected Hill’s work to take another nine to 12 months.
On a brighter note, the company announced that its joint venture with Astad had secured a $43.1m extension to its project management contract to oversee construction of the Doha Metro’s Green Line.
The joint venture (in which Hill has an 80 per cent stake) first won a four-year deal to oversee construction of phase one of the Green Line under a $59m deal won in 2012. This latest extension covers a further two-and-a-half year period leading into early 2019.
The Green Line runs from the east of Doha at Al Mansoura to Al Riffa in the west, passing through Education City, Al Shaqab and Qatar National Library, which is under construction. It will be 22 kilometres long, have 11 stations and the capacity to handle 140,000 trips a day by 2021.
mfahy@thenational.ae
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