Arabtec set to appoint debt restructuring advisers after posting first-half loss
The company said the impact of the pandemic slowed progress on its projects and increased costs
Contractor Arabtec is in the process of appointing advisers to work on a "capital and debt restructuring exercise" after reporting a first-half loss on lower revenue in a weaker construction market.
Net loss attributable to the owners of the company for the period ending June 30 reached Dh788.4 million, compared to a profit of Dh57.9m during the same period in 2019, the company said in a filing to the Dubai Financial Market, where its shares trade. Revenue for the period fell 28 per cent to Dh3.02 billion.
The company attributed the loss mainly to "limited liquidity in the real estate and construction sector". A slowdown in the real estate sector resulted in the awarding of a limited number of contracts, while the effect of the Covid-19 pandemic slowed progress on projects and increased costs. Delays in the settlement of outstanding claims also affected the company's cash flow.
Arabtec's other core businesses including its industrial arm Target Engineering, its infrastructure unit Arabtec Engineering Services and its mechanical and plumbing business Efeco remained profitable, the company added.
The company will soon convene a shareholders' meeting to discuss future options for the group, considering its need for more funds.
Arabtec breached banking covenants at the end of last year, meaning the bulk of its loans became repayable on demand. The company owes about Dh1.8bn to banks and more than Dh5.3bn to trade creditors. Its total liabilities of Dh10.14bn are larger than its assets of Dh9.79bn, , according to its half-year financial statement.
The contractor has been trying to stabilise its business amid difficult market conditions that were further exacerbated by the pandemic.
The company said in a statement addressing its losses that it plans to continue a consolidation and restructuring of its operations to reduce costs, close out legacy projects, pursue legal claims to "secure and recover the group's contractual rights" and to dispose of non-core assets to boost liquidity.
Earlier this year, Arabtec said it will take a more selective approach to geography, clients and contract terms and will focus on its core strengths such as construction of villas to boost growth.
Arabtec, which built Louvre Abu Dhabi and the world's tallest tower Burj Khalifa, completed a recapitalisation three years ago, which saw it reduce the number of shares in issue to wipe out Dh4.6bn of losses and raise Dh1.5bn in fresh capital through a rights issue.
Earlier this year, the company said it remained bullish about opportunities in the industrial and infrastructure segments of the market and that its subsidiary Target Engineering is well positioned to grow revenue and backlog through projects in the UAE and Saudi Arabia.
In July, Target Engineering won a 200m Saudi riyal contract for the replacement of storage tanks at Saudi Aramco's Ras Tanura refinery in Saudi Arabia.
Last month, Arabtec also appointed Mubadala Investment Company’s deputy group chief executive Waleed Al Muhairi as its chairman.
Updated: August 16, 2020 05:25 PM