The engineering and contracting company has posted a decline in profits of 45.3 per cent in the third quarter compared with the same period last year as costs rose.
Drake & Scull International blames profit fall on costs
Drake & Scull International (DSI), the engineering and contracting company, has posted a decline in profits of 45.3 per cent in the third quarter compared with the same period last year as costs rose.
DSI yesterday announced profits of Dh34.1 million (US$9.2m).
The company has expanded in the region since 2008, when the property sector in the UAE began to decline, and has bought several smaller companies.
But the new contracts pushed profits down because the deals have not yet started yielding their full income potential, DSI said yesterday. "Delay in execution of newly awarded projects affected our profit stream, especially when our overheads and pre-construction expenses are continually incurred," said Osama Hamdan, the chief financial officer of DSI. Mr Hamdan said civil contracting had risen to 25 per cent of total revenue and was emerging as a driver of its business.
But that has "impacted our overall margins as the civil business has lower margins" compared with its other operations, such as installing mechanical, electrical and plumbing, he added.
Khaldoun Tabari, the chief executive of DSI, said the results "reflect the measure and the outcome of our expansion, and we remain optimistic about the future outlook of the company as we believe these activities will pave the way for sustainable growth in 2011 and beyond".
DSI's backlog has reached Dh4.7 billion and Mr Tabari said he anticipated another Dh1bn of project deals by the end of the year, particularly in Abu Dhabi and Saudi Arabia.
The company has emerged as one of a few construction related businesses that have successfully diversified exposure away from the struggling Dubai market and into faster-growing economies.
This year, it has set up new offices in Egypt, Syria and Oman and recently announced it had finalised the acquisition of two companies in Saudi Arabia.