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DSI incurs Dh985m Q3 loss on provisions

Dubai - The company, which joins another construction major Arabtec Holding in reporting losses, posted a Dh877.8 million attributable net loss in the three months.

Drake & Scull International (DSI), a Dubai- based engineering and construction company, posted on Sunday third-quarter net loss of Dh985 million due to "one-off provisions and revenue adjustments taken in light of the current challenging market condition."
This compares to a net profit of Dh21.37 million in the same 2014 period, DSI said in a statement.The company, which joins another construction major Arabtec Holding in reporting losses, posted a Dh877.8 million attributable net loss in the three months through September, compared with profit of Dh21.4 million a year earlier. The company's shares fell 10 per cent to 41 fils, the lowest on record since the company's initial public offering in 2009. The drop was the biggest since December 2014.
DSI said revenue for the first nine months was Dh2.83 billion while the total backlog stood at Dh12.35 billion with significant project awards year to date amounting to Dh2.4 billion primarily in the UAE. "The current challenging macro-economic environment; characterised by weaker oil prices, a slowdown in the construction sector and a more competitive landscape has caused developers and clients to defer payments and delay projects across DSI's major markets," it said.
"As the current regional construction sector remains extremely challenging we have taken a pre-emptive and prudent view of our exposure related to key projects and have introduced cost efficiency measures to preserve cash and initiatives to reduce debt," said Khaldoun Tabari, CEO and vice-chairman of DSI.
"Longer-term we remain confident about the prospects for the company. We believe that regional government diversification programs and required infrastructure investments remain a significant tailwind in the GCC and that our clients remain fully committed to funding and completing their ongoing projects," he said. Despite the market challenges, the business remains operationally and financially efficient, the DSI statement said. "Due to longstanding partnerships with major international and local banks, the company continues to retain strong project lines of credit and access to funding to deliver ongoing projects."
DSI said it had initiated a cost-cutting programme to improve operational efficiency. The company is also taking a number of measures to boost working capital, reduce debt levels and improve the capital structure by selling non-core assets to generate cash and improve liquidity.
DSI said it was awarded Dh2.4 billion worth of new projects year to date. The UAE, Oman and Kuwait markets accounted for 73 per cent, 15 per cent and 12 per cent of the new awards respectively.
Painting an upbeat market outlook, DSI said the development of the regional rail networks, urban transportation projects in the Mena region is poised to enter a period of rapid growth.
"Around Dh5 billion worth of rail projects are currently in the tender pipeline and DSI's extensive experience with rail projects in Asia and Europe, particularly in MEP, and its strategic alliances with leading global rail experts positions the company well to win a significant proportion of these projects and drive its future profitability," it said.
- issacjohn@khaleejtimes.com