Dubai's Drake & Scull blames cancelled contracts and tough Saudi market for second quarter loss
Drake & Scull International (DSI) slipped to a loss of Dh207.6 million during the second quarter of 2016 (Q2 2015: Dh6.1m profit) as revenue dropped by 37 per cent year-on-year to Dh805m.
The Dubai-based contractor blamed “contract cancellations and additional one-off provisions” for its plight, stating that the majority of these relate to problem contracts in Saudi Arabia.
For the first six months of the year, the company reported a net loss attributable to its parent company of Dh197m, compared with a profit of Dh35.3m in the same period last year. Revenue for the first six months fell by 23 per cent to just over Dh1.8bn.
The company said that the cancellations related to “individual, one-off projects” and had a minimal bearing on its ability to continue operating in Saudi Arabia.
Khaldoun Tabari, the chief executive and vice-chairman of DSI, said: “Our financial results have been impacted due to the substantial provisions for project delays and cancellations over the last six months, brought on by clients principally based in Saudi Arabia.
“We believe that these developments reflect the considerable challenges we have been facing across the region due to a very challenging macroeconomic environment.”
He said the firm was starting to put in place “a new strategy to reposition ourselves as a leader in the market”.
“We will also initiate fundamental changes to our group and leadership structure, which will be supplemented by a reorganisation and realignment of senior management roles,” he added.
The company’s backlog has reduced by almost 30 per cent year-on-year to Dh9.37bn, but it pointed to a “noted improvement in revenue and operational performance on newly awarded projects” in the UAE, as well as a couple of important wins for its rail and infrastructure and energy divisions.
Mr Tabari said that despite the challenges, DSI remained operationally and financially robust, and that he was “confident about the medium- and long-term prospects of the regional industry.”
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