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Arabtec profits surge in final quarter of 2013

Profits at Arabtec nearly tripled in the final three months of last year, Dubai’s largest listed contractor said yesterday.

The company is benefiting from a recovering UAE construction market and its expansion and diversification strategy.

Posting its full year financial results, Arabtec said that profits rose 285 per cent to Dh122 million in the three months to the end of December 2013 compared with the same period the previous year.

Revenues rose 39 per cent during the quarter to Dh2.2 billion.

Arabtec said that profits for the full year stood at Dh377m – an increase of 171 per cent on full year 2012 profits.

The company reported that its backlog of projects increased 22 per cent last year to stand at Dh24bn – a number that is expected to grow significantly over the coming year, when some of the company’s 2014 contract wins are taken into account.

Arabtec, which is 21.6 per cent owned by the Abu Dhabi investment fund Aabar, was awarded a Dh22bn contract to build 37 new towers in Abu Dhabi and Dubai in February. The company has also won high-profile projects in EgyptJordan and Abu Dhabi in recent months that are not included in last year’s figures.

Arabtec also reported that its construction margins improved in the three months to the end of December to 11 per cent, an increase from 5 per cent during the same period the previous year. For the year as a whole, Arabtec said that margins rose from 10 per cent in 2012 to 12 per cent in 2013.

An Arabtec spokesman said that the improvement could be attributed to the company’s recently implemented strategy of targeting more complicated and higher-margin work.

Arabtec raised Dh2.4bn last June in a rights issue that it said would be mostly used to expand its affordable housing and oil and gas operations, enabling it to diversify from traditional construction activities that were hit hard during Dubai’s property crash.

Arabtec said that its board was recommending a dividend distribution of 40 per cent.

“2013 was a pivotal year for Arabtec,” Hasan Ismaik, Arabtec’s managing director and chief executive said. “Since the start of 2014, our company’s subsidiaries have been selected to execute a series of new projects, with a total value of Dh180 billion, which gives us visibility on our earnings growth for many years to come.”

Shares in Arabtec rose 2.5 per cent yesterday to stand at Dh5.28 each after the stock surged 6.4 per cent in trading on Monday.

“We had viewed Arabtec as the best placed for strong backlog growth, combining a strong underlying general construction market, an influential main shareholder and significant diversifications,” said Loic Pelichet, the assistant vice president for research at NBK Capital.

“However, given the breakneck speed of expansion we feel that more caution is due in valuation, as the execution risk has risen significantly.”

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