Drake & Scull International (DSI) took a significant hit in first half profit and revenue due to the construction downturn in Saudi Arabia where it saw a number of jobs cancelled.
The Dubai-based contractor slumped to a net loss of AED 216mn ($59mn) in the six months to 30 June, from a net profit of AED 34mn in the first half of 2015.
The loss is specifically attributable to project cancellations and additional one-off provisions taken in light of the challenges in the sector, the company said in a statement.
A majority of these provisions emanate from Saudi Arabia, with the total impact on the bottom line amounting to AED 192mn. These cancellations were executed by clients on individual one-off projects with minimal bearing on DSIs ability to continue operations in Saudi Arabia and other markets.
DSI reported a year on year decline of 23 percent in revenue, which stood at AED 1.83bn in H1 2016 as compared to AED 2.39 bn achieved in H1 2015.
Its order backlog fell to AED 9.37bn as of 30 June 2016, from AED 13.24bn in H1 2015, reflecting the project cancellations in KSA.
Despite the slowdown in the regional project awards, DSI managed to secure AED 570mn worth of new project awards year to date including the AED 343mn Doha Metro Depot and Stabilising Yards contract as well as the AED 227mn Zubair Oil Field project in Iraq. These key wins further reinforce the companys strategic decision to concentrate on sector-specific, core engineering projects with high operating margins, it said.
Restructuring
DSI is on track with its cost-reduction programme to improve operational efficiency and reduce overheads by the end of 2016
The company has implemented a number of measures and initiatives to optimize its capital structure, including the sale of non-core assets to generate cash and improve liquidity.
Khaldoun Tabari, CEO and Vice Chairman of Drake & Scull International PJSC, said: We are in the process of embarking on 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 reorganization and realignment of senior management roles as part of our efforts to enhance and streamline our operative framework.
Despite the challenges, our business remains operationally and financially robust. Due to our longstanding partnership with major international and local banks, we continue to retain strong lines of credit and secured access to funding to deliver our ongoing projects backlog.
We remain committed and focused on running efficient, low-cost and sustainable and cash generating operations and are confident about the medium- and long-term prospects of the regional industry.