Arabtec, the UAE's only publicly listed construction firm, yesterday announced a record second-quarter net profit of Dh273.6 million (Dh74m), up by more than 140 per cent on the same period last year.
Riad Kamal, the chief executive, said the profit was driven by "the expansion strategy implemented by Arabtec, and acquisitions which focused on proper integration for large scale operations".
Through a number of recent acquisitions, Arabtec is becoming a vertically integrated construction business. It now owns Target Engineering, an Abu Dhabi-based company that specialises in civil, electrical and marine contracting, as well as Gulf Steel Industries, a steelmaker. Arabtec is one of the three contractors building the Burj Dubai, destined to be the world's tallest building.
The company also acquired a 33 per cent stake in House of Equipment, a firm that rents construction equipment. Last week it revealed that it was close to finalising a joint-venture agreement with a major Malaysian construction firm. The two companies will establish a business specialising in piling and foundation, another key sector of the construction industry.
Arabtec announced a flurry of new contracts in the quarter, including its largest residential construction contract of this year, a Dh3 billion agreement to build 1,500 homes at the Al Furjan development in Dubai, a Nakheel project.
In a note to clients, the investment bank Shuaa Capital said Arabtec's performance this year "has boosted their visibility and provided tangible evidence of the company's ability to expand into Abu Dhabi, the Middle East and other potentially lucrative markets".
In its biggest deal of the quarter, the company won a Dh10bn tender - its largest ever - to construct a 400 metre skyscraper and surrounding buildings in St Petersburg, Russia. The contract was awarded by a division of Gazprom, the largest company in Russia and the world's largest extractor of natural gas.
Mr Kamal has previously said he hopes to see the company earning 40 per cent of its revenues from outside the UAE by the end of the decade. Arabtec now has Dh36bn worth of projects under construction in the UAE, Russia, Qatar, Jordan, Syria and Pakistan. The company recently suggested that an announcement regarding a new project in Saudi Arabia could be expected in the coming weeks.
Industry leaders estimate construction costs in the GCC have risen by 50 per cent this year, following a 30 per cent rise last year. And consumer price inflation in the region, running at over 15 per cent by some estimates, has led to a major labour shortage as would-be migrant construction workers stay at home. This is putting pressure on margins in the sector.
Arabtec says it is bucking the trend through vertical integration and tight supply-chain management. At a recent investors' conference, the company said it had pre-purchased 12 months' worth of construction materials as a hedge against further inflation.
Company officials also said that 50 per cent of Arabtec's contracts were priced on a cost-plus basis, meaning rising prices had no impact on its profitability. A further 25 per cent include clauses that allow increases in the price of steel and cement to be passed on to the client.
However, analysts are concerned that gross margins will fall because of Arabtec's large Russia project and planned forays into Europe, where margins are lower than in the booming Middle East.
"We expect gross margins to suffer an even further decline as contracting works in St Petersburg commence," said Emaar Saudi Financial Services in a recent research note.
Al Mal Capital concurred, adding that the company would not enjoy the same close supply-chain relationships in Russia that it did in the UAE. But all three investment banks see the company as an undervalued growth stock.
Arabtec's shares, traded on the Dubai Financial Market, have increased in value by more than 110 per cent this year. In the last 12 months, Bloomberg's US Home Builders index has declined by 30 per cent; the European index fell by 72 per cent.
@Email:tgara@thenational.ae
Company%20profile
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Company%20Profile
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The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
HIV on the rise in the region
A 2019 United Nations special analysis on Aids reveals 37 per cent of new HIV infections in the Mena region are from people injecting drugs.
New HIV infections have also risen by 29 per cent in western Europe and Asia, and by 7 per cent in Latin America, but declined elsewhere.
Egypt has shown the highest increase in recorded cases of HIV since 2010, up by 196 per cent.
Access to HIV testing, treatment and care in the region is well below the global average.
Few statistics have been published on the number of cases in the UAE, although a UNAIDS report said 1.5 per cent of the prison population has the virus.
BORDERLANDS
Starring: Cate Blanchett, Kevin Hart, Jamie Lee Curtis
Director: Eli Roth
Rating: 0/5
Confirmed%20bouts%20(more%20to%20be%20added)
%3Cp%3ECory%20Sandhagen%20v%20Umar%20Nurmagomedov%0D%3Cbr%3ENick%20Diaz%20v%20Vicente%20Luque%0D%3Cbr%3EMichael%20Chiesa%20v%20Tony%20Ferguson%0D%3Cbr%3EDeiveson%20Figueiredo%20v%20Marlon%20Vera%0D%3Cbr%3EMackenzie%20Dern%20v%20Loopy%20Godinez%0D%3Cbr%3E%3C%2Fp%3E%0A%3Cp%3ETickets%20for%20the%20August%203%20Fight%20Night%2C%20held%20in%20partnership%20with%20the%20Department%20of%20Culture%20and%20Tourism%20Abu%20Dhabi%2C%20went%20on%20sale%20earlier%20this%20month%2C%20through%20www.etihadarena.ae%20and%20www.ticketmaster.ae.%0D%3Cbr%3E%3C%2Fp%3E%0A
Israel Palestine on Swedish TV 1958-1989
Director: Goran Hugo Olsson
Rating: 5/5
Company%C2%A0profile
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TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
How to wear a kandura
Dos
- Wear the right fabric for the right season and occasion
- Always ask for the dress code if you don’t know
- Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work
- Wear 100 per cent cotton under the kandura as most fabrics are polyester
Don’ts
- Wear hamdania for work, always wear a ghutra and agal
- Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
Profile Box
Company/date started: 2015
Founder/CEO: Mohammed Toraif
Based: Manama, Bahrain
Sector: Sales, Technology, Conservation
Size: (employees/revenue) 4/ 5,000 downloads
Stage: 1 ($100,000)
Investors: Two first-round investors including, 500 Startups, Fawaz Al Gosaibi Holding (Saudi Arabia)
The specs
Engine: 2.7-litre 4-cylinder Turbomax
Power: 310hp
Torque: 583Nm
Transmission: 8-speed automatic
Price: From Dh192,500
On sale: Now
The specs
Engine: 1.5-litre 4-cylinder petrol
Power: 154bhp
Torque: 250Nm
Transmission: 7-speed automatic with 8-speed sports option
Price: From Dh79,600
On sale: Now
Armies of Sand
By Kenneth Pollack (Oxford University Press)
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
Company%20Profile
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It's up to you to go green
Nils El Accad, chief executive and owner of Organic Foods and Café, says going green is about “lifestyle and attitude” rather than a “money change”; people need to plan ahead to fill water bottles in advance and take their own bags to the supermarket, he says.
“People always want someone else to do the work; it doesn’t work like that,” he adds. “The first step: you have to consciously make that decision and change.”
When he gets a takeaway, says Mr El Accad, he takes his own glass jars instead of accepting disposable aluminium containers, paper napkins and plastic tubs, cutlery and bags from restaurants.
He also plants his own crops and herbs at home and at the Sheikh Zayed store, from basil and rosemary to beans, squashes and papayas. “If you’re going to water anything, better it be tomatoes and cucumbers, something edible, than grass,” he says.
“All this throwaway plastic - cups, bottles, forks - has to go first,” says Mr El Accad, who has banned all disposable straws, whether plastic or even paper, from the café chain.
One of the latest changes he has implemented at his stores is to offer refills of liquid laundry detergent, to save plastic. The two brands Organic Foods stocks, Organic Larder and Sonnett, are both “triple-certified - you could eat the product”.
The Organic Larder detergent will soon be delivered in 200-litre metal oil drums before being decanted into 20-litre containers in-store.
Customers can refill their bottles at least 30 times before they start to degrade, he says. Organic Larder costs Dh35.75 for one litre and Dh62 for 2.75 litres and refills will cost 15 to 20 per cent less, Mr El Accad says.
But while there are savings to be had, going green tends to come with upfront costs and extra work and planning. Are we ready to refill bottles rather than throw them away? “You have to change,” says Mr El Accad. “I can only make it available.”
COMPANY%20PROFILE
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The biog
Name: Sari Al Zubaidi
Occupation: co-founder of Cafe di Rosati
Age: 42
Marital status: single
Favourite drink: drip coffee V60
Favourite destination: Bali, Indonesia
Favourite book: 100 Years of Solitude
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
BLACK%20ADAM
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COMPANY%20PROFILE%20
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