Depa warns of sliding revenues across the board

Depa, the Dubai interior contractor, says the Arab Spring is impacting its bottom line.

Depa, which fitted out the Burj Khalifa, has been aggressively diversifying its business away from Dubai. Jumana El Heloueh / Reuters

Depa, the Dubai interior contractor that fitted out the Burj Khalifa, is the latest company in the construction sector to warn that turmoil in the Middle East is driving down revenue.

The delay of several large contracts in the region will "dampen full-year market expectations", it said yesterday. The company's backlog of contracts stood at US$2.3 billion (Dh8.44bn) at the end of last month, unchanged from March, the company said.

Shares in the stock fell 2 per cent yesterday to close at 51 US cents a share.

"It appears revenues are much lower than expectations," said Majed Azzam, an analyst with AlembicHC.

Several construction companies and contractors have been affected by the Arab Spring, including Arabtec, the UAE's largest construction company, which reported a 30 per cent drop in revenue in the first quarter compared with the same period last year.

"It's not just Depa facing issues," Mr Azzam said. "It seems to be the theme with contractors."

The value of construction contracts in the Middle East and North Africa region dropped 34 per cent last month compared with June last year, according to a report released this week by Citi Investment Research and Analysis. Overall project award growth is at its lowest rate since March last year, in part due to the Arab Spring, the report said.

"It doesn't mean projects are not going to happen, but it is slowing down the market," said Heidy Rehman, an analyst with Citi.

One of the casualties is Egypt, which has awarded only $347 million worth of projects in the first six months of this year.

"Egypt construction spending has more or less stopped," Ms Rehman said. Depa has been aggressively diversifying its business away from Dubai, including a push into Asia with the Dh295m purchase in August last year of Design Studio, a Singapore company.

Eighty-five per cent of its backlog was outside Dubai, the company reported in March.

Also last year the company was awarded its first contracts in Syria and Yemen. A Dh72m contract to fit out the Yasmeen Rotana Hotel in Damascus is one of the company's contracts delayed by the Arab Spring, a spokesman for Depa confirmed. The company declined further comment.

Depa signed about Dh800m in contracts in the first half of the year, the company reported. The new deals include a Dh110m contract for interior wall work for the Chhatrapati Shivaji International Airport in Mumbai.

"This is an important contract as Depa continues to develop its presence in this fast-growing market," the company said.

Depa also has a contract for the interior fit-out of the spa in Port Baku Towers in Azerbaijan.