Arabtec Falls After Reporing Lower Profit on ExpensesZainab Fattah
Arabtec Holding Co. fell the most in a month after reporting a 32 percent decline in third-quarter profit that was lower than analysts forecast as layoff costs boosted expenses.
The United Arab Emirates’ biggest publicly traded construction company said net income dropped to 68.7 million dirhams ($18.7 million) from 100.8 million dirhams in the same period a year earlier, Dubai-based Arabtec said in a statement. Earnings were forecast at 131.8 million dirhams, the mean of four analyst estimates compiled by Bloomberg. The shares closed 5.9 percent lower in Dubai trading, the most since Oct. 16.
The resignation of Arabtec’s Chief Executive Officer Hasan Ismaik in June and the subsequent dismissal of top managers threw into doubt an expansion plan that saw Arabtec shares quadruple during the CEO’s 15 months in charge. Those who left included the chief operating officer, chief information officer, chief risk officer and mergers and acquisitions head, people with knowledge of the situation said at the time.
General and administrative expenses made up 10 percent of revenue in the third-quarter compared with 6.6 percent in the year earlier period, Sanyalaksna Manibhandu, Abu Dhabi-based analyst at NBAD Securities LLC, said in a research note.
“We suggest the cost of redundancy played a role in the G&A expenses margin expansion,” the analyst wrote. Manibhandu has the shares under review.
Total general and administrative expenses jumped 89 percent to 241.5 million dirhams while direct costs increased 23 percent. Profit declined due to non-recurring general and administrative expenses, the company said. Revenue climbed 24 percent.
Gross profit margin was the key miss, Manibhandu wrote. The margin dropped 0.9 percentage points from the second quarter to 12.8 percent, he wrote.
Arabtec is building a branch of Paris’s Louvre museum in Abu Dhabi and its order backlog jumped to 23.8 billion dirhams by the end of September from 23.47 billion dirhams a year earlier.