Arabtec’s Cash Position Improves on Payments Influx

Arabtec Holding PJSC, Dubai’s biggest construction company, said developers boosted bill payments in the last two weeks, signs last month’s $10 billion government bond is helping to ease cash flows in the emirate.

“We are beginning to see some liquidity being pumped into the system,” Riad Kamal, Arabtec’s chief executive officer, said at a news conference in Dubai today to announce the startup of a Saudi Arabia unit. Arabtec has received almost all outstanding payments up to December 2008 “and we have been promised that the flow will continue for our receivables in the coming few weeks and months,” Kamal added.

Arabtec, which has an order book of 39 billion dirhams ($10.6 billion), had receivables or unpaid bills of 4.98 billion dirhams at the end of 2008. The company is the biggest supplier of construction services to Dubai government-owned developers including Emaar Properties PJSC. It is the contractor for Burj Dubai, the world’s tallest tower that Emaar is building.

Dubai’s property companies will probably be the first to receive support from the emirate’s $10 billion bond sale as the Persian Gulf tourist and financial hub battles the effects of the global credit crisis, Nasser Bin Hassan al-Shaikh, director general of Dubai’s Department of Finance, said Feb. 25.

Dubai said Feb. 22 it had sold half the bonds from a $20 billion medium-term note program to the United Arab Emirates central bank to assist state-owned companies struggling to raise cash amid the worst financial crisis since the 1930s.

Real-estate Slowing

Dubai, which is building the world’s biggest man-made islands, is facing a slowdown of its once-booming property industry after residential prices quadrupled in the past five years and the seizure of global credit markets hurt mortgage lending. Dubai house prices have fallen 25 percent from the market’s peak in September, while Abu Dhabi prices have declined 20 percent, Morgan Stanley said in a report Jan. 30.

Arabtec announced today it had started a venture in Saudi Arabia in partnership with CPC Services Co., a unit of the Saudi Bin Laden Group and Prime International Group Services Ltd. Arabtec will hold 45 percent in the venture, which has equity of 150 million riyals. CPC will take 35 percent and Prime, the rest.

Arabtec’s unit in Saudi Arabia, the biggest Arab economy, expects to generate revenue of 1.5 billion riyals ($400 million) in the first year and 3 to 5 billion riyals in three years, Kamal said. Arabtec Saudi Arabia “has the potential of becoming one of the leading construction companies in the Kingdom.”

Qatar Operations

Arabtec operates in the U.A.E., Qatar, Jordan, Syria and Pakistan, although Dubai contributes more than 50 percent of its orders, the company said in December. It is managing projects valued at more than $1 billion in Qatar, Chief Financial Officer Ziad Makhzoumi told reporters at the conference today.

Arabtec’s revenue in 2009 will be about 9.5 billion dirhams, about the same as in 2008, and its net margin will be “slightly less than 10 percent,” Makhzoumi said.