Exclusive Interview: Khaldoun Tabari, Drake & Scull CEO

Numbers game

For the first nine of months of 2012, DSI reported total revenues of Dhs2.1 billion and a net profit of Dhs83 million for the same period.

The order backlog closed at Dhs7.5 billion as of Sept 2012 while total project awards for the first nine months reached Dhs2.7 billion.

The cumulative revenues for the first nine months of 2012 indicate a continued momentum, a healthy backlog and sustainable growth and sound fundamentals for DSI,” says Tabari.

“The solid performance of DSI‘s core MEP business has been strong with over 10 per cent net margins and will continue to contribute to the growth of DSI .The oil & gas and civil businesses are expected to enhance revenue growth during the last quarter. Expansion into rail is on track and the company is prequalifying for major bids in that sector across the region.”

Tabari is also optimistic about the real estate sector.

“The property market is strikingly different from construction. It has potential, especially in KSA, Lebanon, Dubai and Abu Dhabi, where prices are going up due to greater demand from nationals in Egypt, Lebanon and Syria.”

In Dubai he pegs the Marina, JBR, Burj and Palm Jumeirah areas as strong buys.

Signs of life

Tabari ends on a positive note, stating that it is from this very downturn that growth for the construction market will emerge. As the sector continues shrinking, there will be an exit of small and medium players, which will increase industry consolidation.

“In turn these players will quote the correct prices, subsequently improving not only margins for the remaining players, but also productivity on major projects across the region.”

Currently there are an estimated $4.2 trillion worth of ongoing construction projects in MENA, with the UAE representing the biggest slice at $698 billion, data released by MEED reveals.

According to MEED Gulf Projects Index, growth in the UAE’s projects industry was attributed to the revival of three projects worth $960 million, and the launch of three new projects worth a combined $230 million. Elsewhere in the region, Kuwait recorded the region’s biggest rise in the value of its projects sector, increasing 1.4 per cent to $185.9 billion. Oman continued its growth trend, with the value of its projects sector rising 12 per cent compared to the same period in 2011; while Saudi Arabia, Bahrain and Qatar remained relatively steady.

“There are signs of recovery,” says Tabari. “In the long-term I am positive, but in the short- to medium- term we will see.”

Renewed focus on diversification from oil, increased government spending, along with a better economic outlook will boost construction activity. The fallout from the Arab Spring and the Euro crisis, along with a robust tourism sector will also infuse much-needed credit and subsequent development of construction-related activities. Key findings in a Deloitte report indicate that large infrastructure projects, particularly around social and transport infrastructure, will offer tremendous opportunities for contractors, as will continuing upstream and downstream oil and gas related developments in the coming years.

Tabari anticipates that investment in healthcare, hotels and education will also provide a shot in the arm to construction.

“At Drake & Scull we are neither pessimistic nor optimistic. We are currently conservative in our approach, more so than two years ago, and watching the market carefully.”