Saudi’s Khodari Expects Government Compensation For Labour Fees

Partly because of higher labour costs, Khodari’s net profit tumbled 57 per cent from a year earlier to $3.7 million in the first quarter of this year.



Major Saudi Arabian construction firm Abdullah A. M. Al-Khodari Sons expects the government to compensate it for some of the costs of labour reforms, a senior executive said, in a sign authorities aim to cushion the economic impact of the reforms.

Since 2011, the government has stepped up efforts to push more Saudi citizens into private sector jobs by making it more expensive and difficult for companies to hire large numbers of foreign workers.

In 2012, it introduced a levy of 2,400 riyals ($640) a year for every foreigner whom a company employs above the number of its Saudi workers. For companies such as Khodari, which has about 17,000 employees, the total cost can be substantial.

The government says its labour policies are proving successful and is continuing them, but since last year it has softened the impact on companies in some areas, providing them with money for subsidies and training.

“The Ministry of Labour has announced that they will grant us the compensation for the work permit levy,” Kailash Sadangi, chief financial officer at Khodari, told Reuters.

“We don’t know exactly how much is the levy drawback. The process will commence from May this year. Once our claims (are) approved, we will start accruing income from this source.”

Partly because of higher labour costs, Khodari’s net profit tumbled 57 per cent from a year earlier to 13.98 million riyals ($3.7 million) in the first quarter of this year.

However, Sadangi said the compensation from the government, as well as income from selling used equipment at auction, would boost the company.

“Together with a strong order book, hopefully we will be able to do well again this year,” he said, adding that Khodari’s order book now totalled about 5 billion riyals.

He added, “We are on a growth trajectory…We had revenue growth of 14 percent last year. We cannot say what will be our full-year growth this year, but definitely we would aim for profitable growth.”