Dubai: Arabtec Holding, the Dubai-listed construction firm, said on Monday it is seeking shareholder approval for a Dh1.5 billion rights issue and approval for a capital reduction plan after recording higher losses in 2016.
The statement came as Arabtec reported losses attributable to shareholders of Dh3.4 billion in 2016, widening from the Dh2.35 billion net losses recorded in 2015.
The announcement sent share prices plunging, as Arabtec’s shares ended the day 9.85 per cent lower at Dh1.19. It also spurred selling activity on other shares especially those of smaller cap stocks and construction firms. The Dubai Financial Market (DFM) index ended the day 1.75 per cent lower.
The financial statement for 2016 puts losses in the fourth quarter of the year alone at Dh2.95 billion, more than six times the losses incurred in the entire first nine months of the year, as per Gulf News calculations.
This comes despite repeated attempts by Arabtec to turn around financial performance, with the company having announced in June 2016 it will pull Dh1 billion out of its statutory reserve to extinguish some losses. Arabtec also recently appointed a new chief executive officer, and has been implementing cost-cutting measures.
In its statement, Arabtec attributed the losses to “a combination of impairment charges on high-risk items, which amounted to Dh2.8 billion in total, as well as recurring, non-recurring and operational expenses.”
Revenues for the year rose, however, 5.6 per cent year-on-year to reach Dh7.67 billion.
The company also said its financial performance was “a reflection of the adverse market conditions, which are having a negative impact on the construction industry throughout the GCC.”
“Our board is taking confident, sensible steps to underpin the company’s capital structure as we look ahead to a robust pipeline of business in the years ahead. Aabar Investments’ commitment to the rights offering represents a strong vote of confidence from our largest shareholder in the long-term future of Arabtec,” said Mohammad Al Rumaithi, chairman of Arabtec.
Arabtec said it will convene a general assembly meeting to get approval on the rights issue and the recapitalisation plan.
