DUBAI: Faced with fierce competition for work in Abu Dhabi, Dubai’s Drake & Scull International will focus on middle and upper range projects to protect profit margins, its chief executive said on Wednesday.
Dubai’s property crash, which sent house prices falling by some 60 percent from their peaks in 2008, led to more construction firms flocking from the emirate to win work in the capital of the United Arab Emirates, which has hampered margins.
"What Drake & Scull would like to do is stay in the middle upper range of projects and therefore we do not compete at the lower end," Khaldoun Tabari said at the Reuters Real Estate and Infrastructure Summit in Dubai.
"As you go higher you don’t have many contractors playing that field … we have reduced our margins but we cannot keep reducing margins.
We are right now in Dubai in a survival mode but in Abu Dhabi there is work," he said.
The specialist mechanical, engineering and plumbing contractor is also eyeing opportunities in India and Libya following a rapid expansion plan outside its home market since it listed on the Dubai bourse in 2009, Tabari said.
In May, Tabari told Reuters the company was aiming to increase its order pipeline by a third by year-end to around AED6 billion ($1.63 billion).
"You face dents, you face problems in the road but the road is quite clear," he said on Wednesday, adding he expected turnover to fall in Dubai and pick up "drastically" in Abu Dhabi, and in Kuwait and Qatar, where Drake has made acquisitions.
It would spend between AED500-700 million on buying two Saudi companies this year, he said in May.
The downturn in Dubai led to billions of dollars worth of projects to be put on hold or cancelled and thousands of jobs being cut, but Drake continues to keep hiring as it expands in the region.
"We are hiring. These are great times to hire good people … We are in a growing mode," Tabari said.
The firm, whose projects include luxury hotels such as the Shangri-La Qaryat Al Beri in Abu Dhabi, will start operations in Syria by the end of the year, it said in May, and has begun operations in Oman in 2010.
The company reported net profit attributable to shareholders of AED42 million in the three months to March 31, against AED69 million a year earlier, missing analysts’ forecasts.
The firm’s shares were down 1.38 percent at AED0.8 a share by 0931 GMT, underperforming Dubai’s benchmark index which was 0.53 percent lower. –Additional reporting by Erika Solomon