Builders faced with late payments, low margins

30.10.2014
While Dubai may be moving ahead with great enthusiasm about its new projects, builders in the UAE are finding themselves stuck with massive amounts of work but squeezed profit margins, something that could potentially cause the city's mega-projects to fall behind schedule.

With the Expo 2020 just around the corner, the UAE has been announcing new projects like there is no tomorrow, but according to Arabian Business, all is not well on the construction front.
Builders in the UAE are finding themselves buried under massive amounts of work but profit margins are squeezed and developers are slow to pay bills. That could mean some of Dubai's mega projects may fall behind schedule.
"The biggest challenge contractors face is that the margins are still going down. It's getting more competitive, and a tough market to survive," said Philippe Dessouy, managing director at Belgian construction firm BESIX.
One regional industry expert, who did not want to be identified because of the sensitivity of his comments, said profits at UAE construction companies would be weak this year despite the massive volume of business.
"The contracting business is going through a rough phase. Payments are coming in late, which is impacting builders, and they are now faced with liquidity issues. This would of course have an impact on the projects," he added.
The challenges for construction firms can be seen at companies such as Arabtec, Dubai's largest contractor and builder of the world's tallest tower.Its backlog of projects has almost doubled to about AED26 billion ($7.1 billion) in about two years. The amount of money owed to it by clients jumped to AED9.1 billion in the first half of 2014 from AED6.6 billion a year earlier.
Similarly, Dubai's Drake & Scull had outstanding receivables of AED5.3 billion in the first half of this year, more than double its first-half revenue of AED2.35 billion. Its backlog grew to AED14.3 billion from AED7.4 billion a year earlier. The company declined to comment.

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