DSI Q2 profit slumps 49%

Posts Dh26.1m quarterly profit; German subsidiary weighs on results

Dubai contractor Drake and Scull posted a 49 per cent drop in second-quarter net profit on Wednesday, missing analysts' forecasts, as high financing costs for acquisitions and increased provisions for contracts ate into profits.

The firm, which specialises in mechanical, engineering and plumbing operations, made a second-quarter net profit of Dh26.1 million ($7.1 million) compared with Dh51.3 million in the same period in 2011, it said in a statement.

The results missed analysts' forecasts who expected a second-quarter net profit of Dh46.7 million in a Reuters poll.

The company, which has pushed into other markets like Saudi Arabia and Kuwait following a slowdown in Dubai's real estate sector, blamed expenses from acquisitions and contracts provisioning for the profit drop.

"Finance costs from acquisition funding and contracts provisioning continue to hinder profit growth," said Osama Hamdan, chief financial officer for Drake.

"Our exposure to the euro currency through our German subsidiary and the volatile fluctuations in foreign exchange also contributed to the decline in earnings."

Contract revenue for the quarter fell to Dh717.3 million from Dh738.7 million in the prior-year period.

Hamdan said revenue in the quarter was impacted by lower productivity on major projects, especially in its key focus market of Saudi Arabia.

Drake secured contracts worth Dh1.6 billion year-to-date and has a order backlog of Dh7.4 billion at the end of June 30.

The firm said it is expanding into rail and oil & gas and both business units are expected to contribute to the revenue in the second half of the year.

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