{"id":4160,"date":"2016-02-09T23:00:59","date_gmt":"2016-02-09T16:00:59","guid":{"rendered":"http:\/\/www.siamlandbank.com\/propertynews\/?p=4160"},"modified":"2016-02-09T22:44:37","modified_gmt":"2016-02-09T15:44:37","slug":"contractors-feel-the-pinch-as-saudi-government-goes-slow-in-awarding-projects","status":"publish","type":"post","link":"https:\/\/www.siamlandbank.com\/propertynews\/property-news\/contractors-feel-the-pinch-as-saudi-government-goes-slow-in-awarding-projects\/","title":{"rendered":"Contractors feel the pinch as Saudi government goes slow in awarding projects"},"content":{"rendered":"


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\nThe value of new contracts won by the Saudi contractor Abdullah A M Al Khodari & Sons last year fell by nearly 50 per cent as “government entities did not proceed with awards” in the run-up to its 2016 budget announcement in December.The company, which is based in Al Khobar, in the Eastern Province, is one of many working in Saudi Arabia’s construction sector that is beginning to feel the pinch as government spending slows in response to lower oil prices. Spending on infrastructure and transport was cut by 63 per cent in the 2016 budget to 23 billion Saudi riyals (Dh22.53bn), from 63bn riyals in 2015.
\nDrake & Scull, which has reported continued problems with payment delays for projects in the kingdom, has also had its stock downgraded by analysts from HSBC to “reduce” from “hold”, according to Bloomberg. The Dubai company reported its first-ever quarterly loss, in the three months to September 30, of Dh877.8 million as a result of provisions made on one Saudi contract. The country is currently its biggest market, responsible for almost Dh4bn, or 32 per cent, of a Dh12.3bn order backlog.
\nAl Khodari’s full-year profit dropped by 67 per cent last year, to 33m riyals, which it said was due to a 9 per cent fall in revenue to 167.4m riyals and an increase in costs of completing work following the government’s recent decision to cut fuel subsidies. Al Khodari has typically earned about 95 per cent of its revenue from government-related contracts. It bagged government contracts of 1.5bn riyals last year.
\nThe region’s cement companies are also feeling the pinch as demand continues to decline. On Monday, the country’s biggest producer, Saudi Cement, said it was postponing a plan to upgrade three existing mills and build two new mills to increase capacity, blaming market conditions and a continued ban on exports that was introduced three years ago when shortages were feared. Samba Financial Group’s five-year economic forecast for the Saudi market, published last month, said that capital projects were likely “to bear the brunt” of government spending cuts.
\n“Our estimates suggest that public investment was reduced last year by around a quarter, and we think a further 8 per cent cut is in prospect this year,” it said. “For the moment, continuing investment projects are unlikely to be shelved, but savings in inputs will be looked for and timelines might well be extended.”Rim Ben Salah, an analyst with the Tunisian equity research company Alpha Mena, said Al Khodari’s margins were already “under pressure” as it has higher staff costs than regional peers to meet Saudisation policies.
\nA recent analysis on the sector produced by Alpha Mena found that staff costs are expected to make up more than 40 per cent of costs at Al Khodari this year, compared with about 30 per cent at Drake & Scull and less than 10 per cent at Arabtec.”For the whole GCC construction sector, we are sceptical and adopt a cautious view,” said Ms Salah. “Budget cuts in the Gulf have weakened the sector and reduced the project pipeline.”
\nYet Chris Seymour, the Middle East head of markets at Arcadis, said there are still plenty of opportunities for contractors in Saudi Arabia to work with private sector developers.”KSA remains the largest market in the GCC, with domestic demand outstripping similar locations,” he said. “Even if government spending is reduced it still offers good opportunity.”mfahy@thenational.aeFollow The National’s Business section on Twitter
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\nSource : thenational.ae
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The value of new contracts won by the Saudi contractor Abdullah A M Al...<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"false","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true},"categories":[1],"tags":[],"class_list":["post-4160","post","type-post","status-publish","format-standard","hentry","category-property-news"],"jetpack_featured_media_url":"","jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p75ss1-156","jetpack-related-posts":[{"id":4154,"url":"https:\/\/www.siamlandbank.com\/propertynews\/property-news\/contractors-feel-the-pinch-as-saudi-government-goes-slow-in-awarding-contracts\/","url_meta":{"origin":4160,"position":0},"title":"Contractors feel the pinch as Saudi government goes slow in awarding contracts","date":"February 9, 2016","format":false,"excerpt":"\r \r The value of new contracts won by the Saudi contractor Abdullah A M Al Khodari & Sons last year fell by nearly 50 per cent as \"government entities did not proceed with awards\" in the run-up to its 2016 budget announcement in December.The company, which is based in\u2026","rel":"","context":"In "Property News"","img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":7816,"url":"https:\/\/www.siamlandbank.com\/propertynews\/property-news\/new-construction-contract-awards-in-saudi-arabia-drop-25-in-final-quarter-of-2015\/","url_meta":{"origin":4160,"position":1},"title":"New construction contract awards in Saudi Arabia drop 25% in final quarter of 2015","date":"March 13, 2016","format":false,"excerpt":"\r \r The value of new construction contracts awarded in Saudi Arabia during the fourth quarter of 2015 slumped by 25 per cent on the previous quarter to 45.6 billion Saudi riyals (Dh44.6bn), according to new research by National Commercial Bank (NCB).Its Construction Contracts Award Index showed that 62 per\u2026","rel":"","context":"In "Property News"","img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":25069,"url":"https:\/\/www.siamlandbank.com\/propertynews\/property-news\/riyadh-rents-increase-as-population-growth-outpaces-available-homes\/","url_meta":{"origin":4160,"position":2},"title":"Riyadh rents increase as population growth outpaces available homes","date":"September 5, 2016","format":false,"excerpt":"\r Annual rents in Saudi Arabia's capital Riyadh have risen to an average of26,935 Saudi riyals (Dh26,377) as the city's population has grown far quicker than the number of new homes built.According to property broker Chestertons, which has opened its first offices in Saudi Arabia with Saudi partner Medad Valuation\u2026","rel":"","context":"In "Property News"","img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":4289,"url":"https:\/\/www.siamlandbank.com\/propertynews\/property-news\/saudi-contractor-al-khodari-to-reduce-reliance-on-public-sector-work\/","url_meta":{"origin":4160,"position":3},"title":"Saudi contractor Al Khodari to reduce reliance on public sector work","date":"February 10, 2016","format":false,"excerpt":"\r \r The Saudi Arabian contractor Abdullah A M Al Khodari & Sons (Al Khodari), whose value of government contracts fell by almost half last year, is targeting more private-sector work and deals in the GCC and Africa after cutting 8,000 jobs last year.The amount of new work won by\u2026","rel":"","context":"In "Property News"","img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":48692,"url":"https:\/\/www.siamlandbank.com\/propertynews\/property-news\/light-at-end-of-tunnel-for-saudis-contractors-says-al-khodari\/","url_meta":{"origin":4160,"position":4},"title":"Light at end of tunnel for Saudi's contractors, says Al Khodari","date":"March 18, 2017","format":false,"excerpt":"\r Conditions in Saudi Arabia's contracting market are likely to improve this year but only in the second half, according to the head of a leading construction company in the kingdom.Fawwaz Al Khodari, the chief executive of Al Khodari & Sons, said that his company had experienced \"a very, very\u2026","rel":"","context":"In "Property News"","img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":13952,"url":"https:\/\/www.siamlandbank.com\/propertynews\/property-news\/saudi-arabia-construction-contract-awards-drop-by-51-per-cent-in-first-three-months\/","url_meta":{"origin":4160,"position":5},"title":"Saudi Arabia construction contract awards drop by 51 per cent in first three months","date":"May 22, 2016","format":false,"excerpt":"\r Saudi Arabia's construction market is in for a \"challenging year\" as lower oil prices continue to place restrictions on capital spending, according to a new report by National Commercial Bank (NCB).NCB's quarterly construction contracts index reports that just 27.9 billion Saudi riyals (Dh27.3bn) of new contract awards were made\u2026","rel":"","context":"In "Property 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