Arabtec Holding Company, listed on the Dubai Financial Market, said its accumulated losses amounted to 671.3 million dirhams (about 183 million dollars), and constituted 44.7% of its capital of 1.5 billion dirhams.
Experts believe that this ratio, which is close to 50%, requires Arabtec to search for financial options to avoid the worst, especially in light of the conditions of the spread of the Corona virus, which forced the company to lay off thousands of workers and employees.
Arabtec, the largest contracting company in the UAE and based in Dubai, explained that the main reasons that led to reaching these accumulated losses are the limited liquidity in the real estate and construction sector, which led to delays in the collection of financial amounts in many projects.
Among the reasons also is the slowdown in the real estate sectors, which led to limited winning of new projects, in addition to cases of delays in settlements, recovery of dues and claims, losses due to investment in an associate, and an increase in the size of legal disputes, she said - in a statement to the Dubai Stock Exchange.
The company said that it will take a number of measures to address the accumulated losses, by focusing on completing and delivering old projects, winning projects in new sectors, and adopting a selective method in the projects that are bidding on, in addition to reviewing and reducing the workforce, reducing costs and improving productivity.
Corona's negative effects
The company said that in the event of an increased spread of the Corona virus pandemic and its time span, the continuation of these conditions may lead to a multiplication of negative economic impacts, which may negatively affect the financial results of the group.
Financial analyst Nidal Khouli says to Al Jazeera Net that when the accumulated losses of a company crawl about 50% of its capital, this means that it is close to entering the red zone, a dangerous area that requires the company to search for financial alternatives to avoid passing to the stage of announcing the legal liquidation.
He adds that among the options for the company: looking for investors to help pump more liquidity to raise capital, but he pointed out that even this option remains difficult for a real estate company like Arabtec, given the great impact of this sector in the Corona virus pandemic.
Nidal Khouly expected that the company will accumulate more losses during the coming period, especially in light of the unstable situation due to the Corona virus.
The company announced in February that it had incurred annual losses amounting to 773.8 million dirhams (about 211 million dollars) at the end of 2019, its first annual loss since 2016.
The joint stock companies listed in the Dubai market, whose interim or annual financial data show, must record accumulated losses of 20% or more of the capital, and disclose to the market and the Authority about that in conjunction with disclosing these data, with an explanation of the main reasons leading to these losses, and the procedures that It will be taken to remedy its situation.
Reuters last Thursday quoted well-informed sources that Arabtec Holding had laid off 3,000 manual workers in the past two months, as well as 300 employees, with the company suffering from the consequences of the spread of the Corona virus.
The sources pointed out that the Dubai-based company also reduced the salaries of its current employees between 10% and 40%.