MUSCAT: Galfar Engineering and Contracting, the Gulf region's biggest contracting firm, yesterday announced a net profit of RO1.38 million for the first quarter of 2011, as against a loss of RO844,000 for the same period last year.
However, market analysts said it is lower than their expectations.
"It is still lower than market expectations. The company's order execution has come down, while order backlog is not growing," said Sankar Kailasam, senior vice-president of Gulf Baader Capital Markets.
"The firm used to have an order backlog for three years. Now it is only for two years, which is a concern," he added. The order backlog by end-December 2010 was in the region of RO600 million.
Galfar's revenue slipped to RO79.51 million from RO89.56 million, while expenses came down to RO77.89 million from RO90.40 million. "The results are below our estimate. We were expecting a much higher contract income and net earnings," added Anil Kumar, vice-president of the Financial Corporation (FinCorp).
Kumar said the company must have incurred losses in the recently commissioned Muscat Expressway project, due to cost escalation. "The Muscat Expressway resulted in a lower net profit margin for the company in 2009 and 2010.
We were expecting a marked improvement in net profit margin, which did not happen," he said, adding; "The net profit margin must have improved to 1.7 per cent for the quarter from last year's average of 1.6 per cent.
It used to enjoy a net profit margin of three per cent, before starting work on Muscat Expressway. A delay in completing the project and the consequent cost escalation has affected margins."
The company will seek compensation for the additional cost incurred for Muscat Expressway. However, there is no clarity on the issue and even if the company gets it, it will take time.
© Times of Oman 2011
