The chairman of Australian contracting giant Leighton Holdings said yesterday his firm should never have signed a partnership with Dubai’s Al Habtoor Group.
In an interview with The Australian Financial Review, Stephen Johns said he was unhappy with how the joint venture company Al Habtoor Leighton was faring in the wake of the financial crisis.
"With hindsight, no, we're not happy with [Al Habtoor Leighton], we should never have gone into it,” he was reported as saying.
“Are we happy with where it is post-[global financial crisis] and what's happening in Dubai? No."
The New South Wales-based company established the JV with Dubai’s Al Habtoor Group in 2007 in a bid to tap the booming UAE construction market.
Leighton paid AU$870m (US$857.2m) for a 45 percent stake in the firm’s building arm Al Habtoor Engineering, which boasted US$4.4bn of total work in hand with predicted earnings of US$2.75bn for 2007-2008.
But in the wake of the global financial crisis, which saw Dubai property prices plummet 60 percent and more than half of the emirate’s projects cancelled, the JV proved to be a drag on the rest of the company.
In January 2011, Khalaf Al Habtoor, chairman of the Al Habtoor Group, said HLG was owed more than AED4bn (US$1.08bn) in payments from clients, while other executives said winning new projects was also proving difficult.
Leighton Holdings last year reported an annual net loss of AU$408.8m at the end of June, which it blamed partly on its Middle East investment after the company was forced to raise AU$757m (US$800m) from shareholders and inject AED1bn (US$272m) into the UAE venture.
The company had hoped to boost investor sentiment at the end of the year when it reported profits of AU$340m for the six months to December (a 57 percent profit rise compared with a year earlier), but its hopes were shattered when it became embroiled in a bribery scandal in the Middle East.
In a February statement it confirmed that the Australian Federal Police were investigating its subsidiary Leighton Offshore over potentially improper payments related to a US$1.2bn oil project in Iraq. Leighton shares dropped almost 2 percent in one day.
Media reports at the time said the firm’s executives remained positive, but the market was concerned about the ongoing strain of the group's Middle East ventures.
Chairman of the Al Habtoor Group, Khalaf Al Habtoor, and the CEO of Habtoor Leighton Group, Laurie Voyer, declined to comment when contacted by Arabian Business.