Galfar Engineering & Contracting Co suffered more than RO11mn in losses for the first half of 2020 due to delays and cost overruns in company’s major projects and impact of COVID-19 situation.
The group incurred net losses of RO11.116mn in the first six months of this year compared to a net profit of RO2.48mn reported in the same period of 2019.
Galfar’s consolidated revenues dropped by nearly 13 per cent to RO110.761mn in the first half of 2020 as projects progress was also impacted by COVID-19 situation and the lockdowns and measures taken to control the pandemic, the company said in its report submitted to the Muscat Securities Market on Thursday.
Galfar said that the company continues to sustain heavy interest cost due to delayed payment of receivables. ‘The parent company has certified overdue receivables of more than RO42mn as of date from the government and its related entities. The delay in receiving the overdue receivable has caused a strain on the company’s cash flow, which resulted in suboptimal execution of certain projects and delay in completion of others.’
The economic downturn has also affected the performance of Galfar’s subsidiaries in Oman which incurred losses of RO93,000 in the first six months of 2020 against a profit of RO688,000 in the same period of 2019.
Galfar said that its board and management are working very closely on various measures ‘to restructure the organisation, to reduce operating cost and to collect overdue receivables in order to recover the accumulated losses and strengthen the financial position of the company’.
As per the company’s report, Galfar is expected to face severe challenges for the rest of 2020, with pressure on committed delivery of materials and services from internal and external sources with cascading effect on the performance of the company.
‘The company also expects to have challenges on the cash-flow front with pressure on collection of receivables from various clients. The management continues to implement strategies for the cost control, optimising the resources and plans for close interaction and follow up with clients to ensure collection of outstanding receivables,’ Galfar said.
During the first half of 2020, Galfar said that the parent company was awarded new contracts worth around RO21mn.
In addition, the award of the new project ‘Dualisation of Adam/Thumrait Road Project – Part 4’ for RO115.045mn on July 2, 2020, has further strengthened the order-book of the company which stands at approximately RO450mn as of the end of first half of 2020.
‘Combined with the company’s restricting efforts this strong order-book presents positive forecast for the company to pass through current economic crises and to pursue growth, diversification and capability building in the future,’ Galfar said.
Going forward, Galfar said that its management expects to maintain a solid work pipeline with a significant number of tenders under evaluation across a diverse array of sectors and clients. ‘We reasonably expect to be successful in a number of those which will ensure stability and sustainability of our strong market position,’ the company added.