Arabtec Shares Plummet Due to Legal Claim of the Qatar Airways

The shares of Arabtec Holding Company have slumped to a 1-month low as a legal claim has been filed by Qatar Airways. Qatar Airways have decided to file the claim against the Joint Venture of Depa Ltd. This company is partly owned by Arabtec, which is a leading United Arab Emirates construction company.

The share prices saw a decline of around 4.9% and closed at 2.24 dirhams. This marks the lowest share price of the company since 28th November. In the benchmark DFM General Index, Arabtec has turned out to be the 2nd biggest loser. Incidentally, only on last November, Arabtec acquired almost 25% stake of Depa. Depa is known as the interior contractor which fitted out the tallest tower in the world, situated in Dubai.

The legal claim is of $600 million. Qatar Airways believes that Depa Interiors have delayed at least 1 year in opening the new Doha International Airport. Incidentally, the German-Emirati joint venture, Lindner Depa planned to complete building 19 airport lounges by end of this year’s summer. It was part of a contract worth $250 million. Incidentally, the new Doha airport was initially scheduled to open right on this December, as stated by the official representatives of the Qatar Airways.

Al Fajer Securities’ Partner Nabil Farhat stated that this decision of Qatar Airways is a big setback for Arabtec. Not only that it will get involved in the lawsuits which can cause a distraction in the operational responsibilities, there can be a huge impact on the profitability of the company as well, if, it loses the case. Arabtec probably need to record losses on their investment made on Depa, as on the longer term, Depa shares are bound to decrease, as added by Farhat.

After the decision of Qatar Airways came into public, representatives of Lindner Depa stated that the claims are misleading and completely false. Depa officials are currently looking for legal counsel to combat the claims.

According to economists, Depa is going to post a total loss of 94 million dirhams in 2012 despite of high profits in last year. Arabtec, on the other hand, is expected to come out with a statistics that will confirm a decline of around 18% in the full-year profit. Analysts are currently advising to hold the Depa shares and adopt a wait and watch policy.