The Australian has revealed a string of major problems at its Qatar joint venture including more than $US1bn ($1.3bn) of unpaid debts, jail time for executives and an offer to its partner to sell the Qatar business for 36c.

Still, CIMIC said it would persist in trying to sell its 45 per cent stake in the Dubai-based BIC Contracting joint venture.

“The confidential M&A process previously initiated in respect of the group’s investment in BICC has continued in the period. Discussions are ongoing with potential acquirers for all or part of BICC,” CIMIC said in its annual report lodged on Wednesday. The BICC “investment has nil book value”.

CIMIC paid off $1.48bn in debts for its Middle East business in the 2020 financial year, which is thought to have included outstanding loans with banks including HSBC and Standard Chartered.

It still owes $151m as of December 31, 2020.

CIMIC’s underlying net profit after tax plummeted 25 per cent to $601m for the 2020 financial year, well below an analyst consensus estimate of $658m, but it resumed dividend payments with a final payout of 60c a share.

Profit guidance for the 2021 financial year in the range of $400m-$430m is 30 per cent below market consensus based at the midpoint, Macquarie said, with the cut due to an ongoing hit from COVID-19 on existing projects, a fall in new work secured and its reduced Thiess ownership.

The Sydney-based company’s shares fell 17.1 per cent to $21.56 on Wednesday, giving it a market value of $6.7bn.

CIMIC finalised the sale of a 50 per cent share in its mining services unit Thiess to Elliott Advisers, the British arm of US hedge fund Elliott Management, for $2.2bn in cash — well above the $1.7bn-$1.9bn estimate it provided when announcing the deal in October last year.

There has previously been concerns about strains on the company’s balance sheet exposed by its need to unwind controversial supply chain financing arrangements that had caused concerns about the true state of its financial position.

Its use of factoring arrangements fell by half to $976m at the end of December. The company also said it would contest a class action brought by Melbourne class-action specialists Phi Finney McDonald on behalf of shareholders who bought CIMIC shares between February 2018 and January 2020, when CIMIC booked a $1.8bn writedown of its non-controlling 45 per cent stake in the Dubai-based BIC Contracting joint venture.

The action also alleged its use of supply chain financing pumped up its cashflow and hid the true state of its business from shareholders.

“The company denies there is a proper basis for the claim and will defend the proceedings,” CIMIC said.

Ratings agency Moody’s said its results were credit negative. “The company reported weaker earnings and cashflow, along with a decline in overall work in hand,” Moody’s vice-president Saranga Ranasinghe said.“The weak results primarily reflect COVID-19-induced delays in new project awards for its Construction and Services segments, as well as a slowdown in project completion and higher project costs.” CIMIC is controlled by the Spanish-German shareholder Hochtief-ACS, which owns a 73 per cent stake in the business.

The engineering group — which is building major infrastructure projects in Australia including Melbourne’s troubled $6.7bn West Gate Tunnel — first gained exposure to the Middle East in 2007 when Leighton merged its regional operations with Al-Habtoor Engineering group.

Leighton at the time moved its international headquarters to Dubai from Kuala Lumpur to cash in on the region’s thriving building sector, which initially appeared to have dodged any major fallout from the global financial crisis. Still, market conditions eventually started to unravel and the group has for years struggled to collect hundreds of millions of dollars of bad debts from other suppliers in the region, with court proceedings often drawn out and lacking regulatory enforcement.